student_loan Archives

Jul

2025

A three-dimensional light blue percentage sign with a long shadow stands on a solid coral background.

The History of Federal Student Loan Interest Rates

By Matthew Zeitlin | Student Loans, student_loan | Comments Off

More than two out of three of recent college students took out loans to help cover the costs of furthering their education — averaging $38,375 per borrower in federal student loan debt alone.

When it comes to paying back student loans, both the total amount borrowed (i.e., the principal) and the interest rates (i.e., the percentage charged on top of the principal) can shape how much a borrower ends up shelling out over the life of the loan.

Keep reading to learn more on how current rates compare to the recent history of student loan rates.

Key Points

• Federal student loan interest rates have fluctuated over the years, influenced by legislative changes and economic conditions.

• Federal loans have fixed interest rates, which provide predictability, while private loans may offer variable rates that can change over time.

• Congress sets the interest rates for federal student loans annually, often adjusting them based on the 10-year Treasury note rate.

• Interest rates can vary depending on whether the borrower is an undergraduate, graduate, or parent, with different rates for each category.

• While federal rates are fixed by law, private lenders offer varying fixed or variable rates based on borrower credit profiles—often higher than federal benchmarks.

A Look Back at Student Loan Interest Rates

While the cost of attending college has steadily gone up, the history of student loan interest rates shows both ups and downs. For instance, the 2020-21 federal loan rates for undergraduates were 2.75% — compared to 4.29% five years prior.

For the 2025-26 school year, fixed interest rates on Direct Subsidized and Direct Unsubsidized Loans for undergraduate students are 6.39%.

A wide variety of educational loans are available to eligible students — including subsidized and unsubsidized federal ones and those handled by private lenders.

Interest rates for different loans change over time. The U.S. government plays a major role in shaping the student loan landscape by setting fixed interest rates each year on federal loans, which can impact the total amount a borrower ends up paying back.

To understand the history of student loan interest rates, it can be helpful to zoom out and take a wide-lens view of the student loan landscape in the U.S.

The U.S. federal government is the major player in student lending—with $1.693 trillion in federal student loan debt owed by 42.7 million borrowers.

Understanding US Student Debt

Of the $18.2 trillion in outstanding household debt, almost $1.7 trillion comes from student debt — that totals more than what Americans owe for cars or credit card debt, respectively.

Besides mortgages, student loan debt accounts for the largest form of household debt. More than 92% of all outstanding student loans are federal student loans, making the student loan interest rate set by the federal government a significant factor for millions of student borrowers.

Private student loans tend to be set according to a combination of prevailing interest rates and the lender’s projection of the student’s ability to pay, whereas federal student loan rates can be shaped, in part, by something even more confusing than the fine print on a financial statement: politics.

Federal student loans are fixed interest (but the rates are adjusted annually), while private lenders often provide both fixed-rate and variable-interest loans.

Here’s an overview of federal student loan rates and some changes they’ve seen:

Federal Student Loans

Federal student loans represent the lion’s share of student lending. But, there’s more than one type of federal student loan. There are a variety of federal educational loans with different student loan interest rates that, historically, have changed with time — from subsidized to unsubsidized, from undergraduate to graduate.

Current federally owned student loans include Direct Loans, Direct PLUS Loans, and Parent Plus Loans.

Direct Loans

Direct Consolidation Loans are responsible for the majority of federal student lending. Issued by the U.S. Department of Education, these loans include both subsidized and unsubsidized student loans.

Direct Subsidized Loans are for undergraduate borrowers who can demonstrate financial need. Direct Unsubsidized Loans are not based on need and can be used by undergraduate and graduate students. There are also Direct PLUS Loans for graduate students and parents of students.

Direct Loans for the 2025-26 school year have a fixed interest rate of 6.39% for both Direct Subsidized and Direct Unsubsidized Loans — notably higher than the interest set on federal loans in previous years.

As a point of comparison, Direct Loans for the 2019-20 academic year were set at 4.53% for subsidized loans and unsubsidized loans. The year prior (2018-19), that rate was 5.05%.

Additional Types of Federal Student Loans

The other types of Direct Loans are Direct PLUS Loans and Parent PLUS Loans. These both carry interest rates determined through a federal government formula. For the 2020-21 school year, the rate on PLUS Loans was 5.3%, coming down from 7.08% in 2019-20, and 7.6% the year before that. Current Direct PLUS Loans rates for the 2025-26 school year are 8.94%.

The current rate on Parent PLUS Loans for the 2025-26 school year is also 8.94%. All rates for Direct Loans and Parent PLUS Loans are fixed interest rates.

How Are Rates Determined?

Traditionally, federal student loan interest rates have been determined in response to laws passed by the U.S. Congress. According to a piece of legislation from 2013 known as the “Bipartisan Student Loan Certainty Act,” the rate on Direct Loans is determined by a formula pegged to borrowing cost for government debt.

The first year under this formula produced 3.86% rates on Direct Loans. During the year before, the 2012-13 academic year, subsidized loans were 3.4% and unsubsidized loans were 6.8%. (A 2007 bill had lowered the subsidized rate to 3.4%, but it was due to expire in 2012 and go back to 6.8%.) The bill, which set up the formula currently governing federal student loan rates, was meant to address this snapback to a higher rate.

Before the legislation passed, Congress directly set the student loan interest rate, with 3.4% rates on subsidized loans and 6.8% on unsubsidized loans for the 2012-13 school year. The 2013 bill also introduced caps that limit how high interest rates could go on the new formula.

The cap for Direct Loans to undergraduates was 8.25%, for graduate student loans it was 9.5%, and for PLUS Loans it was 10.5%. Since 2013, the rates have remained well below the legal caps.

Politics and Student Loans

Today’s rates are governed by a formula that differs for different types of loans.

For undergraduate loans, the formula is the interest rate on one type of government debt at a certain time of year plus 2.05%. (The extra interest is added to cover the cost of deferrals, forbearance, and defaults.) For graduate student loans, it’s that same government debt rate plus 3.6%. And, for PLUS Loans, it’s that rate plus 4.6%.

Put another way, the cost students pay to borrow money from the federal government is determined by the cost the government pays to borrow money — plus a fixed buffer of extra interest, which is intended to reduce the risk to the government of students not being able to pay back their loans.

Recommended: Average Interest Rate for Student Loans

The Takeaway

The interest rates on federal student loans are set by Congress each year and are fixed for the life of the loan. They are determined using a formula tied to the government’s borrowing costs. Currently, federal student loan interest rates for the 2025-26 academic year are 6.39%.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Did federal student loan interest rates go up?

Federal student loan interest rates can increase or decrease annually based on the 10-year Treasury note rate and legislative changes. To determine if they have gone up, you would need to compare the current rates to those from previous years. Recent trends and economic conditions influence these changes.

What is the typical interest rate on a federal student loan?

The typical interest rate on a federal student loan varies by loan type and borrower. As of the latest data, undergraduate loans are 6.39%, graduate loans are 7.94%, and parent loans are 8.94%. These rates are fixed for the life of the loan.

How are federal student loan interest rates determined?

Federal student loan interest rates are set annually by Congress and are based on the 10-year Treasury note rate plus a fixed margin. Rates vary by loan type and borrower category, such as undergraduate, graduate, or parent loans, and are fixed for the life of the loan.

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

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

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

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

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

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.

SOSLR-Q225-056

Jul

2025

How to Transfer Student Loans to a Different Lender

By David Wolinsky | Student Loans, student_loan | Comments Off

Table of Contents

How to Change Student Loan Lenders
Lenders vs Servicers: What’s the Difference?
Refinancing as Transferring
Doing Your Homework

Shopping around for the best value is tried-and-true advice that extends to most things you can sink money into. It can be especially true in the world of student loans — an economic ecosystem where there are approximately 43 million borrowers holding more than $1.7 trillion in debt, and payments to erode that debt have been slowing on the whole.

Reasons for choosing a different student loan lender than one previously used might include looking for better service, a lower interest rate, or better terms. Some borrowers may want to refinance their existing loans so they can minimize the number of lenders they work with and the number of payments they have to keep track of.

Borrowers who have federal student loans are encouraged to carefully consider refinancing those loans with a private lender, because in doing so they will no longer be eligible for federal deferment, forbearance, or other repayment or relief aid through the federal government.

Key Points

• Transferring student loans to a new lender typically involves refinancing through a private lender, which may offer lower rates or better terms than your current one.

• Federal loans come with borrower protections like forgiveness and income-driven plans that are forfeited when refinancing with a private lender.

• Refinancing consolidates loans into one, potentially simplifying payments and lowering interest, though extending the term could increase total interest paid.

• Lenders and servicers are not the same — lenders fund the loan, while servicers handle billing and payments.

• To refinance, you’ll need to meet credit and income requirements, and possibly apply with a cosigner if you have limited financial history.

How to Change Student Loan Lenders

There are many reasons to consider transferring student loans to another lender. But something important to understand about this change is it typically will mean seeking out a private student loan lender, even for your federal loans.

So, why would you want to change lenders in the first place? Private student loan lenders might offer better rates, terms, and repayment options than you have currently. Some lenders may be a better fit for graduate students, others for refinancing, and others for cosigner flexibility. Benefits offered by private lenders might also be attractive to borrowers. For instance, SoFi offers eligible members access to local networking events and exclusive rate discounts.

When shopping around for private student loan lenders, knowing what criteria are deal makers and also deal breakers for your unique situation is helpful. Borrowers might qualify for a higher loan amount from a private lender versus a federal student loan, but terms and interest rate typically depend on an applicant’s credit and other financial factors. A private lender might offer a variable-rate loan, which means market changes could impact your monthly payments in unpredictable ways. With so many variables in the mix, it isn’t unusual for students to use both federal and private student loans to cover their college costs.

In most cases, though, federal student loans tend to offer better borrower protections — like loan forgiveness, deferment options, or income-driven repayment plans — than private student loans. Qualifying for federal student loans may also be easier than qualifying for a private student loan for some borrowers because federal student loans don’t typically require a credit check.

Lenders vs Servicers: What’s the Difference?

It might not seem like there is much of a difference between lenders and servicers, but the two play distinctly different parts in the business of borrowing money. Lenders actually make the loans, while servicers collect the payments from the borrowers.

The Department of Education, i.e., the federal government, is the lender of federal student loans. The companies who work on behalf of the government to collect student loan payments are the servicers. The Department of Education’s Federal Student Aid website gives borrowers a comprehensive look at their student aid. With the information all in one place, it might be easier to make a decision about making changes to student loans.

Private lenders also use loan servicers. Just like federal student loans, the company that makes the loan will be different from the company the borrower pays. The servicer and payment information is typically found on the most recent student loan statement. Payments can usually be made in a number of ways: online, by mail, by phone, or even through an app if the servicer has one.

Refinancing as Transferring

Refinancing student loan debt is just a way to turn an existing loan into a newer one, ideally in a way that will result in potentially lower interest rates or lower monthly payments. (Keep in mind that you may pay more interest over the life of the loan if you lower your payments by choosing an extended term.) Most student loans, like any other large consumer loan, are eligible for refinancing for qualifying applicants.

Borrowers who have only federal student loans may be interested in seeking a loan consolidation via a Direct Consolidation Loan, but as the ED warns, the trade-off here is a simpler payment but also the potential loss of some benefits, such as interest rate discounts.

Furthermore, a Direct Consolidation Loan doesn’t typically result in interest rate savings — it has a fixed interest rate for the life of the loan, calculated as the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest one-eighth of one percent. Consolidation is not usually a way to save money on interest payments, but is more an option to streamline repayment — one loan means only one payment to make each month.

Private lenders will typically do a credit check, which includes personal financial details like income and credit histories, and could be a potential drawback for students who may not have much of either. Students might have a tougher time qualifying for a loan on their own with that requirement, and a cosigner may be required on the loan.

Doing Your Homework

There are many moving parts to consider when thinking about using a different lender from one you’ve used in the past or transferring an existing loan to a new lender. What aspects of your student loans would benefit from transferring? What don’t you like about your current lender or servicer? What services or benefits would you like to get from a lender?

If you do decide to move forward with transferring your student loans to a new lender, also known as refinancing student loans, allow SoFi to help. SoFi offers an easy online application, competitive rates, and no origination fees.

See if you prequalify with SoFi in just two minutes.

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

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

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

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.

SOSLR-Q225-055

Jul

2025

Using In-School Deferment as a Student

By Kylie Ora Lobell | Student Loans, student_loan | No Comments

Undergraduate and graduate students in school at least half-time can put off making federal student loan payments, and possibly private student loan payments, with in-school deferment. The catch? Interest may accrue on certain types of loans.

While some students choose to start paying off their loans while they’re still in college, many take advantage of in-school deferment. Keep reading to learn more on in-school deferment and whether or not it’s the right choice for you.

Key Points

• In-school deferment allows students to postpone federal and some private student loan payments while enrolled at least half-time, although interest typically accrues during this period.

• Federal student loans automatically enter in-school deferment, while students must initiate deferment requests for private loans through their loan servicer.

• Accrued interest on Federal Direct Unsubsidized Loans during deferment will be capitalized, increasing the principal balance and future monthly payments.

• Alternatives to in-school deferment include economic hardship, graduate fellowship, military service, and unemployment deferments, each with specific eligibility criteria.

• Exploring options like income-based repayment or refinancing can help manage student debt, but refinancing federal loans eliminates access to federal benefits like deferment and forgiveness.

What Is In-School Deferment?

In-school deferment allows an undergraduate or graduate student, or parent borrower, to postpone making payments on:

• Direct Loans, which include PLUS Loans for graduate and professional students, or parents of dependent undergrads; subsidized and unsubsidized loans; and consolidation loans

• Perkins Loans

• Federal Family Education Loan (FFEL) Program Loans

Parents with PLUS Loans may qualify for deferment if their student is enrolled at least half-time at an eligible college or career school.

What about private student loans? Many lenders allow students to defer payments while they’re in school and for six months after graduation. Sallie Mae lets you defer payments for up to 48 months as long as you are enrolled at least half-time.

Each private lender has its own rules, though, so always check with your specific lender.

How In-School Deferment Works

Federal student loan borrowers in school at least half-time are automatically placed into in-school deferment. You should receive a notice from your loan servicer.

If your loans don’t go into automatic in-school deferment or you don’t receive a notice, get in touch with the financial aid office at your school. You may need to fill out an In-School Deferment Request, which is available at studentaid.gov.

If you have private student loans, it’s a good idea to reach out to your loan servicer to request in-school deferment. If you’re seeking a new private student loan, you can review the lender’s school deferment rules.

Most federal student loans also have a six-month grace period after a student graduates, drops below half-time enrollment, or leaves school before payments must begin. This applies to graduate students with PLUS Loans as well.

Parent borrowers who took out a PLUS Loan can request a six-month deferment after their student graduates, leaves school, or drops below half-time enrollment.

Requirements for In-School Deferment

Students with federal student loans must be enrolled at least half-time in an eligible school, defined by the Federal Student Aid office as one that has been approved by the Department of Education to participate in federal student aid programs, even if the school does not participate in those programs.

That includes most accredited American colleges and universities and some institutions outside the United States.

In-school deferment is primarily for students with existing loans or those who are returning to school after time away.

The definition of “half-time” can be tricky. Make sure you understand the definition your school uses for school deferment, as not all schools define half-time status the same way. It’s usually based on a certain number of hours and/or credits.

Do I Need to Pay Interest During In-School Deferment?

For most federal student loans, no.

However, if you have a Federal Direct Unsubsidized Loan, interest will accrue during the deferment and be added to the principal loan balance.

If you have a Direct Subsidized Loan or a Perkins Loan, the government pays the interest while you’re in school and during grace periods. That’s also true of the subsidized portion of a Direct Consolidation Loan.

Interest will almost always accrue on deferred private student loans.

Although postponement of payments takes the pressure off, the interest that you’re responsible for that accrues on any loan is currently capitalized, or added to your balance, after deferments and grace periods. (This capitalization will no longer occur in certain situations as of July 2023, thanks to new regulations from the Department of Education that are set to take effect.) You’ll then be charged interest on the increased principal balance. Capitalization of the unpaid interest may also increase your monthly payment, depending on your repayment plan.

If you’re able to pay the interest before it capitalizes, that can help keep your total loan cost down.

Alternatives to In-School Deferment

There are different types of deferment aside from in-school deferment.

• Economic Hardship Deferment. You may receive an economic hardship deferment for up to three years if you receive a means-tested benefit, such as welfare, you are serving in the Peace Corps, or you work full-time but your earnings are below 150% of the poverty guideline for your state and family size.

• Graduate Fellowship Deferment. If you are in an approved graduate fellowship program, you could be eligible for this deferment.

• Military Service and Post-Active Duty Student Deferment. You could qualify for this deferment if you are on active duty military service in connection with a military operation, war, or a national emergency, or you have completed active duty service and any applicable grace period. The deferment will end once you are enrolled in school at least half-time, or 13 months after completion of active duty service and any grace period, whichever comes first.

• Rehabilitation Training Deferment. This deferment is for students who are in an approved program that offers drug or alcohol, vocational, or mental health rehabilitation.

• Unemployment Deferment. You can receive unemployment deferment for up to three years if you receive unemployment benefits or you’re unable to find full-time employment.

For most deferments, you’ll need to provide your student loan servicer with documentation to show that you’re eligible.

Student Loan Forbearance

Another option is federal student loan forbearance, which temporarily suspends or reduces your principal monthly payments, but interest always continues to accrue.

Some private student loan lenders offer forbearance as well.

If your federal student loan type does not charge interest during deferment, that’s probably the way to go. If you’ve reached the maximum time for a deferment or your situation doesn’t fit the eligibility criteria, applying for forbearance is an option.

Income-Based Repayment

If your ability to afford your federal student loan payments is unlikely to change any time soon, you may want to consider an income-based repayment plan. Income-based repayment plans are available for federal student loans only, not private student loans.

Student Loan Refinancing

Students can also explore student loan refinancing. The goal of refinancing with a private lender is to change your rate or term. If you qualify, all loans can be refinanced into one new private loan.

Playing with the numbers can be helpful when you’re considering refinancing. Using a student loan refinance calculator can help you figure out how much you might save.

Should you refinance your student loans? If it could save you money, refinancing may be worth it for you. Just know that if you refinance federal student loans, they will no longer be eligible for federal deferment or forbearance, loan forgiveness programs, or income-driven repayment. Make sure you won’t need access to these programs.

The Takeaway

In-school deferment allows undergraduates and graduate students to buy time before student loan payments begin, but interest may accrue on certain types of loans and is added to the balance.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What is student deferment?

Student deferment is a temporary pause on loan payments, allowing borrowers to postpone repayment due to specific circumstances like unemployment, economic hardship, or returning to school. Interest may still accrue on some loans.

Does putting student loans in deferment hurt your credit?

No, deferment itself does not hurt your credit. However, if you miss payments before or after deferment, it can negatively impact your credit score.

What are the disadvantages of deferment?

Disadvantages of student loan deferment include accrued interest on unsubsidized loans, which can increase the total amount owed. It may also delay progress on paying off your loans, potentially extending the repayment period. Additionally, deferment eligibility is limited and may not be available for all types of loans or situations.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

SOSLR-Q225-062

Jul

2025

A man stands on a staircase in an office building, looking at a tablet.

Tips on How to Pay for MBA School

By Sarah Brooks | Budgeting & Goals, Building Your Career, Fresh Out of School, Life & Career, Student Loans, student_loan | No Comments

Getting a Master of Business Administration is an investment. Tuition costs vary widely depending on the school, but the average cost of an MBA is $60,410 for a program in the U.S.

If you’re committed to pursuing an MBA, the reality is that a higher income is probably still a few years away. However, you’re responsible for the cost of schooling now. It can be daunting, but there are options for making business school more affordable. Here are a few tips to consider as you craft a plan to pay for your MBA program.

Key Points

• Earning an MBA degree is expensive. One way to help cover the cost is to save up if you’re currently employed to reduce the amount you may need to borrow in student loans.

• Take advantage of “free money”: Apply for need- or merit-based scholarships, grants, and fellowships from schools you’re considering attending.

• Find out if your company will pay for part or all of your MBA. In return, they may require that you commit to working at the company for a certain amount of time.

• Apply for federal loans student loans by filling out the Free Application for Federal Student Aid (FAFSA®); graduate students may qualify for Direct Unsubsidized and PLUS Loans.

• Research and compare private student loans if federal loans don’t cover the full costs of your degree.

Saving Up in Advance

If you’re already employed, and especially if you earn a high salary, it may make sense for you to stay in your gig for a few more years and put money away toward your degree. The more you save now, the less you may have to take out in loans later. If you’re interested in accelerating your savings, consider cutting your expenses to prepare for the lifestyle change of becoming a student again.

Taking Advantage of Free Money

There are a plethora of scholarships, grants, and fellowships available for business students. If you manage to land one, they can help reduce your costs slightly or significantly, depending on the size of the award.

When hunting for scholarships, consider starting with the schools you’re thinking of attending. Many institutions offer their own need- or merit-based scholarships and fellowships, some of which may even fund the entire cost of MBA tuition. Many of these are geared toward specific groups of students.

Awards may be based on academic excellence, entrepreneurship, and for those committed to careers in business or finance. Contact your school’s admissions or financial aid departments to learn about the opportunities you qualify for.

Getting Sponsored by a Company

Some employers offer to pay for all or part of an MBA degree. In exchange, they may require that you work there for a certain time period beforehand and commit to maintaining your employment for some time after you graduate.

Some companies may offer relatively modest grants, while others might offer to cover the bulk of tuition costs. Some companies that offer tuition reimbursement for employees pursuing MBAs include Deloitte, Google, Apple, Intel, AT&T, and Expedia Group.

If you can land a job at a company that offers this benefit, it can be a major help in paying for school and reducing your debt burden. Just be sure that you’re willing to meet the commitments, which in most cases means staying with your employer for a while.

Taking Out Student Loans

If you can’t cover the full cost of tuition and living expenses through savings, scholarships, or sponsorships, borrowing student loans is another option. You might first consider borrowing from the federal government, as federal loans offer certain borrower protections and flexible student loan repayment options.

Federal Student Loans

To apply for federal student loans, first fill out the Free Application for Federal Student Aid (FAFSA®). The school you attend will determine the maximum you’re able to take out in loans each year, but you don’t have to take out the full amount. You might choose to only borrow as much as you need, since you’ll have to pay this money back later—with interest, of course.

Graduate students are generally eligible for Direct Unsubsidized Loans (up to $20,500 each year) or Direct PLUS Loans. Neither of these loans is awarded based on financial need.

Both of them accrue interest while the student is enrolled in school. Unless you pay the interest while you’re in school, it will get capitalized (or added to the principal of the loan), which can increase the amount you owe over the life of the loan.

Direct Unsubsidized Loans have a six-month grace period after graduation in which you won’t have to make principal payments (remember, interest still accrues). Direct PLUS Loans do not have a grace period but grad students automatically get a six-month deferment after they graduate. No principal payments are due during this time.

Private Student Loans

If you aren’t able to borrow as much as you need in federal loans, you can also apply for MBA student loans with private lenders, including banks and online financial institutions.

Private student loans have their own interest rates, terms, and possible benefits. Make sure to research the different lenders out there and see which is the best fit for your financial situation.

Paying Student Loans Back

Taking out a big loan can be daunting, but there are options for making repayment affordable, especially with federal loans. The government currently offers three income-based repayment plans that tie your monthly payment to your discretionary income and family size.

If you run into economic hardship, you can apply for a deferment or forbearance, which may allow eligible applicants to reduce or stop payments temporarily.

If you put your degree to use at a government agency or nonprofit organization, you may also qualify for Public Service Loan Forgiveness. If you meet the (extremely stringent) criteria, this program will forgive your loan balance after you make 120 qualifying monthly payments (10 years) under an eligible IDR plan.

Refinancing Student Loans

If you’re still paying off student debt from college or another graduate degree as you enter your MBA program, you could consider looking into student loan refinancing.

This involves applying for a new loan with a private lender and, if you qualify, using it to pay off your existing loans. Particularly if you have a solid credit and employment history, you might be able to snag a lower interest rate or reduced monthly payment.

While there are many advantages of refinancing student loans, there are also disadvantages, as well. If you refinance federal student loans, you lose access to federal forgiveness programs and income-based repayment plans. Make sure you do not plan on taking advantage of these programs before deciding to refinance your student loans.

The Takeaway

MBA programs can offer a valuable opportunity to advance your career and increase your income, but they can also come with a hefty price tag. Options to pay for your MBA degree can include using savings, getting a scholarship, grant, or fellowship, or borrowing student loans. Everyone’s plan for financing their education may be different and can include a combination of multiple resources.

Making existing loans manageable while you’re in school can go a long way to making your MBA affordable. Down the line, you can consider refinancing the loans you take out to get you through your MBA program. You can get quotes online in just a few minutes to help figure out whether refinancing can get you a better deal.

If you do decide to refinance your student loans, consider SoFi. SoFi offers flexible terms and no origination or prepayment fees.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How do I fund my MBA program?

Ways to fund an MBA program include looking for scholarships, grants, and fellowships for business students (contact your school to see what’s available), checking to see whether your employer will pay some or all of the cost of your degree (ask your company’s benefits coordinator), or taking out federal and/or private student loans.

How can I get an MBA cheaper?

To reduce the cost of an MBA, look for scholarships that will pay some or all of the expense for earning your degree. Ask the schools you’re considering to see what they may offer — many institutions offer need- or merit-based scholarships for MBA students. In addition, if you are currently employed, check with your employer to find out if they will cover some of the costs of your degree. Some companies offer this as an employee benefit.

How much should I pay for an MBA?

The average cost of an MBA is $60,410 for two years. However, depending what school you attend, the cost may be well over $100,000. For example, the cost of earning an MBA at Harvard is approximately $161,304.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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

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

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

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.

SOSLR-Q225-063

Jul

2025

5 Easy Ways Doctors Can Save on Taxes

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

Doctors tend to make a good amount of money. For instance, primary care physicians report earning about $281,000 a year while specialists make approximately $398,000 annually, according to a 2025 survey from Medscape.

But compared to other high-earners, doctors also have high amounts of student debt. Med school graduates owe an average of $243,483 in student debt, reports EducationData.org. In addition, physicians spend extra years in school, rather than building equity in their future, such as having a 401(k) or an IRA.

That’s why it makes sense to know how to save money on taxes as a doctor and learn about physician tax deductions.

Here are five easy ways doctors can save on taxes, plus tax deductions for doctors.

Key Points

• Doctors can reduce their tax burden by contributing to various tax-advantaged retirement accounts.

• Establishing a 529 plan for children’s education expenses can provide tax savings.

• Self-employed doctors should deduct all business-related expenses to minimize taxes.

• Doctors should evaluate the tax implications of long-term versus short-term capital gains.

• Donating appreciated investments to charity can offer significant tax benefits.

1. Contribute to multiple tax-advantaged retirement accounts.

One way to save? Instead of only paying into one company-sponsored 401(k) or 403(b) plan, spread your retirement savings across as many tax-advantaged accounts as you can. By having multiple accounts like this, you can substantially increase your savings each year.

2. Consider a 529 plan account to save for children’s college funds.

A 529 account grows tax-free when used for qualifying educational expenses. You might even get a tax deduction on your state taxes the year you fund it. Check your local tax laws to find out more.

3. If you own a practice or you moonlight, consider deducting all business-related expenses.

For physicians, owning a practice comes with a perk: tax deductions for doctors. Think advertising, licensing fees, board exam fees, website fees, subscriptions to professional publications, dues and memberships to medical associations, and traveling to conferences. The general strategy is to deduct as much on Schedule C or your personal tax return as allowable.

4. For investments, consider the tax benefits of long versus short term gains.

Owning an investment for more than one year means any profit will qualify as a long-term gain. That makes sense. What’s important to consider is that long-term capital gains are typically taxed at lower rates than short-term capital gains (which are taxed at your ordinary income rate). For those with portfolios to manage, this is one factor worth keeping in mind.

5. For charitable donations, don’t forget you can donate investments.

Most people know that donating cash or used items qualifies as a tax deduction. But for physician tax deductions, it’s good to remember you can donate appreciated stocks and funds. In this case, you can gain a double tax benefit by getting a tax deduction for the gift—and avoiding the capital gain on the sale.

Another way to possibly save money is with student loan refinancing. When you refinance, you replace your existing student loans with a new loan, ideally with a lower interest rate and better terms.

Should you refinance your student loans? One very important thing to keep in mind is that refinancing federal student loans makes them ineligible for federal protections and programs, like income-driven repayment plans. If you think you may need these federal benefits, refinancing may not be right for you.

This student loan refinancing guide may be helpful as you weigh your options.

If you decide to explore refinancing, this student loan refinance calculator can help you figure out what you might save. For instance, a lower interest rate or a longer loan term may help lower your monthly payment. However, a longer loan term means you may end up paying more interest over the life of the loan.

This student loan refinancing guide may be helpful as you weigh your options.
If you decide to move forward with refinancing your student loans, SoFi offers flexible terms and no origination or prepayment fees.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

How can doctors reduce their taxes?

Doctors can reduce their taxes by taking such steps as contributing to multiple tax-advantaged retirement accounts, deducting business expenses if they own their own practice, opening a 529 plan to save for their children’s education, exploring long-term vs. short-term capital gains when it comes to investments, and donating investments.

What can you write off as a doctor?

Tax deductions you can write off as a doctor include board exam fees, memberships and dues to medical associations, traveling to conferences, licensing fees, and fees for professional publications.

Why do doctors get taxed so much?

Doctors may pay more in taxes because they typically earn high salaries. For example, primary care physicians make about $281,000 a year, while specialists make around $398,000. Tax-saving strategies such as contributing to tax-advantaged retirement accounts, taking work-related tax deductions, and making charitable contributions may help lower a doctor’s tax bill.

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

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

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.

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

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

SOSLR-Q225-064

The History of Federal Student Loan Interest Rates

A Look Back at Student Loan Interest Rates

Understanding US Student Debt

Federal Student Loans

Direct Loans

Additional Types of Federal Student Loans

How Are Rates Determined?

Politics and Student Loans

The Takeaway

FAQ

Did federal student loan interest rates go up?

What is the typical interest rate on a federal student loan?

How are federal student loan interest rates determined?

How to Transfer Student Loans to a Different Lender

How to Change Student Loan Lenders

Lenders vs Servicers: What’s the Difference?

Refinancing as Transferring

Doing Your Homework

Using In-School Deferment as a Student

What Is In-School Deferment?

How In-School Deferment Works

Requirements for In-School Deferment

Do I Need to Pay Interest During In-School Deferment?

Alternatives to In-School Deferment

Student Loan Forbearance

Income-Based Repayment

Student Loan Refinancing

The Takeaway

FAQ

What is student deferment?

Does putting student loans in deferment hurt your credit?

What are the disadvantages of deferment?

Tips on How to Pay for MBA School

Saving Up in Advance

Taking Advantage of Free Money

Getting Sponsored by a Company

Taking Out Student Loans

Federal Student Loans

Private Student Loans

Paying Student Loans Back

Refinancing Student Loans

The Takeaway

FAQ

How do I fund my MBA program?

How can I get an MBA cheaper?

How much should I pay for an MBA?

5 Easy Ways Doctors Can Save on Taxes

1. Contribute to multiple tax-advantaged retirement accounts.

2. Consider a 529 plan account to save for children’s college funds.

3. If you own a practice or you moonlight, consider deducting all business-related expenses.

4. For investments, consider the tax benefits of long versus short term gains.

5. For charitable donations, don’t forget you can donate investments.

FAQ

How can doctors reduce their taxes?

What can you write off as a doctor?

Why do doctors get taxed so much?

JOIN THE COMMUNITY

Student Loan Refinancing

Personal Loans

Online Investments

Other

Student Loan
Refinancing

Personal
Loans

Online
Investments