SoFi

Congratulations: You’re on your way to college. You can put all the standardized tests, the applications, and the rest of the stress behind you and embark on this new adventure. Education and independence await, but you have to prepare for it.

And that starts with packing. Which clothes, books, and artwork are coming with you? What do you need to go shopping for?

To help you prepare, follow this list of what every new student might need.

School Supplies

Don’t be fooled into thinking that the only necessary supplies are a laptop and phone. Additional supplies can help students manage their college courses.

Even though phones and laptops have built-in calendars, having a physical planner can be a good idea as well. Writing information down can help you remember it better, and it can be less distracting having school information in a physical planner, away from all those social media apps.

When it comes to taking notes, some professors don’t want everyone on their computers during class, and some don’t mind. It’s a good idea to have a notebook for each class just in case, along with pens, pencils, and highlighters.

Check the specific course requirements as well. You’ll likely need some textbooks (you may be able to pay for books with student loans, if you have taken any out). Also check the syllabus for each class should be available early enough to read through and see if the professor lists any required materials. If you’re taking a math class, for example, a specific type of calculator may be required.

(Tip: Since paying for college can be a stretch, look into renting books and equipment instead of buying them outright.)

Depending on how many books you have to lug around campus, you may want to invest in a new backpack or messenger-style bag. Some students like a small bag with roll-aboard-style wheels if they have to lug it long distances. The most suitable bag will likely depend on students’ schedule, how big their campus is, and how many classes they have in a row.

It might be good to wait to choose this item after you’ve selected your courses and can see what each day is going to require.

💡 Quick Tip: With benefits that help lower your monthly payment, there’s a lot to love about SoFi private student loans.

Shower Supplies

Students who choose to live in the dorms will need to bring shower supplies with them. Sharing a bathroom is going to be another adjustment in starting college. There are a few must-haves for a comfortable experience.

•  Shower shoes are one of these musts. A cheap pair of flip-flops will do the trick. These are shoes that are worn only while taking a shower. What’s the deal? They help to prevent athlete’s foot, a fungal infection that can result from public showers. Just make sure to rinse and dry off the shoes after each use.

•  A shower caddy is another essential. Most students will likely be walking from the dorm room to the shower, so they’ll have to bring all shower supplies with them. A portable container makes this much easier.

•  The caddy will have room for your shampoo, conditioner, body wash, and so on, and some of them also come with hangers, so they could potentially be hung up in the shower. In choosing a shower caddy, look for one that is waterproof and has holes in it so it doesn’t fill up with water.

•  Don’t forget the towels. At home, there’s always a stack of clean towels ready to be used. This won’t be the case in the dorms.

•  You might also want to have a robe that can be thrown on while walking from the dorm room to the bathroom and back.

Recommended: A Student’s Guide to Money

Wardrobe

This can be one of the most fun parts of packing: Thinking about what you’re going to wear. After all, it’s an opportunity to present your best self or a whole new you on campus.

You may have a stellar closet full of clothes you can’t wait to take with you. Or you may want to go shopping and take a break from the looks that you loved in high school. You’ll also have to consider the weather. If you grew up in Florida and are heading to Maine for freshman year, you are going to have to get gear that’ll keep you warm.

If you’re the sort of person who wants an entirely new wardrobe for college, it’s wise to learn how to save money on clothes, and uncover the joys of everything from couponing to hitting thrift stores.

Recommended: What Is the Average Cost of College Tuition

Don’t Forget Shoes

College campuses are much bigger than most high schools, so investing in a good pair of walking shoes is important. Classes may end up being a solid 15- to 20-minute walk away from each other.

It’ll take a toll on a student’s mood and physical comfort if they try to handle that walk in heels, unsupported sandals, or ill-fitting shoes.

Shoes take up a lot of space while packing, so trying to bring just the necessary pairs is wise. If your college is in a state that will experience cold or snowy winters, make sure to invest in some warm boots.

Recommended: Guide to Private Student Loans

Bedding and Room Necessities

What else do students need to bring to a college dorm? Most dorm rooms will come with a bed but not sheets. Pack a couple of sets of sheets and a nice comforter. Some college students also recommend bringing a mattress pad and backrest pillow because you may spend more time in that bed than expected. Not living on campus? If you’ll be staying off-campus, look for furnished apartments to minimize your costs.

One important note: It’s vital to look into the school’s list of restricted items so you know what you should not bring to college. The college may also list the furnishings that come with the room. Check out your school’s website first so you don’t buy something that’s already there.

It can also be helpful for students to contact their roommates ahead of time and see if they’re planning to bring anything that could be shared. That could be a move that helps make college more affordable.

It’s not a bad idea to pack on the light side; it can help you avoid overbuying and spending too much on things you don’t need. If you get there and need things, most items can be ordered online anyway.

Planning how to make the most of the small space provided in a college dorm is going to be great practice for when students are ready to move into apartments.

💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

The Takeaway

The packing list has been made and the shopping trip planned, so what’s next? Paying for everything. There are a lot of options for financing the entire college experience, and students can try to get help from more than one avenue if they need to.

Students seeking financial aid should look into scholarships and grants and then federal aid. If federal student loans do not cover the full need, or if a student is not eligible for federal aid, private loans may be an option.

Private loans are issued by private financial institutions. A co-signer is often necessary. Look for loans that don’t have origination fees and offer extra services like co-signer release and hardship deferment.

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

SoFi 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.

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.

SOIS0723018

Federal student loans offer a specific selection of repayment plans that borrowers can choose from. Federal student loan borrowers may be assigned a repayment plan when they begin loan repayment, but they can change their repayment plan at any time without fees.

Choosing the right repayment plan may feel overwhelming, but understanding the repayment plans available to federal student loan borrowers can help.

The student loan repayment options for federal loans covered in this article are:

•   Standard Repayment Plan

•   Extended Repayment Plan

•   Graduated Repayment Plan

•   Income-Driven Repayment Plans

The Standard Repayment Plan is 10 years (10 to 30 years for those with Consolidation Loans) and usually has the highest monthly payments, but it allows borrowers to repay their loans in the shortest period of time. That may help a borrower pay less in accrued interest over the life of the loan.

The Extended Repayment plan stretches out the repayment period so that you’re putting money toward student loans for up to 25 years. Payments can be fixed or they may increase gradually over time. This repayment plan may be worth considering for borrowers who have more than $30,000 in federal Direct Loans and cannot meet the monthly payments on the Standard Repayment Plan.

On the Graduated Repayment Plan, the repayment period is typically 10 (10 to 30 years for those with Consolidation Loans). The monthly payments start out low and then increase every two years. This plan may be worth considering for borrowers who have a relatively low income now, but anticipate that their salary may increase substantially over time.

Income-Driven Repayment plans tie a borrower’s income to their monthly payments. These options may be worth considering for borrowers who are struggling to make payments under the other payment plans or who are pursuing Public Service Loan Forgiveness.

Choosing a repayment plan is one of the basics of student loans. For help determining which plan may be a good choice for your situation, you can take this quiz. Or, you can go directly to the overviews of the different repayment plans below to get a better understanding of them.

Quiz: What Student Loan Repayment Plan is Right for You?

Student Loan Repayment Plan Options for Federal Student Loans

Standard Repayment Plan

The Standard Repayment Plan ​is essentially the default repayment plan for federal student loans. This plan extends repayment up to 10 years (10 to 30 years for those with Consolidation Loans) and monthly payments are set at a fixed amount. The interest on the loan remains the same as when it was originally disbursed.

One of the benefits of the Standard Repayment plan is that it may save you money in interest over the life of your loan because, generally, you’ll pay back your loan in the shortest amount of time (10 years) compared to the other federal repayment plans (20 to 30 years).

A common challenge associated with the standard repayment plan is that payments can be too high for some borrowers to manage. Remember that this is the default option when it comes time to set up a repayment plan, so if you would prefer another option, you’ll need to choose one when the time comes to start repaying your loans.

Student Loans Eligible for the Standard Repayment Plan

The following federal loans are eligible for the Standard Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Extended Repayment Plan

If you have over $30,000 in Direct Loan debt and the payments are too high for you to manage on the standard 10-year repayment plan, you can choose the Extended Repayment Plan for your federal loans. Under this plan, the term is up to 25 years and payments are generally lower than with the Standard and Graduated Repayment Plans. You can also choose between fixed or graduated payments.

If you’re eligible, an Extended Repayment Plan can provide significant relief if you’re struggling to pay your monthly loan payments by lengthening your term and potentially lowering your monthly payments.

This can help keep you out of default (which is important!). But it is critical to be aware that lengthening your loan term usually means you will be paying significantly more interest over the life of the loan — because it will take you longer to pay off your loan — and it may not give you the lowest monthly payments, depending on your circumstances.

Student Loans Eligible for the Extended Repayment Plan

The following federal loans are eligible for the Extended Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Graduated Repayment Plan

With this plan, you would pay your federal student loans back over a 10-year period (10 to 30 years for Consolidations Loans), with lower payments at the beginning of the term that gradually increase every two years.

The idea behind the Graduated Repayment Plan is that a borrower’s income will likely increase over time, but may not be much at the start of their career.

Of course, the income boost may not happen. With this plan, because interest keeps accruing on the outstanding principal balance over a longer period of time, even though you’re making payments, the longer you take to repay your loan(s), the more interest you’ll wind up paying in the end. (Remember, more payments with interest = more interest paid total.)

Student Loans Eligible for the Graduated Repayment Plan

The following federal loans are eligible for the Graduated Repayment Plan:

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

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

Income-Driven Repayment Plans

Each of the three plans listed above (Standard, Extended, and Graduated) are considered traditional repayment plans. Income-Driven Repayment Plans , though, are different because the student loan payment amount is based upon the borrower’s income and family size.

To be eligible for an income-driven repayment plan, you’ll need to go through a recertification process each year, and your monthly payment could change (increase or decrease) annually based upon your current income and family size.

Maximum payments are set at 5% or 10% of what’s considered your discretionary income (the difference between 150% of the poverty guideline and your adjusted gross income), depending on the loan and the plan. There are two types of income-driven plans:

•   Income-Based Repayment Plan (IBR)

•   Saving on a Valuable Education (SAVE), the new plan announced by the Biden Administration that’s replacing the Revised Pay As You Earn Repayment Plan (REPAYE) plan

A significant advantage of using income-driven repayment plans is that your payment can be adjusted to accommodate a lower income. And in most cases, if you choose one of these plans, any remaining balance after 20 or 25 years may be forgiven if repayment has been satisfactorily made.

Again, the longer you extend your loan term, the more payments (with interest) you’ll be making. Not all loans qualify for this type of program; you’ll need to be vigilant about recertifying for this repayment program and regularly provide updated information to the federal government. And, if the remaining portion of the debt is forgiven, you may owe taxes on that dollar amount.

Another Option to Consider: Student Loan Refinancing

Refinancing student loans with a private lender allows borrowers to consolidate (that is, combine) the loans. This could help make repayment convenient because there will be just one monthly payment.

One of the other possible advantages of refinancing student loans is that borrowers who qualify for a lower interest rate may be able to reduce the amount of money they spend in interest over the life of the loan.

You typically need a certain credit score to qualify for student loan refinancing, along with other fairly standard lending qualifications (like income and employment verification, among other factors).

And know this: Once federal student loans are refinanced with a private lender, they will become ineligible for federal repayment plans, programs like Public Service Loan Forgiveness, and other borrower protections like deferment or forbearance.

💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

Repayment Plans for Private Student Loans

The repayment plans for private student loans are set by the lender. If you have private student loans,you can review the loan terms or contact the lender directly to review the payment options available to you. This private student loans guide may also help you learn more about how these loans work.

The Takeaway

Borrowers repaying federal student loans have three traditional repayment plans to choose from (Standard, Extended, and Graduated) and two Income-Driven Repayment Plans. When selecting a repayment plan, consider factors like your current income and expenses, potential future income, and career goals. For example, borrowers pursuing Public Service Loan Forgiveness will need to be in an income-driven repayment plan.

Those who choose a longer term to lower their payments, should keep in mind that this may mean paying more in interest over the life of the loan. If the goal is to pay off debt more quickly and pay less back in interest overall, potential borrowers may pick a shorter term.

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.

Student loan interest rates change on a regular basis and are determined by different factors. You may have student loans taken out in different years and/or from various lenders — each with a different interest rate. But why? Who makes these decisions and when were they made? Here’s an in-depth look at what goes into the determination of student loan interest rates.

How Did We Get Here?

Federal student aid programs are enacted and authorized by Congress. There have been a few different programs over the years, aimed at students with various financial needs and educational goals:

•   The first such program was the GI Bill, implemented in 1944 to assist veterans who had served during wartime. The idea behind the GI Bill was that the veterans needed a chance to catch up to their peers who did not have their lives interrupted by military service and had been able to go to college.

•   In 1958, spurred on by the Soviet launch of Sputnik, Congress enacted the National Defense Education Act (NDEA), which provided financial aid to students in certain fields of study. The NDEA provided low-cost loans for undergraduate students, with the opportunity for debt cancellation for students who became teachers after graduation. It also established graduate fellowships for students studying in fields with national security relevance, such as science, mathematics, and engineering. Scholarships or grants that were outright need-based were not included in the NDEA, however.

•   The first sweeping legislation to offer educational financial aid came in the form of the Higher Education Act (HEA) of 1965. Title IV of the HEA focused on the needs of students who did not have the financial means to afford a college education, with the introduction of Educational Opportunity Grants. This section of the act also introduced College Work-Study and the Guaranteed Student Loan (GSL) program.

Congress has enacted comprehensive reauthorization of the HEA eight times during successive presidential administrations. The HEA and student financial aid programs that today’s system is centered around came about with the 1972 reauthorization of the act. Changes included:

•   Financial support to students in programs other than four-year baccalaureate programs: career and vocational programs, community colleges, and trade schools, as well as to students in part-time programs.

•   Educational Opportunity Grants, College Work-Study, and the GSL program were replaced by Basic Grants (renamed Pell Grants in 1978).

•   State Student Incentive Grants, which provided federal matching funds to states that enacted or expanded their own need-based programs, were introduced.

•   Sallie Mae (“Student Loan Marketing Association”) was established to administer funds in the GSL program.

Later reauthorizations of the HEA saw further changes to student financial aid programs. Some of these changes included:

•   Expansion of student financial aid to the middle class.

•   Widening eligibility for Pell Grants.

•   Availability of subsidized guaranteed loans to students regardless of income or financial need.

•   Introduction of an unsubsidized federal student loan option that doesn’t take financial need into account at all.

•   Increasing the borrowing limits for federal student loans.

All of those various pieces of legislation introduced the concept of financial aid and programs that administered them. Some components of student financial aid, such as scholarships and grants, typically don’t have to be repaid, but student loans do have to be repaid — with interest.

After a three-year pause, interest accrual on federal student loans will resume on Sept. 1, 2023, and payments will be due starting in October 2023.

3 Factors Affecting Your Student Loan Interest Rates

There are a lot of moving pieces in the puzzle that is higher education funding. And affording a college education can be quite puzzling to students and parents. If you’re considering applying for a federal or private student loan, there are a few main factors to learn about that might help you make a decision:

1. How Legislation Affects Student Loan Interest Rates

One of the main factors affecting federal student loans in general and their interest rates is legislation. Rates set by private lenders are not governed by legislation.

Until 1979, banks’ rate of return for GSLs was capped by the rate set by a group of government officials. But that year, Congress passed an amendment to the HEA that assured banks a favorable rate of return on GSLs by tying their subsidies directly to changes in Treasury bill rates. Before this amendment, federal grants and work-study made up about 50% of student financial aid and federal student loans made up about 25%.

During the 1980s and 1990s, student loan volume skyrocketed and those percentages essentially flip-flopped — loans made up about 60% of student aid, and grants and work-study made up only about 35%. But the low Treasury rates of the 1960s and early 1970s, which the banks’ subsidies had been based on, rose dramatically from the late 1970s though the mid-1980s, and didn’t return to the early-1970s rates until 1992, and they didn’t stay there for long.

The Student Loan Reform Act of 1993 was introduced to address the problems student loan borrowers were having repaying those debts. The Act implemented flexible repayment plans and began phasing in the Federal Direct Student Loan program, which still exists today, to replace previous loan programs.

Prior to 2006, federal student loan interest rates were variable, based on the 91-day Treasury bill rate plus varying percentage rates depending on the type of loan, and were capped at 8.25% for Stafford Subsidized and Unsubsidized Loans, and 9% for PLUS Loans.

From 2006 to 2012, rates were fixed at 6.8% for Stafford Subsidized and Unsubsidized Loans, and 7.9% for Direct PLUS loans for graduate students and parents. During this time range, subsidized Stafford Loan interest rates were reduced incrementally based on the distribution date.

The 2013 passage of the Student Loan Certainty Act changed the way interest rates on federal student loans were calculated. This Act established the interest rate calculation as based on the 10-year Treasury bill rate. New rates are set every year on July 1, and are applied to loans disbursed from July 1 through June 30 of the following year. In other words, as prevailing interest rates change from year to year, rates on newly disbursed Direct Loans do, too.

How Does This Affect Your Rates?

If you are a federal student loan borrower, your loan’s interest rate was set according to the calculation used when it was disbursed. Consolidation can be an option for some borrowers with multiple loans that have different interest rates. Any loans that have variable rates can be switched to a fixed interest rate through consolidation. There are pros and cons to consolidating loans, though, so it’s important to consider your financial situation before deciding if it’s the right option for you.

2. How the Type of Loan Affects Student Loan Interest Rates

The kind of student loan you have dictates the interest rate you’ll be charged.

•   For current undergraduate borrowers , there are two types of federal student loans available:

◦   Direct Subsidized Loans for student borrowers with financial need.

◦   Direct Unsubsidized Loans, which don’t have a financial need requirement.

◦   The applicant’s credit history is not a consideration for either of these types of loans.

•   Current graduate and professional borrowers also have two federal student loan options:

◦   Direct Unsubsidized Loans, which don’t have a financial need requirement.

◦   Direct PLUS Loans , which are commonly referred to as Grad PLUS Loans when taken out by graduate students.

▪   Federal Direct PLUS Loans do require a credit check to determine eligibility, but this does not affect the interest rate, as it is fixed by federal law.

•   Parents of dependent, undergraduate students have the option of borrowing under the federal Direct PLUS Loan Program.

◦   Commonly referred to as Parent PLUS Loans when taken out by parents, a credit check is required for qualification, but since the interest rate is fixed by federal law, the applicant’s credit history does not affect the interest rate.

For the 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%, the rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and are set annually by Congress.

Private student loans may be another option for some borrowers. After exhausting all federal student loan options, seeking out scholarships and grants, and using as much accumulated savings as you feel comfortable using, a private student loan can help fill in any gaps in educational funding that might be left. Here are some details about private student loans that might help you as you consider financial options:

•   Private student loans are administered by the lender, not the federal government.

•   The borrower’s credit score and credit history will be used to determine the interest rate they might qualify for.

•   Recent high school graduates may not be able to qualify on their own, so might need a cosigner.

•   Interest rates can be higher with private student loans than federal student loans.

A borrower might end up with a combination of several types of loans to repay and want to make that repayment as simple and financially feasible as possible. Federal student loans come with consolidation options and repayment plans that aren’t generally offered by private lenders. If there is a need to reduce your monthly student loan payment on federal student loans, it’s best to try all federal options — forbearance, deferment, or income-driven repayment (IDR) — before looking at student loan refinancing options with a private lender.

The White House in June 2023 announced a new IDR Plan — the Saving on a Valuable Education (SAVE) Plan — that replaces the existing Revised Pay As You Earn (REPAYE) Plan. Borrowers with undergraduate loans may see their monthly payments cut in half under the SAVE Plan, and some borrowers may qualify for $0 monthly payments based on income, according to the White House.

How Does This Affect Your Rates?

Federal student loan interest rates are fixed by federal law, so your rate will only be affected by the date of disbursement. If you have more than one federal student loan, you will likely have different interest rates on each of them.

Private student loan interest rates are set by the lender. Some private lenders will offer the choice of a variable- or fixed-rate loan. A variable rate loan usually offers a lower initial interest rate than a fixed-rate student loan, but because the rate can fluctuate over time, it also presents a greater risk. If interest rates go up, so do your interest payments. A fixed rate loan’s interest will be the same amount each month, which can make it easier to budget.

3. How You Can Affect Your Student Loan Interest Rates

The choices and decisions you feel comfortable making will affect how much you pay for a student loan.

Opting for a federal student loan means your interest rate will be fixed for the term of the loan. Your personal credit history does not have an effect on the interest rate.

Opting for a private loan means your credit history will be taken into account when determining eligibility and the interest rate offered. This means that financial decisions you’ve made in the past may determine how much you pay for your student loan in the future.

Auto-pay is an option that may reduce your student loan interest rate by a certain percentage. Federal loans offer this option, and some private lenders do, too. Check with your loan servicer to ask about auto-pay options.

If college graduation is but a fond memory, and your credit history is better established and more positive than it may have been in the past, you might consider negotiating your private student loan interest rate. There is no guarantee that the lender will agree to a lower rate, but it’s worth asking.

How Does This Impact Your Rates?

The bottom line with this factor is that you can choose the option that you think works best for your financial situation and personal comfort level. If you want the fixed-rate steadiness and other benefits that a federal student loan comes with, then choosing that may be right for you. If you’re comfortable with the potential of an interest rate increase with a variable-rate private student loan, then this is another option you may choose.

The Takeaway

For first-time borrowers, federal student loans can be the way to go — after all, most undergrads haven’t had time to build up a history of responsibly (or irresponsibly) using credit. However, graduate and professional school borrowers, or nontraditional student borrowers with clear financial pictures, may have more options than the one-size-fits-all approach. Remember, private student loans may not have the same protections and benefits that come with federal student loans and usually are not considered until all other financial aid options have been exhausted.

If a student loan fits your financial needs, consider looking at private student loan online options offered by SoFi. With undergraduate, graduate, professional, and parent student loans, SoFi Private Student Loans can be used at any point in a student’s college career. Borrowers pay no fees and have flexible repayment options.

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 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.

Graduation from college or grad school is a time to celebrate the great achievement of years of hard work. But once the party is over, many graduates will be thinking of their next steps: new careers, new cities, and a life filled with new experiences and responsibilities.

For most recent grads, one of those responsibilities is a major one — managing and organizing the repayment of student loans. The average undergrad leaves school with $37,388 in student loan debt, joining the growing population of Americans who, together, are repaying more than $1.7 trillion in student loans.

Student Loan Repayment Options

Managing the repayment of a federal student loan debt requires strategy, organization, diligence, and a bit of know-how, especially when it comes to picking a repayment plan.

There are several federal repayment options: the standard plan, income-driven plans, and the graduated repayment plan, among others. New grads can also consider consolidating or refinancing their student loans into one new loan with a new rate and new terms. For a recent grad overwhelmed by new choices and decisions, parsing out the details of these loans can be a chore — one that frequently gets ignored.

The graduated repayment plan has been somewhat replaced by newer repayment options, like income-based and income-contingent plans. For some borrowers, though, this plan can be a useful way to begin repayment slowly but still pay off federal loans in 10 years (10-30 years for consolidation loans).


💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

How Do Graduated Repayment and Extended Graduated Repayment Plans Work?

Graduated Repayment Plan

The graduated repayment plan is designed to help keep repayment costs low for recent graduates who may have lower starting salaries, but who expect to see their salaries increase substantially over the next 10 years.

Under the graduated repayment plan, the repayment term for federal loans will be 10 years (10-30 years for consolidated loans), which is the same length as the standard repayment plan. With the standard repayment plan, you will pay the same fixed amount each month for the length of the term.

On the graduated plan, your payments will be lower than what you would pay if you were to stay on the standard plan, but never too low that you aren’t paying the amount of interest that is accruing each month. Then, every two years, your payment amount will increase.

Extended Graduated Repayment Plan

The extended graduated repayment plan is similar to the graduated plan, however, the repayment term is over 25 years rather than 10. Typically, borrowers who select this plan will have lower monthly payments than they would under the standard or graduated plan. While their payments will increase over time, they’ll do so more gradually than they would under the extended plan due to the longer term.

With this plan, borrowers may have a much lighter bill to pay each month than they would on many other plans, however, they will end up paying more in interest over time.

What Are the Benefits of a Graduated Repayment Plan?

The main benefit of the graduated repayment plan is that your payments will be low for the first few years of repayment. This can be a big help to recent graduates on entry-level salaries who may not have additional cash flow and are just learning how to build a solid financial foundation while staying within their budget.

Payments will increase over time, but your repayment term (for unconsolidated loans) is 10 years. This means that if you make scheduled payments, you’ll be finished paying off your debt relatively quickly. For Direct Consolidation Loans, your repayment period will depend on the amount of debt you have and could be between 10 and 30 years.

What Are the Drawbacks of a Graduated Repayment Plan?

There are a number of drawbacks to the graduated repayment plan, which can make it a less attractive option than some of the other repayment options available. First, even though you’ll be paying off your loans in 10 years, you will end up paying more in interest using this plan as opposed to the standard plan.

Why? Because with the graduated plan, you’re making lower payments in the first few years. As a result, you’re not paying down as much of the principle as you would be on the standard plan, which means you’re paying more in interest over time.

Another potential drawback is that your payments are scheduled to increase every two years. Depending on the amount you owe, these increases can be staggering.

While the lower payments up front might fit your budget as you start your career, it’s hard to predict whether your salary will increase at just the same rate as your payments will. However, if you end up having a difficult time making the higher payments that eventually come with a graduated repayment plan, you can switch to an income-based plan or an extended plan.

Refinancing Student Debt vs Graduated Repayment Plans

Once you’ve gotten settled into a steady job, another option to consider is refinancing your student loans with a private lender. When you refinance, you are essentially using one new loan to pay off all your current student loans. Then, you just have the new loan to repay, which will have a new interest rate and new terms.

There are a number of benefits to refinancing, including getting a lower interest rate, a lower monthly payment, or a shorter or longer loan term. Additionally, replacing all your loans with one loan will help you streamline your repayment. Some lenders even allow you to refinance private and federal loans together. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

Refinancing your loans with a private lender at a lower interest rate and shorter term can potentially save you thousands of dollars in interest over the life of your loan. However, when you refinance, you give up some of the benefits that come with keeping your federal loans, including student loan forgiveness and income-based repayment plans.

If you foresee a need to use any of these benefits that come with federal loans, it might not be in your best interest to refinance. But, if you have built a strong financial foundation and have a steady income coming in, refinancing could be the best strategy for paying your loans down quickly — and for saving money in the process.

Refinancing Student Loans with SoFi

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

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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.
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.

Inflation indirectly causes student loan interest rates to rise. That’s because the government tends to increase interest rates to combat rising prices, which typically raises the cost of borrowing.

Student loan interest rates have in fact risen since the Federal Reserve began raising interest rates to combat inflation during the Covid-19 economic recovery. For example, the fixed interest rate on newly disbursed federal student loans for undergraduates went from 2.75% in July 2020 to 5.50% in July 2023.

The fixed interest rate on newly disbursed federal student loans is largely determined by the high yield of the final 10-year Treasury note auction held each year in May. Bond yields are typically higher when interest rates go up.

High inflation is bad news for people seeking new student loans and those with variable interest rate loans, though people with fixed-rate loans won’t see their rates go up.

What Exactly Is Inflation?

Inflation — the rising cost of everyday items — is an important economic factor to everyone from investors to policymakers to borrowers. The reason it matters to borrowers is that inflation can lead to higher interest rates on every kind of debt, including student loans.

Put simply, inflation means that the price of bread will be higher tomorrow than it is today. So lenders may increase their interest rates during times of high inflation, given that borrowers will be paying the money back when those dollars will buy less. That’s one reason inflation and many interest rates have typically risen or fallen in step with each other.

The Federal Reserve is another reason. The country’s central bank plays a major role in managing the economy, especially with factors like interest rates and inflation.

The Fed began its rate-hiking campaign in March 2022 to combat high inflation and continued raising rates into 2023. Increases to the federal funds rate have prompted commercial banks to raise the price of consumer loans and other financial products, including private student loans.

What Does Inflation Mean for Student Loans?

To someone with student loan debt, inflation may not always be bad news. That’s because price inflation may influence wage inflation.

Inflation typically drives up the price of everything, including wages. As a result, some borrowers are paying back certain fixed-rate loans, for example, with dollars that have less value than the ones they borrowed.

There are exceptions. If a borrower took out a variable rate private student loan, it’s likely that inflation will lead to higher interest rates, which will translate into higher interest rates that the borrower has to pay. But if the borrower has a fixed-rate private student loan and their salary keeps up with the pace of inflation, then inflation can be helpful.

With the Federal Reserve in 2023 still aiming to cool down inflation or Consumer Price Index (CPI) growth, it’s worth checking to see whether your private student loan has a fixed or variable rate.

As a quick primer, fixed-rate loans have the same interest rate from when borrowers take out the loan to when they pay it off. Variable-rate loans change the interest they charge, which is influenced by Federal Reserve rate changes.

Variable-rate loans, also sometimes called “floating rate” loans, usually start out with lower interest rates than fixed-rate loans.

All federal student loans disbursed since July 2006 have fixed interest rates. Meanwhile, banks and other private lenders may offer fixed-rate and variable-rate private student loans.

When Does Refinancing Make Sense?

Student loan refinancing may be right for you if you qualify for a lower interest rate. Refinancing federal student loans with a private lender would remove your access to federal income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF). A student loan refinancing calculator may come in handy as you weigh your options.

The first step is to check the interest rates on your existing student loans against the rates offered by other lenders. If they offer a better rate, then it may be possible to pay off that student loan debt faster or reduce your monthly payments with refinancing.

Some lenders refinance both federal and private student loans. If you choose to refinance federal student loans with a private lender, realize that you will give up federal benefits and protections like IDR plans and PSLF.

After a three-year pause, interest accrual on federal student loans will resume on Sept. 1, 2023, and payments will be due starting in October 2023. If you qualify for a lower interest rate, student loan refinancing may reduce your borrowing costs. Refinancing for a longer term, however, may increase your total interest costs.

Recommended: SAVE Plan for Federal Student Loans

The Takeaway

Borrowers with variable-rate student loans may see their borrowing costs go up during times of rising inflation. Whether your student loans have a fixed or variable interest rate, the impact of consumer price inflation across the economy may impact your ability to make ends meet.

If you find student loan refinancing is right for you, SoFi can help. SoFi refinances federal student loans, parent PLUS loans, and private student loans with no origination or prepayment fees.

Photo credit: iStock/MicroStockHub

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 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.