On Saturday June 3rd, President Joe Biden signed the long-awaited debt ceiling deal into law. The Fiscal Responsibility Act of 2023 averts the general economic chaos that could ensue if the U.S. defaulted on its domestic and foreign debts, and imposes cuts in federal spending.
The legislation also ends the three-year pause on federal student loan payments and interest accrual in effect since March 2020.
When Will Federal Student Loan Payments Resume?
According to the bill’s language, the federal student loan payment pause will end “60 days after June 30th,” or Aug. 30th.
Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October. The Department of Education will notify borrowers well before payments restart.
On June 30th, the Supreme Court ruled against President Joe Biden’s plan to forgive up to $20,000 in federal student loan debt for qualified loan holders, saying the president did not possess the constitutional authority to take such an action but that Congress should make such a decision.
The Department of Education is instituting a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.
In addition to the “on ramp” program, Biden said he will strengthen a plan that reduces federal loan holders’ debt based on their income called SAVE.
For years, people who struggled to pay their federal student loans could enroll in the government’s Income-Driven Repayment Plans . Such a plan sets your monthly federal student loan payment at an amount that is intended to be affordable based on your income and family size. It takes into account different expenses in your budget.
The four income-based plans are: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR).
Biden said that his Administration is “creating a new debt repayment plan, so no one with an undergraduate loan has to pay more than 5 percent of their discretionary income.”
The Takeaway
The Fiscal Responsibility Act of 2023, commonly referred to as the debt ceiling bill, officially cancels the pause on federal student loan repayment and interest accrual at the end of August. Borrowers must now prepare to repay their loans this fall. Federal student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October.
Student loan refinancing is one way borrowers can seek to make student loan payments more manageable. Note that the refinanced amount will lose access to federal protections and programs, and you may pay more in interest over the life of the loan if you refinance with an extended term.
Refi with SoFi today to get flexible terms and a competitive low rate.
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SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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Many students rely on student loans to help them pay for college. In addition to charging interest, student loans may also have additional fees associated with them. Fees charged may include origination fees — a fee charged by the lender for processing the loan — or late payment fees.
When students sign up for loans or are in the midst of repayment, they may not even be aware of fees that accompany many private and federal student loans. But by learning about these fees, they can better prepare themselves financially and avoid headaches.
What Are Student Loan Fees?
As briefly mentioned, student loan fees are charged to borrowers and are not the same as the interest rate. Interest rates on student loans are fixed or variable, and will increase the cost of the loan over time.
Student loan fees may include:
• Origination fees
• Late payment fees
• Returned-check fees (aka insufficient-funds or non-sufficient-funds fees)
• Loan collection fees
• Forbearance and deferment fees
Can a Student Loan Fee Be Waived?
For the most part, student loan fees cannot be waived. In some instances, lenders may be willing to waive late payment fees for borrowers who have not previously made a late payment. Fees and policies may vary by loan type and lender, so contact your lender with specific questions. Continue reading for an explanation of different types of fees that may be associated with a student loan.
Origination Fees
Origination fees cover the cost of processing the loan. They are typically a small percentage of the loan amount.
What Is an Origination Fee on a Student Loan?
An origination fee on a student loan functions similarly to origination fees on other types of loans. Origination fees are generally charged as a percentage of the loan.
How Are Student Loan Origination Fees Assessed?
Student loan origination fees are charged as a percentage of the loan amount. Federal student loans do have an origination fee, and the information will be included in the master promissory note. For federal student loans, the origination fee is deducted from the amount borrowed, so when you receive the loan it will actually be for less than the amount you borrowed.
Private student loans may or may not charge an origination fee, the policy will depend on the lender.
How Much Are Student Loan Origination Fee?
For federal student loans, the origination fee (also known as disbursement fee) is dependent on the loan type. Direct Subsidized and Unsubsidized loans disbursed between October 1, 2020 and October 1, 2024 have a 1.057% origination fee. During the same timeframe, Direct PLUS Loans have a 4.228% origination fee. Direct Unsubsidized and Subsidized Loans are types of student loans for undergraduate programs. Unsubsidized loans and Direct PLUS Loans are student loans for graduate programs.
The origination fee on private student loans will vary based on the lender, and not all private lenders charge an origination fee. Review the terms and conditions closely and contact your lender with any questions.
Late Payment Fees
Making a loan payment past the due date for a federal student loan can result in a late fee. After 30 days, the late fee may be up to 6% of the loan amount due. Review your Master Promissory Note or contact your loan servicer with questions.
The late fee for a private student loan depends on the lender and loan program. Some private student loan lenders do not charge late fees.
Returned-Check Fees
If a borrower pays using a check that bounces, the student loan servicer could charge a returned-check fee.
Loan Collection Fees
If a borrower defaults on a loan by not making payments for a certain amount of time (270 days for most federal student loans), the loan may be placed with a collection agency and be subject to loan collection fees. Any fees incurred will be in addition to the outstanding principal balance, interest, and fees.
Private student loan companies may charge even higher loan collection fees. Generally private student loans also enter default sooner than federal student loans. The default period is described in the loan contract.
Forbearance and Deferment Fees
Borrowers who cannot make payments temporarily can request student loan forbearance or deferment. Typically, loan holders can avoid a fee, but they will need to contact their loan provider.
Forbearance and deferment are available for most federal student loans. Private lenders are not obligated to offer either program, but may offer some forms of deferment. If you are struggling to make payments on a private student loan, contact your lender to evaluate the options available to you.
Federal Student Loan Fees
When students want to apply for a loan, they can do it through the federal government or a private company, depending on their circumstances. The loan providers charge different types of fees.
Students will pay an origination fee for a federal student loan. As mentioned previously, for Direct Subsidized and Unsubsidized Loans, the fee is about 1.057% of the loan amount. For Direct PLUS Loans (including Grad PLUS and Parent PLUS Loans), the fee is about 4.228% of the loan amount.
A late payment fee will typically be charged within 30 days after the payment is due. The late fee could be up to 6%. At that rate, if your monthly minimum payment is $250, your fee would be $15.
Private Student Loan Fees
Loans for students from private lenders may not charge origination fees, though there may be an origination fee for a specialty loan, like a loan for medical school.
Some lenders charge late fees — generally a percentage of the late payment amount or a flat fee. They also typically charge for returned checks.
Additionally, most private student loan companies charge a fee for forbearance, a flat fee determined by the lender.
Collection fees will vary from lender to lender. If there is a collection fee on a private student loan, it will typically be included in your loan agreement.
A lender like SoFi® has staked its reputation on no fees: no late fees, insufficient-funds fees, or origination fees for private student loans.
Avoiding Student Loan Fees
If students need to take out private or federal student loans, they can at least avoid some of the fees.
Federal student loan origination fees are pretty unavoidable. With other loans, even if a student can persuade a company to take off the origination fee, that could mean a higher interest rate, which is usually not worth it.
Paying on time is always recommended, not only to avoid late fees but to keep a credit report healthy. To avoid late fees, returned-check fees, and collection fees, borrowers can set up automated payments from a bank account. Otherwise, they can set up reminders on their phones and calendars that go off when their payments are about to come due.
In terms of deferment fees, borrowers having trouble making payments on time can call their student loan servicer and ask for extensions or other options so that they don’t go into default.
Going into default can cause a credit score to drop significantly and hurt the chances of getting a mortgage, other loan, or credit card in the future. (Student loan deferment or forbearance do not hurt an overall credit score.)
Students shouldn’t be afraid to reach out to their loan servicer as soon as they can’t make a payment.
Plenty of borrowers end up in a tough spot financially and need a little help. Even if borrowers have to pay more interest over time by extending the loan term, that is almost always better than defaulting.
Some student loan companies don’t charge fees. Signing up for a loan with one of these companies could put money back into your pocket that could go toward repaying the loan.
Fee-Free Student Loans
Undergraduate and graduate school loans. Law school and MBA loans. Parent loans. SoFi offers all of those private student loans with no fees — no origination fees, returned-check fees, or late fees.
A loan comes with a fixed or variable rate and a flexible term. And there is no prepayment penalty.
As a bonus, SoFi members can access perks like financial advice, career coaching, and Edmit Plus, a tool that helps estimate financial aid, compare cost of attendance, and highlight merit aid and scholarships available.
Paying for College
Paying for college may require a combination of resources. One of the first places for students to start their financial aid journey is by filling out the Free Application for Federal Student Aid (FAFSA®) every year. This application allows students to find out if they are eligible for federal financial aid, including federal private loans, grants, scholarships, and work-study.
When comparing your options, it’s important to understand the difference between grants vs. scholarships vs. student loans from a private lender. Continue reading for information on these three categories of aid and additional strategies for paying for college in addition to federal student loans.
Private Student Loans
Private student loans, as mentioned, are offered by private lenders such as banks, credit unions, and other financial institutions. To apply, potential borrowers will need to file applications with individual lenders.The interest rate and loan terms are generally determined based on the applicant’s personal information such as their income and credit score, among other factors. It’s generally worth shopping around to find the best rate and loan terms for your personal situation.
Private student loans can be helpful tools to pay for college. However, when comparing private student loans vs. federal student loans, it’s important to note that private student loans lack the borrower protections afforded to federal student loans – things like income-driven repayment plans or deferment options. For this reason they are generally considered an option after all other financial resources have been depleted.
Credit Card
It can be possible to pay for college tuition using a credit card. While schools may accept payment by credit card, there is generally a fee associated. This fee can be between 2.5% to 3% depending on the school, which likely offsets the rewards you may be earning on your credit card.
Credit cards could be helpful for students while they are paying for other college related expenses, like textbooks, food, or other living expenses. Credit cards, when used responsibly, can be tools to help individuals build or establish their credit history. If you plan on using a credit card to pay for expenses, aim to pay off the card each month to avoid accruing interest. Credit card interest rates can be very high — the average interest rate for new credit cards was 22.45% as of July 2023, according to WalletHub.
Personal Savings
Some students may have the money saved to go to college, or someone in their family might be able to finance their education. For instance, perhaps their parents or grandparents opened a 529 savings plan for them when they were younger and funded it with money to put toward college.
Grants
Grants are a type of funding for school that typically don’t need to be repaid. Grants are generally awarded based on financial need and can be found from sources such as the federal or local government, college, or even nonprofit organizations.
Each grant application may have different application and eligibility requirements so be sure to read the instructions closely.
Scholarships
Scholarships are another type of aid that recipients are not required to repay. Often, they are awarded based on merit though can be awarded based on other criteria as well.
Students can look for scholarships in a variety of places, schools, nonprofit and community organizations, companies, and more all offer scholarships.
Take a look at your school’s financial aid website to see what scholarships are available at your school. There are also online databases like Scholarships.com that aggregate information on available scholarships, including basic eligibility criteria. Some scholarships can be quite competitive, so it may be worth applying to a variety of scholarships.
The Takeaway
Student loan fees like an origination fee or late payment fees can increase the total cost of borrowing the loan. The types of fees on student loans will vary based on the loan type. For example, federal student loans do charge an origination fee which varies based on the type of federal loan and there are late payment fees associated with payments that are 30 or more days late.
Private loans may or may not have an origination fee or late payment penalties. The policies will vary by lender. If you’re interested in a private student loan, be sure to shop around and compare fees in addition to interest rate and loan terms to fully understand the cost of the loan.
Private student loans with SoFi have no fees, including no origination fees or late payment penalties. Qualifying borrowers can secure a competitive interest rate and SoFi members are eligible for other benefits like career coaching and member events.
Check your rate on a SoFi private student loan in a few clicks.
FAQ
How much is the origination fee for student loans?
The origination fee on a student loan will likely vary depending on the loan type and lender. For federal student loans, the origination fee from October 1, 2020 through October 1, 2024 is 1.057% for Direct Subsidized and Unsubsidized Loans and 4.228% for Direct PLUS Loans.
The origination fee on a private student loan will vary by lender.
Do unsubsidized student loans have an origination fee?
Yes, unsubsidized loans through the federal government’s Direct Loan Program do have an origination fee of 1.057% for loans disbursed between October 1, 2020 and October 1, 2024.
Can a student loan origination fee be waived?
Federal student loans have an origination fee and it’s unlikely to have this fee waived. Some private student loans may not charge an origination fee and lenders that do may be willing to negotiate with borrowers.
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.
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 Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
College students often use a combination of funding including grants, scholarships, student loans, and savings to pay for their college education. Scholarships and grants are helpful because they typically don’t have to be repaid. But in many cases, students rely on borrowed funds to help pay for some college costs.
Student borrowers have two major options available to them — private and federal student loans. While both types can be used by students to help pay for college there are big differences in how a student will apply for them. Continue reading for more details on the differences between private and federal student loans and their application process.
Federal Student Loans vs Private Student Loans
Federal student loans are provided by the federal government. Private student loans are issued by institutions such as banks, some schools, and other private lenders. In order to make an educated borrowing decision it’s important to understand the major differences between federal vs private student loans. These differences include:
Repayment Terms
Federal student loans have a standardized set of repayment options. Borrowers can choose any of the federal plans and can adjust their repayment plan at any time without incurring any costs by contacting their loan servicer.
These repayments include income-driven repayment options which aim to make repaying student loans more affordable by linking monthly payments to your income.
The repayment terms on private student loans are set by the lender at the time the loan is borrowed. Some lenders may offer flexible repayment terms, but they are not required to do so. Thoroughly review the loan terms before borrowing.
Interest Rates
All federal student loans have fixed interest rates, which are determined annually by Congress.
Private student loans may have either fixed or variable interest rates. With variable rates, the starting rate depends on factors such as your credit score, income, and employment history, and it can change as the economy fluctuates. Lenders determine the interest rate on a loan based on reviewing borrower information such as income, credit history and score, among other factors.
In-School Deferment Options
Your choice between federal and private student loans may also determine when you start paying back your loans.
If you have a federal student loan, you generally aren’t required to start making payments until you graduate, leave college altogether, or reduce your course load below half-time. Many federal loans offer a six-month grace period after you leave school or cut back to below half-time, meaning you don’t have to make student loan payments during this time.
Certain private lenders allow you to wait to make payments on your private student loans just as you would with federal loans, but others require you to start paying them while you’re still in school full-time. This varies depending on the lender, so it’s important to check the specifics before taking out a loan.
Which Type of Student Loan Should You Apply for First?
Federal student loans tend to be more flexible in regards to repayment options and loan forgiveness, and sometimes offer lower interest rates than private student loans. Because private loans are awarded based on borrower criteria including credit history, undergraduate students with limited credit history may need to add a cosigner to strengthen their chances of being approved for a private student loan.
Generally speaking, federal loans are prioritized over private student loans. But, in situations where borrowers have exhausted their federal borrowing options, private student loans can help fill financing gaps.
How Does the Application Process Differ Between Federal and Private Student Loans?
We’ll dive into an overview of how to apply for student loans, broken down by federal and private loans. But you should know that there are two main differences in the processes: where to apply and when to apply.
Federal Student Loan Deadlines
For federal student loans, you’ll fill out the Free Application for Federal Student Aid, better known as the FAFSA®. You will need to fill out the FAFSA each year you are in school.
When it comes to timing, there are important FAFSA deadlines set by the state and sometimes your individual college. Some states offer aid on a first-come, first-served basis, so procrastinating may not be in your best interest. Jumping on the FAFSA® early could make a difference in how much aid you receive.
Private Student Loan Deadlines
To apply for a private student loan, you’ll fill out an application directly with an individual lender. While private student loans are known for being more stringent with their terms and requirements, they can actually be more flexible when it comes to application timing. There’s no universal private student loan deadline. That’s one reason you may prefer to apply for federal student loans before private ones—to see how much federal financial aid you receive first, then, if needed, you can fill in the gaps with private loans.
To apply for federal student loans, the first step is to fill out the FAFSA.
Filling out the FAFSA
You can fill out the FAFSA online at the Student Aid website. You can list up to 10 colleges on your FAFSA® form. If you want to list more than 10, you just have to follow a couple of extra steps.
The FAFSA form will ask for personal and financial information about the student and their parents (if the student is a dependent). These questions cover your age, marital status, level of degree you’re acquiring, military status, and your own dependents.
You’ll provide the necessary financial information. This includes your federal income tax returns and tax documents (and/or your parents’ returns and documents, if you’re considered a dependent). This may sound like a lot of work, but the website makes it relatively easy. It includes an IRS Data Retrieval Tool, and once you enter the relevant information, it should be able to pull up you and/or your parent’s tax return(s).
Just a heads up — you won’t submit the most recent tax return. For example, if you’re applying for aid for the 2023-24 school year, you’ll attach your 2021 tax returns.
If you have any untaxed income from that particular calendar year (the year 2021 from our example), you’ll need to provide records for those earnings. If you’re a dependent, this could include your parent’s income, including sources like child support or disability benefits.
Last but not least, you and/or your parents will provide bank statements. These statements should be current at the time you fill out the application, not from the year of the tax documents and untaxed income reports you submitted.
After receiving your Student Aid Report, you may want to double-check with the schools you listed on the FAFSA® to make sure they received your information and to ask if they need you to fill out any more documents. Some schools require different documents, so it may be beneficial to contact each one.
Once a school has processed your information, you’ll receive an award letter from the institution that officially reports how much aid you’ll be receiving. Colleges differ in how long they wait to send out award letters, so if you’re feeling antsy, you can call to inquire about their reward deadline.
Now for a huge follow-up step: applying for private student loans if scholarships, grants, and federal loans don’t cover everything.
Types of Federal Student Loans
There are four types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans for graduate and professional students, and Direct PLUS Loans for parents.
Direct Subsidized vs Unsubsidized Loans
Direct Subsidized Loans are available for undergraduate students. These loans are for students in financial need, and you don’t have to pay the interest until six months after you’ve graduated, left school, or dropped below half-time enrollment. These six months are referred to as the “grace period.” Interest will still accrue while you’re in school, but the government covers interest while you’re enrolled and during the grace period.
Direct Unsubsidized Loans are also for undergraduate students, but they aren’t disbursed based on your financial situation. The government doesn’t cover the cost of interest while you’re in school, so interest will accumulate throughout your time in college. You have the option to pay off the interest while you’re still a student, or you can wait until you start repaying your loans after the grace period—just keep in mind that unlike with Subsidized Loans, you’re responsible for paying the interest from this time period, not the government.
Direct PLUS Loans
The third type of federal student loan is a Direct PLUS Loan for graduate or professional students. The student takes out the loan, which is unsubsidized.
The fourth type is the Direct PLUS Loan for parents. This loan is for the parents of undergraduate students, so the parents would apply for and are held responsible for paying back the loan. Parent PLUS Loans are also unsubsidized.
Direct PLUS Loans require a credit check, unlike Direct Subsidized and Unsubsidized Loans.
Applying for Private Student Loans
As mentioned above, you can typically apply for private student loans directly on the lenders’ websites. If you’re having trouble deciding where to apply for private loans but have already narrowed down your top schools, you can contact those institutions. Some colleges have “preferred lender” lists.
However, you aren’t necessarily bound by those lender lists. You may still want to research private student loans to find the right interest rates, interest rate types (fixed or variable), payment schedules, and included fees for your specific needs. Remember, private student loans tend to vary in their terms, so a little research can’t hurt.
Lender Requirements
Make sure you meet the requirements to receive a private student loan. For example, will you be enrolled in school at least half-time?
You should also make sure you’re attending a school that’s eligible for private student loans. If you’re attending a community college or trade school, you may or may not be able to receive a private loan.
Keep in mind that private student loan lenders tend to check things like your credit, income, and job history when you apply. This step will affect everyone differently, but if you’re fresh out of high school, this step could throw you for a loop. What if you’ve never had a job? What if you didn’t even know credit scores were a thing before this moment?
Your options for a cosigner are fairly flexible, but many borrowers choose someone they trust, such as a parent, close relative, or trusted friend.
Cosigners can also come in handy if you aren’t a U.S. citizen. Maybe someone from your host family or study abroad program can cosign for you.
Still, it may be possible to get a private loan without a cosigner if you have low credit and/or income. Just be prepared to possibly pay more in interest!
Other Ways to Finance Your Education
Yes, federal and private student loans are tools for receiving money to pay for college. But they aren’t the only options! Remember, you can always apply for scholarships and grants.
Scholarships and Grants
Scholarships are “gift aid,” which means they don’t usually need to be repaid, and are typically merit-based. You can search for scholarships based on skill, such as academic, athletic, or music scholarships.
There are also scholarships available for people of certain demographics, such as ones for minorities or for women. You could even find scholarships for people of a certain religion/denomination or for those who’ve engaged in community service.
Grants are gift aid awarded based on your financial need. Some grants are provided by the government (state or federal), while others may be offered by your school or a private company.
Work-Study Program
The federal work-study program awards students with financial need the option to work part-time jobs to help pay for college. If you are interested in participating in the work-study program, you can indicate your interest when you fill out the FAFSA.
If you do not qualify for work-study, you may consider getting a part-time job.
The Takeaway
To apply for a federal student loan, and other forms of federal financial aid, students will fill out the FAFSA annually. Students interested in private student loans will fill out applications directly with private lenders.
Private student loans can be a tool when all other forms of aid have been exhausted. But if scholarships, grants, and federal student loans don’t cover your cost of attendance, finding a suitable private student loan could be the final step to supplementing your education costs. SoFi offers fee-free private student loans with competitive interest rates for qualifying borrowers. Plus, SoFi members can access even more benefits like career coaching.
Ready to get started? SoFi offers private undergraduate, graduate, and parent student loans, and student loan refinancing with flexible repayment options.
Ready to get started? SoFi offers private undergraduate, graduate, parent student loans, and student loan refinancing with flexible repayment options.
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.
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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
With the average cost of tuition at a private college close to $40,000 per year, it’s no surprise that many students will take out student loans to pay for their education. These student loans come in all shapes and sizes: federal or private, subsidized or unsubsidized, cosigned or not.
Most federal student loans do not require a credit check and can be borrowed without a cosigner. While the majority of students who take out private loans have a cosigner to guarantee the loan, that’s not an option for everyone. A cosigner — generally a family member or close friend — is someone who guarantees they will pay back your student loan if, for some reason, you can’t.
If you don’t have enough established credit to qualify for a private student loan on your own, turning to a cosigner, if possible, may also help you get approved at a better interest rate. However, not everyone has someone to cosign their student loans, and that’s okay too. There are plenty of ways to potentially qualify for both private and federal student loans without a cosigner. Here’s what you need to know.
Key Points
• Many students need to take out loans due to rising tuition costs, with options including federal loans that do not require a cosigner.
• Obtaining a private student loan without a cosigner is possible, but typically requires a solid credit history and may result in higher interest rates.
• Federal student loans offer various funding options without the need for a cosigner, although loan limits may restrict the total amount available.
• Students unable to secure a loan without a cosigner can consider alternatives such as attending a community college or exploring grants and scholarships.
• Building credit early and checking eligibility through soft credit inquiries can help increase the chances of qualifying for loans without a cosigner.
Purpose of Adding a Cosigner
There are two main reasons why adding a cosigner to a private student loan may make sense — one is to improve your chances of being approved for a loan and the other is to potentially help secure a more competitive interest rate.
If you’re applying for student loans, you may not have a long credit history yet. To lenders, a lack of credit history can be seen as risky because you haven’t proved how well you can manage your financial obligations. You might need a cosigner to convince a lender to give you a student loan, since having a cosigner with more financial security or a better credit history reduces risk to the lender.
A cosigner with a strong credit history may also help you get approved for a loan with a lower interest rate, which could help reduce the amount of money you pay in interest over the life of the loan.
A cosigner will need to share their financial information with the lender, so it’s a good idea to make sure that your cosigner has plenty of time to get their documents in order and discuss loan applications with you.
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Can You Get a Federal Student Loan Without a Cosigner?
You’ll submit your financial information and, if you’re a dependent student, your parents’ information too. Depending on your financial need, you’ll then be offered a combination of federal student loans — including subsidized and unsubsidized Direct or PLUS Loans — and work-study programs.
Federal student loans typically do not require a cosigner, nor a credit check, and they often have competitive interest rates. Direct PLUS Loans , which are primarily offered to parents and graduate or professional students, however, do require a credit check.
You’ll want to keep in mind that there are limits on how much you can take out in federal loans. For example, dependent students whose parents are unable to obtain PLUS Loans cannot take out more than $9,500 as a first-year undergrad. And, no more than $3,500 of this amount may be in subsidized loans. For more information on loan limits, check here . Because of these limits, students may look for additional sources of funding.
💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.
Can You Get a Private Student Loan Without a Cosigner?
Yes, it is possible to get a private student loan without a cosigner, but you will likely need to have an established credit history or be willing to pay a higher interest rate.
To qualify for a private student loan, which are available from banks, credit unions, and online lenders, you generally have to be age 18 or older, a U.S. resident, and enrolled in school at least part time. Additionally, certain lenders may only approve loans if you are enrolled at schools that meet their criteria, which can vary from lender to lender.
To qualify for a private student loan without a cosigner, you typically must meet certain credit requirements. This often includes at least two years of established credit history, a credit score in the “good” range (670-739), and a certain minimum amount of income.
Some private lenders will provide student loans without a cosigner even if you have a limited credit history or income. However, you will almost definitely pay a higher interest rate.
If you know you’re going to need a student loan without a cosigner, one option is to start building your credit as early as you can. There are several ways to begin building credit. One is to be added as an authorized user on a credit card held by someone (usually a parent) with good credit. If you’re over 21, you might consider applying for a low-limit credit card. This type of credit card can help keep you from going overboard on spending, while still allowing you to establish credit.
Why It Can Help to Have a Cosigner on a Private Student Loan
Having a cosigner on a private student loan can help you qualify for a loan you might not otherwise be able to get. In addition, it can help you get approved for a larger loan amount, as well as lower rates and fees.
You’ll also want to keep in mind that having a cosigner is not necessarily a permanent situation. Some lenders will “release” a cosigner from a loan after the primary borrower meets certain requirements, like a certain number of payments and a credit check.
You also may consider refinancing your loan once you’re out of school, which will then be a way to have the loan in your own name. It can be a good idea to talk through what your cosigner expects and anticipates for the life of the loan, so that you’re both on the same page.
What is the Minimum Credit Score for a Student Loan?
If you apply for a federal student loan, your credit score won’t be a factor, since a credit check is not even part of the application process. However, private student loans often require a credit score of at least 670 to get a loan without a cosigner.
The exact qualification criteria will vary from lender to lender but, generally, the higher your credit score, the more likely you are to qualify and obtain a competitive interest rate for a private student loan.
Before you apply for a private student loan, you may want to get copies of your credit reports (available free at AnnualCreditReport.com ) and check your credit score to get a sense of where you may stand in the eyes of a lender. You also can check your credit report for any errors, which could bring down your score.
Who is Eligible for Student Loans That Don’t Require Cosigners?
Federal student loans don’t require a cosigner. There are also some private student loans that don’t require a cosigner, though you typically need to meet certain credit and income requirements.
You may be able to check your private student loan eligibility before you apply for a loan without a cosigner. This triggers what’s known as a “soft” credit check. A soft credit check does not affect your credit score, but can give you an approximate idea of whether or not you’ll be approved for a loan and what the interest rate on the loan may be.
Keep in mind, though, that your loan won’t be finalized until you apply for the loan. At this point, a hard credit check will be performed and final approval decisions will come through. But checking loan eligibility is one way to know whether or not a lender may consider your application without a cosigner.
What are Your Options If You Can’t Get a Student Loan Without a Cosigner?
If you can’t get a student loan without a cosigner and you don’t have someone who can be your cosigner, don’t panic. There are other potential paths forward depending on your goals and your circumstances:
• Take a gap year. Some students take a year off to build credit, grow their income, and reapply once they feel their finances are on more secure footing.
• Consider a less expensive school. Some students who can’t get a cosigner decide to go to a community college and take core credit courses. They may also work during this time. Then, when they feel their finances are on more secure footing, they transfer to their intended school to finish their degree.
• Rethink your education priorities. If you can’t get a cosigner and are having trouble shouldering loans on your loan, you may recalibrate your educational goals and consider different degree programs or institutions that may have a less expensive price tag. It can be helpful to talk to people who work in your future career field — they may have thoughts on how you can save money on education or may have tips for alternate paths toward the job you want.
• Talk with your financial aid office. Chances are, your financial aid office has seen similar situations and may have ideas. They may also be able to connect you with other funding opportunities, as well as students who have independently financed their education.
Other Ways to Help Finance Your Education
Besides taking out federal student loans or private student loans without a cosigner, there are a few other options to help finance your education.
There are many grants and scholarships available, including need-based grants and merit-based grants (grants available for students who reach a certain level of academic excellence) that you do not need to repay. You can search for scholarships online to see if there are any you might qualify for. You might also ask your high school’s college counselor or selected college’s financial aid office for information on any scholarships or grants you may be eligible for.
You might also consider working while you’re in school. Some students find they can manage a job alongside their studies, while others find that it’s challenging to find a balance. There is no “right” way to pay for your education. Some students may take a year or more off to save up for school, and then focus full-time on school. Talking to graduates can help you see different pathways and that there is no “one size fits all” when it comes to financing an education.
The Takeaway
Applying for a private student loan with a cosigner can help a potential borrower secure a more competitive interest rate or preferable loan terms. This is because the cosigner provides additional security for the lender — if the primary borrower runs into any issues repaying the loan, the cosigner is responsible.
Federal student loans, aside from Direct PLUS loans, do not require a credit check or cosigner. If you find that your federal loans aren’t going to cover your education, a private student loan may help. And, some private lenders will offer student loans without a cosigner. Just keep in mind that private student loans lack the borrower protections offered by federal student loans.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
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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.
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 .
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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Sending your child off to college is a major milestone towards their independence. But if your kid decides to get a private student loan, they will most likely need to have a cosigner. Typically, that means mom and dad step up to the plate.
Should parents cosign on student loans? The answer will depend on such factors as your risk tolerance, your child’s probable ability to repay the loan, and if it makes sense for your family and your finances.
Cosigning for a student loan has benefits and disadvantages. There are also other options that can help bridge the gap between the cost of higher education and what you’re able to pay.
This guide will provide important facts to know about being the cosigner on a private student loan.
Key Points
• Cosigning for student loans is often necessary due to students’ limited credit history, with about 92% of private undergraduate loans requiring a cosigner.
• The decision to cosign involves considering potential risks, such as impacting personal finances and the possibility of strained family relationships if repayment issues arise.
• Alternatives to cosigning include pursuing federal financial aid, scholarships, and encouraging students to build their own credit history through responsible financial practices.
• Parents can opt for a Direct PLUS Loan, allowing them to cover educational costs directly, but they bear full responsibility for repayment, often at higher interest rates.
• Exhausting all federal aid options is crucial before considering private loans, as they can help fill educational funding gaps while avoiding unnecessary financial burden.
Why Are Student Loans Cosigned So Often?
It’s no secret that the cost of college education has skyrocketed. Consider these statistics:
• The average cost of college has doubled since year 2000.
• The current average cost for one year of college at a public institution is $26,027, including living expenses, with tuition and fees costing $9,678 in-state and $27,091 on average out-of-state.
• For a private, nonprofit university, that number rises to $55,840 on average, with tuition and fees accounting for $38,768 of that sum.
There are many kinds of funding and different types of student loans to contemplate when budgeting for college. When savings, federal student loans, federal work-study, and scholarships or grants can’t fill the gap, students may look to private lenders to help them cover the rest.
Unfortunately, students just starting out usually don’t have the credit history needed to get a loan from a private lender, so cosigners sometimes step in.
But do students have to have a cosigner for a private student loan? Almost always. Since many lenders won’t lend money to young adults with no or little credit history, they typically require cosigners. Roughly 92% of all private undergraduate student loans have a cosigner.
💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.
What Are the Downsides to Cosigning My Child’s Loan?
If you’re looking to privately fund your child’s education costs, it means they likely need the help to pay for college, just like many Americans do. But cosigning for your child’s private student loan is not without potential repercussions. Think over the following:
• When wondering “Should I cosign a student loan?” do consider your relationship with your child. If something goes wrong — missed payments, extended unemployment, or worse, default — the potential for financial stress could create the possibility of misunderstandings and hurt feelings. If your relationship with your child is already tenuous, bringing financial stress into it will likely not help.
• Cosigning could put your own finances at risk. You may have the most responsible young adult in the whole state, but if something goes awry and the loan goes into default, the lender may sue you or hire a collection agency to try to recoup the debt.
A student loan default might also tarnish your credit score. Simply signing the loan also affects your score. Even if you’re not the one making payments, you’re still responsible for the loan, according to the major credit bureaus.
Do parents have to cosign student loans? Not necessarily. And so you may wonder what options you have to cosigning a loan for your child’s education. Here, a few to know about:
The First Step for Federal Aid: FAFSA®
Do parents have to cosign a private student loan? The answer in the previous section was “almost always.” The “almost” part of that answer is “not if they can find other sources of funding.” Scholarships and grants, which don’t have to be repaid, are a good place to start, but they often don’t cover the entire cost of an entire college education. The first source of funding that should be exhausted before any others is federal student aid.
Filling out the Free Application for Federal Student Aid (FAFSA®) is the first step to figuring out how much federal (and frequently state) financial assistance your child is eligible for. You’ll add your financial information that will determine the amount of federal assistance, which includes Direct Subsidized Loan, Direct Unsubsidized Loans, and other student aid from the federal government, like grants and work-study.
Some states and colleges also base merit aid on FAFSA information, so the application is an important one for all types of financial aid, not just federal.
Establishing Their Credit Score
There are also some other pathways to consider when trying to find loans without a cosigner. One good idea is to have your child start building their credit history. A credit score is typically enhanced over time as the record of their successful payments grows, along with other factors like their outstanding debt, credit mix, and more. A couple of pointers:
• Your student might start by either getting a secured credit card at a credit union or other financial institution, then showing they can make timely monthly payments on a purchase.
• If your student is trustworthy and mature, you could also consider adding them as an authorized user to a credit card you already have. You’ll be responsible for making the monthly payments, but they could benefit from your financial behavior.
Scholarships
Loans and scholarships can go hand-in-hand to make college affordable. Like the real estate mantra concerning location, the college payment mantra might be, “Scholarships, scholarships, scholarships!” Money you don’t have to pay back? Yes, please.
The FAFSA will help colleges determine what federal student aid, scholarships, and grants your child might qualify for, but don’t let your student stop there.
Merit scholarships come in all sizes and from diverse sources, including local and national organizations, heritage associations, and various writing and other contests sponsored by nonprofits and other organizations. It might help to look at groups that your family might be closely associated with, such as unions, professional associations, or alumni organizations.
Keep in mind that your child can apply for scholarships while they are still in college, because some are tied to college majors, and your student is likely to have settled on a major after the first year or two. This could open up scholarship options that couldn’t be considered before they declared a major.
You might also be able to forego cosigning a student loan by making strategic decisions about education costs. Can your student reduce the overall cost of college by ditching the meal plan, living off campus, or even attending a significantly less expensive college?
Or, instead of paring down expenses, maybe your student could consider boosting their income to avoid the need for a cosigner on a student loan. One idea might be to start a low-cost side hustle. Another could be to take a year off to work — this may be enough to close the gap, avoiding the need for a loan altogether.
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Loans for Parents
Parents who don’t mind shouldering more of the cost can also take out their own federal student loans with the Direct PLUS Loan , sometimes referred to as a “parent PLUS loan.”
Even though your student benefits from the loan, they are not the borrower, and you’ll be solely responsible for paying it back. Some parents may consider working out a repayment arrangement between themselves and their student. If this will be the expectation, however, it’s a good idea to discuss the arrangement with your student before taking out this type of loan.
Direct PLUS Loans can also be taken out by graduate or professional students. Whether a parent or a graduate student, there is a downside for the borrower. The interest rate for Direct PLUS Loans is often higher when compared to other federal student loans — 8.05% for the 2023-2024 school year versus 5.50% for Direct Subsidized Loans and Direct Unsubsidized Loans.
However, in this scenario, you won’t be asking yourself, “Should a parent cosign a student loan?” because you’re helping fill the gap without depending on your student to pay the loan back.
💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.
The Takeaway
There are options available to eligible students before considering a private student loan. However, if all other options have been exhausted, a private student loan can be a good choice to help your child complete their college education.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.
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.
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 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.
