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If you’re thinking about taking out student loans to pay for college, you’re in good company: Nearly two-thirds of college graduates leave school with debt. Like most loans, student loans charge interest, which is the cost of borrowing money from a lender. Whether you take out federal or private student loans, you’ll end up paying back more than your original borrowed.

Is it worth it?

The answer depends on your degree, major, and the type and size of your debt. Read on to learn more about whether the current cost of college is worth it, different ways to pay for school, and when it makes sense to take out student loans.

College Costs Vary By School

It’s no secret that college costs have gone up over the years, causing more students to take on debt as a means to afford a college education. Indeed, student debt has more than doubled over the last two decades. As of March 2023, about 44 million U.S. borrowers collectively owed more than $1.7 trillion in federal and private student loans.

But not all schools cost the same amount. In fact, some colleges cost considerably less than others. According to Educationdata.org, the average cost of attendance for a student living on campus at a public four-year in-state college is $26,027 per year; out-of-state students pay $27,091 per year. The average cost of attending a private, nonprofit university, by contrast, is $55,840 per year.


💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Factoring in Financial Aid

Financial aid is another factor that affects the cost of going to college. Some schools may have a high sticker price but offer a variety of need- and merit-based aid options to students, which can lower the actual cost of attendance.

Colleges and universities will frequently publish what percentage of their students receive financial aid and will sometimes also publish the average award amount. This can be helpful information for students applying to colleges.

When deciding where to apply and attend school, keep in mind that while the sticker price for College A is more expensive than College B, the financial aid package at College A may make it a more affordable option in the end.

Not All Majors Have the Same Income Potential

Another consideration when evaluating whether borrowing student loans is worth it is to factor in the earning potential based on your selected major, keeping in mind that not all majors offer the same income potential.

For example, undergraduate degrees in computer and information science and software engineering net recent grads a median salary over $127,000. Other majors, such as dance or drama, generally don’t offer as much consistent earning potential to graduates.

It’s a good idea to do some research on the future earning potential for the major and field you hope to pursue. This can be helpful in understanding how much you’d realistically stand to earn and, therefore, how long it may take to pay back student loans. Resources like the Payscale College Salary Report or the Bureau of Labor Statistics are two places to start.

How Much Should I Borrow for College?

A general rule of thumb is that students should limit what they borrow to what their potential career will reasonably allow them to repay. As a rough guideline, you may want to avoid borrowing anything more than you will likely be able to earn in your first year out of college.

Keep in mind that just because your financial aid package may include a certain amount in federal student loans, you are not required to borrow the maximum. Consider reviewing other sources of financial aid like private scholarships and grants. It can also be worth setting up an annual budget with anticipated costs for tuition, fees, room and board, and other expenses so you have an idea of how much you may actually want or need to borrow to pay for school.

College Graduates May Have More Financial Stability

In the long term, college graduates may have more financial stability. Research suggests that college graduates have both a higher median income than those without a college degree and earn more over their lifetimes.

Another factor, based on unemployment rates, is that people with a college degree tend to have greater career stability than those without a college degree.

This isn’t always true, however. As some recent studies suggest, certain career paths that don’t require a degree — such as construction inspectors or cardiovascular technicians — also offer significant earning potential.

Here’s What You Might Consider if You Choose to Take Out Student Loans

There are a number of factors to consider when deciding what type of student loan will best suit your particular needs, so it’s important to do your research beforehand.

Things like whether the loan is federal or private, what the current interest rates are, and how long it will take to pay off the loan could all contribute to how much student loan debt you ultimately find yourself in and are important considerations before taking out a loan.

Federal Loans vs Private Loans

There are two main types of student loans — federal loans and private loans. Federal loans are borrowed directly from the government, whereas private loans are borrowed from private lenders like banks, credit unions, and other financial institutions.

While the two loans serve the same purpose, there are some important distinctions. Because federal loans are made by the government directly, the terms and conditions are set by law. These loans also come with certain perks and protections, such as low fixed interest rates and income-driven repayment plans, that may not be offered with private loans.

Private loans are less standardized, since the terms and conditions are set by the lenders themselves. For example, some may offer higher interest rates than federal loans, and interest rates may be fixed or variable. It’s important to understand specific terms and conditions set by a private lender. Since private student loans may lack the borrower protections and benefits offered by federal loans, you generally want to tap financial aid and federal student loans first, then consider filling in any gaps with private student loans.

Understanding Interest Rates

Sometimes people fail to consider the interest rate on the student loan and how it will affect the amount of money they will end up owing.

Interest is calculated as a percentage of the unpaid principal amount (total sum of money borrowed plus any interest that has been capitalized).

Capitalization is when unpaid interest is added to the principal balance of a loan, and interest is calculated using this new, higher amount. You might have interest capitalization if, for example, you decide not to make interest payments on an unsubsidized federal loan or private student loan while you are in school. This unpaid interest will be added to your loan balance and interest will be charged on this new, higher balance.

For all federal student loans, interest rates are set by the government and are fixed, which means they won’t change over the life of the loan. With private student loans, it’s up to the lender to set the rate and terms. Generally students (or their parent cosigners) who have strong credit qualify for the best rates. If you are interested in borrowing private student loans, it’s a good idea to do some research and shop around so you can find the loan that best meets your needs.


💡 Quick Tip: Federal student loans carry an origination or processing fee (1.057% for Direct Subsidized and Unsubsidized loans first disbursed from Oct. 1, 2020, through Oct. 1, 2024). The fee is subtracted from your loan amount, which is why the amount disbursed is less than the amount you borrowed. That said, some private student loan lenders don’t charge an origination fee.

How Long Will it Take to Repay Your Loan?

Paying more money sooner can significantly reduce the amount of time it takes you to pay off a loan (as well as lower the cost). But that may not always be a feasible option. It’s important to consider the implications of different kinds of repayment plans when you take out a loan.

The standard term to repay a federal student loan is 10 years. However, depending on your income and other factors, you may need more or less time to pay back the money. The federal government offers a choice of payment plans, including fixed payment plans and plans that base your payment on your income. Private lenders also typically offer a choice of repayment options.

When choosing your loan term, keep in mind that a longer repayment term will lead to lower payments but a higher overall cost, since you’ll be paying interest for a longer period of time.

The Takeaway

Student loans can help open up doors to higher education for students, but borrowing responsibly is important. When deciding if student loans are worth it for you — and how much you should borrow — you’ll want to consider multiple factors, including your choice of major, future career path and earning potential, and the cost of the school you hope to attend after factoring in financial aid.

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.

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.

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Returning to school can help you advance in your current job, open you up to new professional opportunities, and increase your salary. But those potential benefits don’t come without costs.

If you’re thinking about going back to school at 30 (or any age), it’s a good idea to consider what you hope to gain out of more education, and whether it may increase your earning potential or improve your job (and overall life) satisfaction. You’ll then want to factor in how much the program will cost and how you’ll pay for it.

There’s no one simple formula to determine whether or not going back to school is worth it, but these tips can help you make an informed decision.

Determining Whether Going Back to School Is Worth It

Once you’re clear about what program you’d like to pursue and have a list of schools to consider, you may want to ask yourself the following:

•   Will the degree help me in my career path?

•   Is this degree necessary to continue on my career path?

•   Will this degree increase my job and overall life satisfaction?

•   Will my investment in this degree be worth the cost?

Here’s a look at how you can answer each one of these questions.

Will This Degree Help Me in My Career Path?

When going back to school as an adult, it’s important to position yourself for continued growth based upon the career progress you’ve made to date. Sometimes, your continuing education of choice will take you further on the same career path you’ve already established. Other times, you will be broadening your education to branch out into complementary fields.

Talk to Trusted Colleagues

To make sure that the program you’re choosing will help you to accomplish your career goals, consider talking to people whose judgment you trust, including those who have pursued the path you’re considering.

Review Linkedin

Another resource that might be worth checking out is LinkedIn. You can search the profiles of people who work for companies you admire or who are in a job position you’d like for yourself. What educational credentials have they listed? If they have a graduate degree, which one? Does this mesh with what you have in mind?

Recommended: 6 Ways to Save Money for Grad School

Evaluate Career Opportunities

Sometimes, of course, obtaining additional education is necessary to fulfill your career goals. This is true if you want to become a doctor, dentist, nurse, or lawyer. In other cases, you may not necessarily need additional education to get a job in a particular field, but you might need further education to rise up the career ladder, get a significant increase in pay, or work for a particularly prestigious company.

Obtaining an MBA, for instance, can provide you with skills that will suit you well in various fields. It can also position you to take on new career positions and boost your overall pay.

Is This Degree Necessary to Continue on My Career Path?

Sometimes, of course, obtaining additional education is necessary in order to fulfill your career goals. This is true if you want to become a doctor or a dentist, a nurse or a lawyer. And, in other cases, you may not necessarily need additional education to get a job in a particular field, but you might aspire to work for a company that requires further education from its professionals.

Obtaining an MBA, for instance, can provide you with skills that will suit you well in various fields. And companies are very interested in hiring MBA graduates: After a hiring slump due to the Covid-19 pandemic, companies planning to hire MBAs in 2021 has rebounded to the same level as pre-pandemic, according to The Graduate Management Admission Council . In other words, not only can getting an MBA increase your skill set, it also may set you up for greater career and financial success down the line.

Will This Degree Increase My Job and Overall Life Satisfaction?

Any time you invest significant resources into a decision, such as going back to school, you probably have desired outcomes in mind. If you’re thinking about going to college to finish your degree (or for the first time) or going to grad school, you may be hoping to receive a promotion or get a better or more satisfying job, which is reasonable. But, it’s also important to consider whether those accomplishments will really make you happier.

A lot of the things in work that make us happy are intangible: a work culture and community that aligns with your values, work-life balance, or a boss you work well with. Having said that, you might need an advanced degree to get into companies and positions that provide these essentials.

Keep this in mind when deciding if going back to school is the right decision to make.

Will My Investment in This Degree Be Worth the Cost?

To determine the answer to this question, you’ll want to try to calculate what your financial return on education (ROEd) might be. To do this, you’ll first need to research the salary potential for someone with the degree you’re considering. You can then look at the costs involved to determine if, and when, the investment will likely pay off.

According to data from the National Center for Education Statistics, workers aged 25 to 34 with bachelor’s degrees earn, on average, 55% percent more than those who completed high school; those with master’s or higher degrees earn around 21% more than those with bachelor’s degrees.

How to Finance Going Back to School as an Adult

If you decide going back to school is worth the cost, the next step is to figure out how to pay for the program of your choice.

Explore Private Scholarships

First, you can conduct a scholarship search and explore foundations and organizations that may provide funding to you based upon your professional credentials, your community, religious affiliation, and/or ethnicity, etc. Also, you could check to see if your employer offers tuition reimbursement or any scholarship or grant programs that can benefit you.

Federal Financial Aid

It’s also a good idea to fill out the Free Application for Federal Student Aid (FAFSA®). This will give you access to financial aid, including grants, scholarships, work-study, and federal student loans. If you’re looking into grad school, keep in mind that graduate or professional students are typically considered independent students for the purposes of completing the FAFSA form. This means you generally are not required to provide parent information.

Grants and scholarships are a form of gift aid and do not need to be paid back. Federal student loans need to be repaid, but come with benefits such as income-driven repayment plans and forgiveness programs.

Private Student Loans

If financial aid isn’t enough to cover the cost of going back to school, you might look into getting a private student loan. These are available through private lenders, including banks, credit unions, and online lenders. Loan limits vary from lender to lender, but you can often get up to the total cost of attendance for an undergraduate or graduate program. Interest rates vary but borrowers who have strong credit generally qualify for the lowest rates.

Keep in mind, though, that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that automatically come with federal student loans.


💡 Quick Tip: Master’s degree or graduate certificate? Private or federal student loans can smooth the path to either goal.

Refinancing Existing Student Loans

If you’re heading back to school and have existing student loans from your undergraduate degree, refinancing might allow you to qualify for a lower interest rate. This can either help you pay off the loan faster and/or decrease how much you pay each month. You can also lower your monthly payments by refinancing for a longer loan term. However, this will result in paying more interest overall.

You can refinance private or federal student loans. It’s important to note that when you refinance federal student loans with a private lender, you forfeit certain federal benefits, such as forbearance and forgiveness programs.

What Is Student Loan Entrance Counseling?

If you plan to go back to school as an adult and take out federal student loans, keep in mind that all federal borrowers must go through student loan entrance counseling. This is a short, online course that is designed to help ensure students understand the responsibilities and requirements that come with borrowing student loans. It highlights the terms and conditions of borrowing a loan, and also emphasizes borrower rights.

The federal government conducts student loan entrance counseling online. You can get details on the course by logging into your account on the Federal Student Aid website.

The Takeaway

When evaluating whether or not going back to school is worth the cost, you’ll want to factor in things like your career goals, the anticipated job market after graduation, typical program costs, and average salaries for the career you are pursuing with the degree.

Going back to school is a personal choice. While it typically comes with added expenses, you may decide that the potential returns make it well worth the investment.

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.

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.

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There can be a good amount of competition for some college internships, and for good reason. They may provide invaluable work experience, exposure to an industry that’s of interest, and networking opportunities. But note the use of the word “may.” In some cases, an internship may not be as beneficial as others.

Here, you’ll learn more about the value of internships, both paid and unpaid, as well their advantages and disadvantages. Once you have that basic knowledge, you’ll be able to make the best decision for your needs. If you do think a college internship is a good move, then try the tips for finding one, also included below

What Is an Internship?

First, here’s a definition of an internship: It’s a professional work experience for a student. To add a little more detail, it can immerse them in a given career, show them some of the responsibilities typically related to a job in the industry, and give them hands-on time to do some tasks or two watch them be executed.

Internships may be paid or unpaid; some are completed to earn school credit. For some students, an internship can forge career connections and even lead to a job offer.

Paid Versus Unpaid Internships

An Internship’s value in terms of your future career hunting and job search can be considerable. But what about actually collecting a paycheck?

•   Some internships are paid (typically, a low wage, such as minimum wage) and others are unpaid, meaning there’s no financial remuneration.

•   However, some unpaid internships may allow the student to earn school credit, and some may offer a stipend to cover, say, transportation and food costs related to the job.

An internship is often a summer position, but it may also take place during a school break. Sometimes, a student may take on an internship during the school year, whether part-time or full-time, perhaps as part of the institution’s curriculum.

For example, Northeastern University in Boston is well-known for its co-op program which alternates periods of study with full-time work as a way of helping students prepare for their future careers.

One recent Gallup study found that about 40% of students had held an internship.

Are Unpaid Internships Legal?

Unpaid internships are a hotly debated subject. They are legal if executed properly. However, it can be important that unpaid internships do not have students engaging in the same work as employees but for free. In this scenario, an intern may do work adjacent to that of paid staffers, but they may not be able to actually get the hands-on experience they were hoping for.

Paid internships, obviously, offer the benefit of income and may allow students more hands-on experiences with work situations and tasks.

Both may allow participants to network and make valuable connections that could help them when they enter the job market. And both types of internships can be added to a student’s resume, helping them when they look for work.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Value of Internships: Improved Employment Opportunities

Here, take a look at an angle on the value of an internship.

•   Many organizations offer internships, at least in part, to identify quality candidates for entry-level professional positions. The internship period, for those companies, allows them to vet interns to see whom they are impressed with. This can lead to a more permanent commitment, aka a job offer.

And the value of college internships could go beyond potentially getting a job where you interned.

•   If you apply elsewhere, other companies may very well look to see whether or not you’ve completed an internship. If you have, this could indicate the level of seriousness you have about pursuing your chosen career.

•   In fact, an internship could add to the value of a college degree as it shows that you already have a bit of experience applying your skills and education in the workplace.

•   It also shows that another organization was willing to have you work for them, another plus.

Applying for and nabbing a college internship is important in one other way:

•   It gives you experience hunting for a job, creating a resume, and, most likely, interviewing for a position. These are valuable real-world skills to hone.

Recommended: What Is an Apprenticeship?

Value of Internships: Personal Development

When you intern at a company, you’re not just gaining experience. Mull over these points:

•   Being in a workplace and seeing what it’s like, day in and day out for a period of time, can also help you decide what you really want.

Although, say, a summer internship may not provide enough time to definitively decide if a certain path is right for you, it might contribute to your feeling of, “Yes, this is for me!” or, of course, the opposite. At a minimum, you’re more industry-savvy than you were before, which might help guide your direction.

•   Your internship could also help you develop a professional network — a group of people who might assist you as you forge your own unique career path. They could invite you to industry events, and your contacts could also share job opportunities with you. They might even be able to provide references. Who knows? You might even emerge from the experience with a career mentor.

Just remember that, as you build your professional network, it could be important to nourish those relationships, keep in touch, and reciprocate support however you can.

•   Internships might help you build confidence, as well, in your knowledge, skills, and abilities. You may feel more at ease in a workplace and job-hunting situations.


💡 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.

How to Find Internships

If you appreciate the value of internships and are ready to hunt for a college internship? You may want to try these tactics:

•   You could start by talking to your school counselors, who often have invaluable resources to share. Your college may have a career services or internships program or office to tap as well.

•   Look online. For example, Internships.com might be a great place to look. And, if you’re interested in specific companies, you could check their websites for opportunities. You might luck out with an internship that could lead to a rewarding job.

•   You could also talk to chambers of commerce, consult with professional associations connected to your career, ask for recommendations in the industry-focused clubs you belong to at college, and otherwise network and ask for advice. Career fairs might yield some leads, too.

•   Check in with your school’s alumni office. There may also be grads from your school who might be willing to make recommendations or even be hiring interns.

Some of the more coveted opportunities tend to fill up early, so you might want to start your search as early as you can. Your college’s career center might be able to guide you with timelines. You could focus on something that dovetails with your college major, but don’t worry about being too specific. Gaining a broad knowledge of your areas of interest could help you choose the right career.

Student Loan Refinancing

Internships could be invaluable for college students when it comes time to hunt for a job, and if you have student loan debt, getting a job earlier means you might have opportunities to pay down your student loan debt faster. That, in turn, could potentially help you save on the amount of interest you’ll pay back overall.

Another strategy you could consider is to consolidate all of your student loans and then refinance them into one loan that could help you save. (Keep in mind, though, that refinancing with an extended term can result in paying more interest over the life of the loan.)

To find out how much money you could save by refinancing, you might use an online student loan refinance calculator. An important note: If you refinance federal loans with a private lender, you will lose access to federal benefits and protections, such as student loan forbearance and forgiveness.

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

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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It’s a common scenario for students (and sometimes their parents) to borrow student loans as a way of covering costs associated with college. Tuition, housing, textbooks, and incidentals can really add up. But what happens if their loan amounts to more than what the bursar’s office has listed as the balance? In that case, they may receive a student loan refund.

A student loan refund is money that the borrower receives when the loan amount exceeds the amount of money required to pay for qualifying education expenses. Say, perhaps you borrowed enough for some living expenses that are not billed via your school. That overage would come to you as what’s called a student loan refund in the form of direct deposit or a check.

So what happens next when you get a student loan refund? Read on for more information on what a student loan refund is and what to do if you receive one.

What Is a Student Loan Refund?

To understand what a student loan refund is, it can be helpful to first look at what college financial aid is and how it is distributed to students. When a student or their parent pursues federal financial aid, such as a student loan, that aid is distributed via a credit to the student’s account at their college.

Private student loans are distributed differently depending on the lender’s preferences. Some private lenders may deliver the funds directly to the student.

Others may choose to credit the student’s college account similar to how federal aid is distributed.

Private or federal, this is where student loan refunds may come into play. Student financial aid can cover costs such as tuition, room, and board, and fees. Here’s more detail:

•   On occasion, an aid distribution can lead to there being an additional credit in the student’s college account.

•   This happens if there is any excess money after paying for the necessary expenses. In that case, the student or parent will receive a student loan refund via a check or in the form of a direct deposit to their bank account.

•   An example of how this might happen is that funds are sent to the student’s school, where the student’s account only reflects tuition. But the amount was also intended to cover textbooks, which the student will buy separately. The overage in the student loan (the part meant to pay for the books) could then be sent to the student.

Or it might be a case of the student having borrowed more than they actually needed to afford their school costs for a particular time period. Perhaps they signed up for a class that wound up being canceled and are now taking a different class that carries fewer credits and less expense.


💡 Quick Tip: Some student loan refinance lenders offer no fees, saving borrowers money.

How to Get a Student Loan Refund

Whether a student or a parent takes out a federal student loan, the process of getting a student loan refund will generally look similar. Each semester, the school will generally review student accounts to determine if there are any eligible credit balances that can be refunded to the student.

If that is the case, here are some details to know:

•   The school has 14 days to issue a payment to the student if there is credit on their account. In some cases, schools may determine that credit balances should be applied to students’ future costs at the university.

•   In some cases, if the credit is not a result of the student receiving financial aid, the school may require that students request a refund. Follow the refund request process as determined by the school you attend.

•   In general, the school in question will contact the student or their parents in writing any time they distribute any loan money. The loan servicer will also provide confirmation that the loan money was delivered.

•   Alongside this notice, borrowers will generally also receive information on how to cancel part or all of the student loans. If the borrower realizes they don’t need the full loan amount, this may be an option they want to pursue.

•   Know that any amount refunded is still considered part of the total amount borrowed. So, borrowers who receive a portion of their student loans refunded would still be responsible for repaying that amount, with interest, if the refund is not canceled.

•   If this is the case, when it comes to federal student loans vs. private loans, the borrower can cancel all or part of their loan within 120 days of receiving it. They will incur no interest during this time and no fees will be charged.

The process of getting student loan refunds may vary when dealing with private lenders.

•   If the funds were received by the student to pay for qualified expenses, such as textbooks, the student can go ahead and use it for such purchases (more on this below).

Recommended: How and When to Combine Federal and Private Student Loans

Common Student Loan Refund Mistakes

When it comes to private and federal student loan refunds, there are a few common pitfalls that students and their parents should avoid. Especially if they want to get their hands on a student loan refund check sooner rather than later.

Moving Too Slow

Requesting a student loan refund is a bit of a time-sensitive process.

•   If someone realizes they won’t need the full amount of a federal student loan awarded before the funds are disbursed, they can actually request the school cancel the check or deposit before the need to process a refund even arises.

•   If the borrower realizes after distribution of a federal student loan that they don’t need all or any of the funds, they have 120 days after the disbursement date to return the funds without incurring interest or fees.

•   If a borrower misses both of these opportunities, the process of working with their school’s financial aid office to return the funds can become more complicated and time-consuming.

Not Establishing a Paper Trail

When making a student loan refund request, it may be a good idea to keep a paper trail of all requests and communication in order to establish a clear history of a desire to return the unused funds, if that is your situation. If things get lost in translation (which could happen), having a paper trail can be extremely helpful.

Over Relying on Student Loans

Some students and their parents lean too heavily on student loans and may be able to get a bigger refund if they can find another way to finance any qualified education expenses. Student loans can be used to pay for academic and living expenses for the student while they’re in school.

However, pursuing other forms of financial support, such as a work-study program can allow students to send more of their aid funds back, which will leave them with fewer loans when they graduate.

While it can be tempting to use a student loan refund to cover extra expenses like clothing and transportation — the less that is borrowed, the less that will be owed at graduation.

Just be sure that, if you receive a larger loan disbursement than what you actually need, you don’t wind up spending it on, say, dining out or clothes while in school. While those are part of college life, that could be a misuse of your financial aid.

Recommended: What Happens If You Just Stop Paying Your Student Loans

What to Do With a Student Loan Refund

When a student or their parent gets a student loan refund, they have two main options. They can keep it or return it.

Keep the Student Loan Refund Check

The first option is to keep the refund. This money can be used as the borrower sees fit. Borrowers aren’t required to submit proof of what they spent the funds on which can make it tempting to spend the refund on expenses that aren’t necessarily required for education purposes.

Keep in mind, as noted above, that spending the funds on nonqualified expenses could be considered fraud and is not recommended. It may feel appealing in the moment to use the funds, it may not be the wisest decision. Additionally, a student loan refund is still money that needs to be repaid with interest, so keeping that money may also not be in your best interest from a financial perspective either.

Return the Student Loan Refund Check

If the funds aren’t needed to pay for school, returning the refund check may be the most beneficial choice in the long run. Because, as mentioned, the money will have to be paid back (with interest) and spending it on unnecessary expenses can be quite a disservice to the borrower.

For details on returning your student loan refund check, contact the school’s financial aid office. If the borrower chooses to keep the student loan refund check or misses the deadline to return it, there are still some next steps available to them. One such option is to make a payment on their student loan balance.

Even though federal student loans don’t require payment until the student graduates, this can be one way to cut down student loan debt. The borrower can also use those funds for expenses in the next term and as a result, can choose to borrow less money for that term.


💡 Quick Tip: If you have student loans with variable rates, you may want to consider refinancing to secure a fixed rate in case rates rise. But if you’re willing to take a risk to potentially save on interest — and will be able to pay off your student loans quickly — you might consider a variable rate.

Refinancing Student Loans

Now, imagine that all your hard work has finally paid off. It’s time to cross that graduation stage. Once graduation day rolls around, students and their parents will begin to think about how they want to manage and pay off their student loan debt.

One option that can lead to saving money on interest and potentially expedite the repayment process is to refinance student loans.

When someone refinances a student loan, they get a new loan at a new interest rate and/or a new term. If a borrower initially had more than one student loan, this leaves the borrower with only one monthly payment to make instead of multiple ones. In some cases, this can lead to a lower interest rate or it might mean a lower payment for a longer term. Keep in mind that if you refinance with an extended term, you may pay more interest over the life of the loan. Also know that if you refinance federal loans, your new private loan means that you have forfeited the benefits and protections of your federal loan. For these reasons, refinancing may not be the right choice for all borrowers.

The Takeaway

If there are funds from student loans left over after all tuition and fees are paid, students may receive a student loan refund check. This check can be used to pay for other educational expenses or can be returned.

Keep in mind that this money will need to be repaid with interest. Refinancing student loans can be an option when it’s time to start paying back what you have borrowed.

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

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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Disappointed by your financial aid package? Sometimes students don’t get as much aid as they hoped for. Occasionally, they’re denied any aid at all. Before you give up on going to your dream school, know that the decision isn’t necessarily final.

A financial aid appeal letter allows you to plead your case and share any new information. However, it’s essential to know how to write a letter compelling enough to change minds.

Here we’ll offer proven tips for building a persuasive argument, and a sample financial aid appeal letter template to get you started.

When To Write a Financial Aid Appeal Letter

At what point in time after you receive your financial aid offer should you send an appeal letter? As soon as possible. That’s because some financial aid is handed out on a first come, first served basis. The sooner you appeal the decision, generally the more funds there will be to draw on.


💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Why Write a Financial Aid Appeal Letter

There are two main reasons why students appeal their financial aid offer: not getting the amount of aid they need and getting denied outright.

The Financial Aid Offer Fell Short

A student’s financial aid offer is based on the school’s certified cost of attendance (COA) and the student’s Student Aid Index, or SAI (formerly called Expected Family Contribution, or EFC). The latter is calculated based on information provided in the Free Application for Federal Student Aid (FAFSA®) form.

But a lot can happen between when you file your FAFSA and when you receive your student aid offer letter. Your circumstances may have changed. Some common life changes that can affect your financial aid calculation include:

•   Parent’s job loss or switch to a lower-paying position

•   Medical emergency or other financial commitment that ate up the cash your family had set aside to help you

•   Parents’ divorce

•   New member joined the family, through birth, adoption, or guardianship

•   Death of a parent

Recommended: Independent vs Dependent Student: Which One Are You?

Not Meeting Eligibility Requirements

In order to qualify for federal financial aid, students need to meet a handful of eligibility requirements. The criteria include being enrolled or accepted for enrollment in an eligible degree program, and maintaining “satisfactory academic progress,” including a 2.0 GPA. The full list of eligibility requirements is available on the Federal Student Aid website at StudentAid.gov.

If you don’t meet one of the requirements before the financial aid office makes its decision or you lose eligibility after receiving an offer, you may not get the help you need.

Recommended: What Are the FAFSA Income Limits for Eligibility?

What To Say in a Financial Aid Appeal Letter

Before you begin writing your letter, you’ll want to verify if your school has an official appeals application or form. In addition, you can check your school’s financial aid office for details on the financial aid appeal process. Some schools offer appeal forms online or have walk-in hours to address appeal questions.

If your school doesn’t offer a form, here’s a look at some specific things you may want to include in your appeals letter.

Address a Specific Person

It’s a good idea to avoid generic greetings like “To Whom It May Concern.” Instead, you’ll want to identify a specific individual at the financial aid office. If you are unsure whom to address, reach out to the financial aid office to ask.

Highlight Examples

Your case will likely be more compelling if you can provide details about your situation and why you are unable to pay for college. Consider writing a bulleted list so you can provide straightforward facts about your family’s financial situation. A bulleted list will also make it easier to connect details with support documentation.

Provide Documentation

If you have any relevant documents that can help support your case, you will want to include them with the letter. For example, a death certificate, doctor’s note, or unemployment benefits letter can give the financial aid office the evidence that it needs.

State a Dollar Amount

If you’re asking for a specific amount, consider including a budget breakdown of how you’d spend that money, including tuition, room and board, supplies, books, and transportation costs. (SoFi’s Ca$h Course: A Student’s Guide to Money may help with this.)

Recommended: Ca$h Course: A Student’s Guide to Money

Add a “Thank You”

You may want to end your letter by thanking the person you’re sending it to. You may also want to express your excitement about attending this school.

Sample Financial Aid Appeal Letter

Date
Person’s name (if available)
OR
Financial Aid Appeal Committee
Name of School
Office of Financial Aid

Dear Name Here,

I am writing to appeal the financial aid offer I received. My proposed package included $00,000 in scholarships and grants, and $00,000 in federal student loans, for a total award of $00,000. However, the amount I will need to cover my cost of attendance this year and living expenses this year is $00,000. I am requesting an increase in student loans or gift aid to cover the remaining $00,000.

Since completing and submitting the FAFSA, my family has experienced a change in circumstances. My father was laid off from his job in February and is still looking for work. He provided the primary income for our household, so our family’s total income has dropped from $00,000 to $00,000 per year.

My family and I would be grateful if you would approve an increased aid amount of $00,000 to help me afford the cost of school this year. I’m thrilled to have been accepted at my school of choice and am eagerly looking forward to starting in the fall.

I appreciate your taking the time to consider my appeal. Thank you very much.

Sincerely,
Your name

3 Tips for Writing a Financial Aid Appeal Letter

A good financial aid appeal letter can potentially shift your financial aid office’s decision in your favor. Here are some things to keep in mind while you’re writing it.

1. Be Polite

Not getting the financial aid you feel you need can be a frustrating experience. When it comes time to direct your request to someone specific, look for a contact in your school’s financial aid office and address the letter to them directly. If you’ve received some aid, you could thank them for the amount and perhaps explain how much you appreciate them considering your appeal.

It can be difficult to leave emotion out of the equation, but a respectful tone can have a positive influence.

2. Keep It Concise

Be clear with your request and how much aid you need. Then give a straightforward explanation of why it’s needed. If you were denied aid for an issue with eligibility, you might want to explain the reason why it happened. For example, maybe your grades dipped because you were diagnosed with a severe illness, lost an immediate family member, or became homeless.

Try to keep your letter to one page. This is not the time for a manifesto. The financial aid office will likely be reviewing multiple letters, and brief messages can be surprisingly powerful.

3. Proofread the Letter

After writing and thoroughly proofreading the letter yourself, consider having a trusted friend or family member give the letter another read. It’s not always easy to catch errors on your own, and the easier your letter is to read, the better the impression you’ll make.

What To Do If Your Appeal Is Unsuccessful

If your appeal is denied, you may still have other options for covering college costs.

For example, you may be able to qualify for scholarships through your school or a private organization. Check your school’s website for opportunities, as well as websites like Scholarships.com, Fastweb, and the College Board. SoFi also offers a helpful Scholarship Search Tool.

Even if you were denied a federal Direct Subsidized Student Loan, you may have the option of taking out a Direct Unsubsidized Student Loan, which is not need-based. Or, if your parents are willing to help, they can apply for a Parent PLUS Loan through the Department of Education. These loans are also not need-based, and the maximum amount they can borrow is your school’s cost of attendance minus any financial aid you’ve already received.

Finally, you may also be able to apply for a private student loan. These loans are available through banks, credit unions, and online lenders. Loan amounts vary by lender but you can often borrow up to the full cost of attendance. These loans require a credit check, so if you’re still relatively new to credit, you may need a parent to cosign the loan. As you consider these options, take the time to research their costs and terms to make sure you get the best deal for you. You‘ll want to exhaust all federal aid options first before applying for a private student loan.


💡 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

Writing a financial aid appeal letter can help students qualify for additional financial aid. Appealing an aid offer won’t always result in an increased award, but writing an effective letter can potentially improve a student’s chances of getting more aid. A few suggestions to strengthen your letter include being concise, providing supporting documentation, being specific in how you’ll use the funds, and keeping the letter polite in tone.

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.

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