SoFi

Borrowing money to pay for school comes at a cost, in the form of interest. In certain situations, interest that has accrued may be “capitalized” on the loan. This means that the accrued interest is added to the principal, or the initial amount borrowed. This new value is then used to calculate the amount of interest owed each day, called student loan capitalized interest.

Interest capitalization can dramatically increase how much a borrower owes over time. Students who have subsidized federal student loans don’t have to worry about interest accruing while they are in school or during their grace period. For other types of federal student loans, including unsubsidized loans and PLUS loans, borrowers are responsible for paying the accrued interest.

Read on for more information about capitalized interest and student loans plus ways that can help reduce the impact of capitalized interest.

What Is Capitalized Interest On A Student Loan?

The simple answer to “What is capitalized interest?” is this: When accrued interest is unpaid, it is sometimes added to the principal value of the loan. This new loan principal becomes the value that is used to calculate the interest. Because the borrower is now paying interest on top of this new, higher loan balance, future payments will also be higher.

How Does Interest Capitalization Work on Student Loans?

Capitalized interest can happen on student loans in several scenarios. First, it may happen after a borrower graduates from school or after a grace period, and unpaid interest is added to the balance of the loan. Second, it could happen after periods of student loan deferment on direct loans and the Federal Family Education Loan (FFEL) Program loans managed by the U.S. Department of Education. Private student loans that are in forbearance may also be subject to capitalized interest.

Even though payments are not due during these periods, interest is often calculated and added to the balance of the loan once that period is over. This is the process of capitalization, which will likely increase the student loan balance.

Borrowers utilizing income-driven repayment plans may want to pay attention to capitalized interest as well. In these situations, unpaid interest may be capitalized on the loan:

•   If an individual voluntarily leaves an Income-Driven Repayment plan, does not recertify their income and family size annually, or does not have a partial financial hardship

•   If a deferment period ends

•   If a borrower consolidates their loans

In general, unpaid interest is added to the principal of a loan under an IDR plan under the following circumstances:

•   During times of forbearance or deferment

•   While the borrower is enrolled in school and has an unsubsidized loan

•   The borrower has a grace period.

Can You Avoid Student Loan Interest Capitalization?

There are a few ways that borrowers can try to minimize capitalized interest. Once interest is capitalized, there is little a borrower can do about it, so the trick is to avoid scenarios where interest is capitalized in the first place.

How Much Does Capitalized Interest Cost?

The actual cost of capitalized interest varies according to the amount of the principal and interest rate. For instance, if a borrower has $25,000 in student loans with an interest rate of 5%, the capitalized interest could be $3,083. This brings the total amount owed to $23,083.

Note: The monthly payment might be $117 under the SAVE plan, one of the repayment plans offered for federal student loans. The monthly payment can increase if the borrower decides to put the loans in deferment because during these times of non-payment, interest is capitalized.

When Does Interest Accrue?

Interest on federal student loans begins to accrue the day the loans are disbursed, and interest accrues daily through the life of the loan. This is likely the case for many private student loans, but be sure to confirm the terms with the lender before borrowing. Regardless of whether the student loan is federal or private, the promissory note generally includes all pertinent information on the loan.

Depending on the type of loan(s) a borrower has — subsidized or unsubsidized — they may or may not be responsible for paying for the interest charges accrued while they are enrolled in school and during periods of deferment or forbearance.

Immediately after graduation, most federal loans offer a six-month grace period where borrowers aren’t required to make loan payments. The grace period exists so recent graduates have time to find work. Not all loans have grace periods and even if they do, interest may still accrue during the grace period, but a borrower may not be responsible for paying it during this time.

Understanding Interest During Deferment or Forbearance

Students may be able to temporarily halt their student loan payments with programs such as deferment or forbearance due to economic hardship or job loss, but interest may accrue during these periods.

Borrowers with subsidized loans won’t have to pay interest accrued during periods of deferment because the government covers those interest charges. However, the government pays no interest charges on unsubsidized loans during deferment and does not make interest payments on any loan types during periods of forbearance.

It’s important to understand whether or not the interest will be capitalized on the loan before filing for deferment. This can help borrowers prepare for what lies ahead.


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

Ways to Minimize Capitalized Interest

Making Interest-Only Payments

Consider making interest-only payments while in school, during the loan’s grace period, or during periods of deferment or forbearance. If that isn’t in the cards, try to minimize the amount borrowed.

Applying for Scholarships and Grants

Continue to look for scholarships and grant money while enrolled in school and after receiving your financial aid award. Scholarships and grants are free in the sense that they are not required to be repaid.

Think Carefully Before Taking a Deferment

Graduates should be judicious about taking a deferment whether this period is immediately following school or arises after a borrower loses their job. While you shouldn’t feel bad about utilizing these programs when needed, it can be a wiser decision to do so only if it’s totally necessary.

If a borrower puts their loans in deferment, they can try making interest-only payments. Even if they’re not able to tackle the principal at this time, making interest payments makes it possible to minimize the amount of interest that may ultimately be capitalized on the loan.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

The Takeaway

When the accrued interest on federal student loans is unpaid, it may be added to the principal value of the loan under certain circumstances. This becomes the new principal value of the loan and is used to calculate the interest as it accrues moving forward. This is capitalized interest, which only applies…

•   When a borrower withdraws from an IDR plan.

•   When a borrower does not update their income and family size, or doesn’t have a financial hardship.

•   After deferment or consolidation of student loans.

In the long term, capitalized interest can make the cost of borrowing more expensive.

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.

If your parents are high earners, you might assume you won’t get any financial aid to help pay for college. But that’s not necessarily the case. The Department of Education doesn’t have an official income cutoff to qualify for federal financial aid. So, even if you think your parents’ income is too high, it’s still worth applying (it’s also free to do so).

Read on to learn how to get financial aid for college when you think your parents make too much money, as well as how to pay for college costs if you don’t qualify for financial aid.

It All Starts With the FAFSA®

The first step to knowing whether or not you qualify for any financial aid is to fill out the Free Application for Federal Student Aid (FAFSA). Even if you think your parents make too much to qualify for financial aid, it’s a smart idea to fill out and submit this form.

For one reason, there’s no income cutoff for federal student aid, so you may be surprised by what you are able to qualify for. For another, the FAFSA gives you access to non-need-based aid, such as Direct Unsubsidized Loans and institutional merit aid.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

Who Determines Aid Amount and Type?

The financial aid office at your chosen college or career school will determine how much financial aid you are eligible to receive. Here’s a look at what goes into the decision.

1. The first factor considered is the cost of attendance (COA), or what it costs a typical student to attend a particular college or university for one academic year. Cost of attendance includes tuition and fees, as well as books, lodging, food, transportation, loan fees, and eligible study-abroad programs.

2. Then the school considers your Student Aid Index, or SAI (formerly called Expected Family Contribution, or EFC). Your SAI is an eligibility index number that results from the information that you provide in your FAFSA.

3.   To determine how much need-based aid you can get, the school will subtract your SAI from the COA. Need-based aid includes Pell Grants, Direct Subsidized Loans, and federal work-study.

4. To determine how much non-need-based aid you qualify for, the school takes the COA and subtracts any financial aid you’ve already been awarded. Federal non-need-based aid includes Direct Unsubsidized Loans, Direct PLUS Loans, and TEACH Grants.

One big difference between subsidized and unsubsidized loans is when interest accrual starts. Because subsidized loans are need-based, the government covers any interest that accrues until loan repayment starts (typically six months after graduation). With unsubsidized loans, the interest starts to accrue from day one (though you don’t need to start making loan payments until six months after graduation).

You can estimate your eligibility for federal student aid by using either the Federal Student Aid Estimator or your school’s net price calculator (which you can find using the Department of Education’s search tool).

What Are Rules on Dependency, Divorce?

A student’s dependency status can make a big difference on their SAI. Not living with parents or being claimed on their taxes, however, does make you an independent student. To be considered independent for federal financial aid, a student must be at least 24 years of age, married, on active duty in the U.S. Armed Forces, financially supporting dependent children, an orphan (both parents deceased), a ward of the court, or an emancipated minor.

The rules regarding financial aid and divorce are changing for the 2024 – 2025 school year. The new FAFSA rules require the parent who provided the most financial support in the “prior-prior” tax year to complete the FAFSA application instead of the custodial parent. Prior-prior refers to the tax year two years ago from the beginning of the college semester. For the 2024 – 2025 award year, FAFSA would be looking at the 2022 tax year for this determination.

Other Routes to Meeting All Needs

The government isn’t the only path to money for school. Here are several other options you may want to consider.

Scholarships

The best thing about scholarships? You don’t need to pay them back. The second best thing is that they’re most often based on merit, not need.

So even if your parents make a good living, you may still be eligible. While many are awarded solely on academics, others are given for athletic talent, specific interests, or being a member of a specific group.

There are numerous college scholarships out there, offered by schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations. To suss out scholarship opportunities you might be eligible for, talk to your high school guidance counselor, your college’s financial aid office, and/or check out one of the many online scholarships search tools.

An Appeal of Your SAI

If your financial aid offer is less than you need to be able to afford college, you are within your rights to appeal to the school’s financial aid director.

You might want to be prepared to back up your request with detailed information such as your SAI, the amount you’ll need to successfully attend school, or a change in circumstances that will affect your family’s actual ability to pay, such as a parent’s job loss.

Recommended: How To Write a Financial Aid Appeal Letter

Parent Loans

Parents can apply for a Parent Plus Loan through the Department of Education. These loans are available to parents regardless of income, provided they do not have an adverse credit history. For loans disbursed on or after July 1, 2023, and before July 1, 2024, the interest rate is 8.05%. This is a fixed interest rate for the life of the loan. There is also an origination fee of 4.228%, which is deducted from each loan disbursement.

Some private lenders also offer parent student loans. You can apply for a private parent student loan directly with the lender. Before signing up for a private parent loan, it’s a good idea to shop around to find the lowest student loan interest rate you qualify for. Some lenders have a pre-qualification process that allows you to see a personalized rate before the lender does a hard credit pull.

Both federal and private parent loans can be used to cover any gaps left over after scholarships, grants, and other financial aid have been applied, up to the full cost of attendance.


💡 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.

Private Student Loans

Private student loans are also available to students to help them cover the costs of higher education, and they could be a good Plan B if there’s a gap between the aid you received (including federal student loans) and the cost of attendance.

Private student loans don’t have federal benefits like income-driven repayment plans and forgiveness programs, and interest rates are typically higher than undergraduate federal student loans. However, unlike federal student loans, you can apply for them at any time of the year. Plus, you can typically borrow up the full cost of attendance, which gives you more borrowing power than you get with federal student loans.

Private student loans can have either a fixed or variable interest rate; rates are determined by the lender. Qualifying for a private student loan is based on the borrower’s creditworthiness rather than need.

The Takeaway

What happens if your parents make too much money to qualify for financial aid? You may have to shift course a little bit, but there are other ways to get help paying for all of the expenses of college, including merit-based scholarships, non-need-based federal student loans, and private 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.

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.

SOIS1123015

While a college education can help prepare students for life, taking advantage of the professional network college offers can help launch your career. Whether trying to land a summer internship, get that first job out of college, or apply to graduate school, a letter of recommendation from a professor can be helpful.

Although requesting this is common practice, it can still feel nerve wracking to broach the subject. Keep reading to learn helpful tips to receive a glowing letter of recommendation from a professor.

1. Asking a Professor Who Knows You and Your Work

There are several factors to consider when deciding who you’ll ask for a letter of recommendation. Taking stock of which professors actually know your interests and goals, not just your name, is something to consider right away.

A strong letter of recommendation can involve praising a student’s personal character and highlighting their goals and ambitions. For this reason, choosing a professor you’ve personally interacted with, whether through class discussions or during office hours, could be beneficial.

If you’ve taken several courses with a professor, they may be able to showcase how you’ve grown throughout your time in college.

Since a professor will also be attesting to your academic merit, it can be helpful to start by identifying who has seen samples of your strongest work throughout college. For example, a personal essay or in-person presentation that earned a strong grade might indicate that a professor valued your work.

2. Choosing a Professor Who Specializes in Your Field

Although a letter of recommendation is foremost about your own skills and attributes, also of benefit can be a professor’s own credentials within an industry or academic field you are targeting.

A letter of recommendation from an esteemed and notable professor could help you stand out in a competitive group of applicants.

Many professors have built up extensive networks from academic conferences and working with faculty at other universities and in the private sector.

Though they may not have contacts at the company, organization, or university you’re applying to, their advice and connections in a specific sector or academic discipline could prove valuable as you begin your job search. As academic professionals, they may have insight on the return on education for different graduate degrees and careers.

Often, jobs or graduate school applications require submitting more than one letter of recommendation. Choosing a combination of references who can highlight your strengths and character and carry respect in your desired field could further enhance your candidacy.

3. Asking in Person, if Possible

Given the importance of the request, asking in person can show that you’re serious about your future and respectful of a professor’s time.

For students currently enrolled in school, finding time to ask a professor for a letter of recommendation may be as simple as making an appointment during their office hours.

If you’re studying abroad or have already graduated, reaching out via email may be your only feasible option for starting the conversation. To further demonstrate your commitment, you might ask to arrange a phone or video call.

4. Making a Personalized and Specific Request

The average college has a student to faculty ratio of 14-to-1, so it’s not uncommon for professors to have several students ask for letters of recommendation each year. Still, that doesn’t mean every request is guaranteed a response or agreement to receive a recommendation.

Out of consideration for a professor’s busy schedule, making a request that’s tailored to them and clearly outlines what you need may increase your chances of success.

To personalize the request, consider reminding them which of their courses you took, a key project or assignment, and how they influenced your academic and career goals. Next, providing a concise explanation of the position or program you’re applying for and what it means to you is an opportunity to convey your own professionalism and passion.

Since writing a letter of recommendation is a favor, sending a courteous request that allows a professor to opt out could help avoid a lukewarm reference. A well-crafted request makes it easy for the professor to quickly decide if they have enough knowledge about you and the position to write a letter of recommendation.

5. Providing Information to Write the Recommendation

Even if you have a strong relationship with a professor, the quality of the recommendation can benefit from supplemental information. For instance, providing a resume, college transcripts, personal statement, and a sample of work can help jog their memory and give them a blueprint of your experience and accomplishments to draw from.

It can be helpful to include a job description or, for a graduate program, admissions information. This could help a professor connect your academic knowledge and experience to the job or program’s desired qualifications and skills.

This is also the time to provide information and guidance for submitting a letter of recommendation. Some typical considerations to include are where to send the letter, any relevant deadlines, and to whom it should be addressed.

6. Giving Plenty of Notice

Asking your professor several weeks, if not months, before the recommendation is due can convey respect and appreciation for their time and effort and help ensure submission deadlines are met. Also, it can give you time to regroup and consider other options if a professor or two declines.

7. Keeping Them Updated Though the Process

Professors typically have busy schedules, so probably won’t keep thinking about your job search or grad school application after the letter of recommendation has been written and sent. Letting them know when you have interviews and other updates can help them be prepared should they receive a call from an employer or admissions office.

8. Saying Thanks and Staying in Touch

Besides creating good karma, thanking a professor is another opportunity to foster a good relationship with them. They might become a mentor to you, especially if you’re pursuing a job or education in the same field.

You might apply to another job or a graduate program in the not-so-distant future and want to ask for another recommendation from the same professor.

Instead of starting from scratch each time you apply for a new job, you may want to periodically update academic and professional references along your career path and as your goals change.

Not only can this make for an easier request and stronger recommendation next time around, it may lead to more professional opportunities and meaningful relationships.

The Takeaway

Keeping up with former professors can be a pleasant way to reminisce about college years. Another not-so-pleasant reminder can be student loans.

Like many students, you may have taken out loans to pay for college and/or graduate school. Refinancing your student loans may be an option to help with repayment.

Keep in mind, however, refinancing federal student loans with a private loan means the borrower forfeits all federal loan benefits, such as income-driven repayment plans, loan forgiveness programs, access to deferment or forbearance, and other forms of federal student loan debt relief.

On the flip side, refinancing federal student loans might offer lower interest rates or a shorter term.

With SoFi, student loan refinancing could reduce the overall cost of your student loans and get you out of debt sooner when refinancing to a shorter term. Applying online is free and can be done in a matter of minutes.

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.

SOSL1123017

As your child enters the “getting into college” phase of their lives, there’s a lot to talk about, from whether it’s better to take the SAT or ACT to how many schools they should apply to. At the same time, it’s important to discuss how your family is going to pay for college and, if debt will be part of the equation, how student loans work.

For one reason, the topic is pretty complicated. For another, even if you plan to help repay any student loans, most qualified education loans are taken out in the student’s name, which means they are personally on the hook for repayment. Maybe your student-athlete or scholar is counting on a full ride. While confidence is a wonderful thing, full rides are exceedingly rare.

Here are six student loan concepts you can discuss with your aspiring college student.

1. Here’s What We Think We Can Contribute

It might be uncomfortable to talk frankly about your family finances, but they almost always determine the amount and types of financial aid your child may qualify for.

It can be important for parents to discuss what they’re able to contribute in order to help their young adults wrap their heads around the numbers, too. How much debt they may need to take on to pay for college could impact where they choose to apply to school, since tuition costs vary widely.


💡 Quick Tip: When shopping for a private student loan lender, look for benefits that help lower your monthly payment.

2. Let’s Forge Ahead With the FAFSA

The first step to hunt for financial aid is to complete the Free Application for Federal Student Aid (FAFSA). While this form has a reputation for being long and complex, a new streamlined FAFSA is being released for the 2024-25 academic year. The new form is scheduled to become available by Dec. 31, 2023 — a delay from the typical Oct. 1 release date.

Based on financial need, a college’s cost of attendance, and FAFSA information, schools put together a financial aid package that may be composed of scholarships and grants, federal student loans, and/or work-study.

Awards based on merit (scholarships) or need (grants) are considered “free money” for college. When they don’t cover the full cost of college, that’s where student loans can come in.

If your income is high, should you bother with the FAFSA? Sure, because there’s no income cutoff for federal student aid. And even if your student is not eligible for federal aid, most colleges and states use FAFSA information to award non-federal aid.

3. Interest Rates: Fixed or Variable

Your soon-to-be college student may not know that there are two types of interest rates for student loans: fixed and variable.

Fixed interest rates stay the same for the life of the loan. Variable rates go up or down based on market fluctuations.

You can explain that all federal student loans have fixed interest rates, which are set each year by the federal government, and that private student loan interest rates may be variable or fixed.

4. Federal vs Private Student Loans

Around now your young person is restless. But press on.

Anyone taking out student loans should learn that there are two main types: federal and private. All federal student loans are funded by the federal government. Private student loans are funded by banks, credit unions, and online lenders.

If your child is going to borrow money for college, it’s generally advised to start with federal student loans. Since federal student loans are issued by the government, they have benefits, including low fixed interest rates, forbearance and deferment eligibility, and income-based repayment options.

Private student loans have terms and conditions set by private lenders, and don’t offer the generous repayment options or loan forgiveness programs of federal loans, but some private lenders do offer specific deferment options.

Private student loans can be used to fill gaps in need, up to the cost of attendance, which includes tuition, books and supplies, room and board, transportation, and personal expenses. A student applicant often will need a cosigner.

5. Another Wrinkle: Subsidized vs Unsubsidized

Financial need will determine whether your undergraduate is eligible for federal Direct Subsidized Loans. Your child’s school determines the amount you can borrow, which can’t exceed your need.

The government pays the interest on Direct Subsidized Loans while your child is in college, during the grace period (the first six months after graduation or when dropping below half-time enrollment), and in deferment (postponing repayment).

With federal Direct Unsubsidized Loans, interest begins accruing when the funds are disbursed and continues during grace periods, and the borrower is responsible for paying it. Direct Unsubsidized Loans are available to both undergraduate and graduate students, and there is no requirement of financial need.

Borrowers are not required to pay the interest while in school, during grace periods, or during deferment (although they can choose to), but any accrued interest will be added to the principal balance when repayment begins.

There are annual and aggregate limits for subsidized and unsubsidized loans. Most dependent freshmen, for example, can borrow no more than $5,500, and no more than $3,500 of this amount may be in subsidized loans.


💡 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.

6. Soothing Words: Scholarships and Grants

It’s important to not overlook the non-loan elements of the financial aid package. They can (hooray) reduce the amount your student needs to borrow.

Scholarships and grants are essentially free money, since you are not required to pay the money back. While some schools automatically consider your student for scholarships based on merit or other qualifications, many scholarships and grants require applications.

You may want to assign a research project to your college-bound young adult to look into all of the scholarship options they may qualify for. There are numerous scholarship finders available online. They may also want to talk to their guidance counselor and the financial aid office of their chosen school to learn about opportunities.

The Takeaway

Debt isn’t the most thrilling parent-child topic, but college students who will need to borrow should know the ins and outs of student loans: interest rates, federal vs. private, subsidized vs. unsubsidized, and repayment options.

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.

SOIS1123007

Whether you’re attending college for the first time or returning to finish your degree, you may have the opportunity to choose online vs. in-person classes. Though online college has been a niche offering in higher education for over a decade, it’s become more popular and commonplace in recent years. This is in part due to the COVID-19 pandemic, when many institutions were forced to shut down and adapt to distance learning. Though campuses have since opened back up, many students are opting to continue their studies online.

Online school offers benefits like flexibility and convenience. On the other hand, online learning can make it difficult for students to connect with their peers. It can also make it harder to grasp concepts that require more hands-on learning. What follows is a closer look at the pros and cons of online school.

What is Online School?

Online school is a format of education where classes are conducted virtually. Some colleges are designed specifically for online learning. Other colleges and universities may offer both in-person and remote learning options for students. Depending on the program, classes may be offered synchronously, where students attend via an online forum at a specific time; asynchronously, where lectures are recorded and can be viewed at a student’s leisure; or a hybrid model of the two.

While detractors of online learning say that it can be a pale imitation of in-person learning, there are several key advantages, including convenience and cost.


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

Pros of Online School

When schools pivoted to online learning due to the COVID-19 pandemic, the experience was generally set up ad-hoc and created to ride out the crisis. But many online programs have been constructed with online learning at the front of mind. This means that they may be thoughtfully designed in a way that supports distance learning.

When considering online schools, you’ll want to make sure that the program is accredited by an organization recognized by either the U.S. Department of Education or the Council for Higher Education Accredited. This can help students avoid any online scams.

Part of analyzing whether online school will be successful for you is knowing yourself. The pandemic allowed a lot of people to obtain deep insight into whether working remotely — either at work or school — was productive or even enjoyable. It has also given some people confidence that, even if in-person is preferred, online is doable and may not be as challenging as they may have thought in the past. That said, if you think online school might be right for you, here are some other factors to consider.

Cost May Be Lower

No buildings and no in-person instruction means less expensive tuition, right? Not necessarily. While some institutions that specifically invest in online learning may be less expensive, you may find that online tuition is commensurate whether or not you go in person, depending on the program.

If cost is the primary factor in pursuing online education, it may be a good idea to look at universities and degree programs that specialize in online learning, as they may create pricing based on an online-first business model.

Recommended: How to Pay For Online College

More Convenient

A huge benefit to online school is that many programs are structured knowing that students may also be juggling career and family responsibilities. This can translate into asynchronous learning — lesson modules that can be done on your own time — rather than a mandatory lecture you need to attend at a set time and place.

Still, the time commitment required to attend online school can be challenging when you’re going to school and working at the same time. Even if you don’t need to be in class at a certain time, there will still be due dates, studying, and exams to contend with.

Self-Directed Course of Study

On a similar note, many fans of online courses like that the course can be more self-directed, allowing you to take control of your education on your own timeline. This may mean you need to be more proactive about scheduling office hours with professors, blocking out time to study, and making sure that assignments are turned in on time.

Cons of Online School

While some people thrive in an online environment, others may prefer to have in-person interaction. Here’s a look at some of the disadvantages of online school.

Limited Hands-On Experience

Some degree programs that have a lab component may be harder to mimic online. Some degrees accept virtual labs, while other degrees may require a “wet lab” (a.k.a. a hands-on lab). You’ll want to check what your degree needs, and confirm that all coursework can be done entirely online. It can also be helpful to speak with current students in the program to hear any of their frustrations.

Lack of Community

Some people find it hard to connect with classmates and may find group projects or virtual small groups to be much less engaging than they might otherwise have been if they had been in person.

Harder to Connect with Professors

Some professors maximize online interaction, while some may be harder to pin down and connect with. Heading to office hours, even if they are virtual, can help you build a connection and get to know the professor.

Limited Access to On-Campus Resources

If the online school you’re attending also has a brick-and-mortar campus, there may be resources for career development as well as on-campus events related to your department. It may be worth assessing how virtual students can tap into these resources and what resources are accessible to them.

Longer Timeframe

The flip side of a more convenient schedule means that courses may be more spread out. What could be a one- or two-year program in a full-time setting could potentially take several years if done virtually.

Recommended: Can You Get Student Loans for Community College?

Additional Considerations for Online School

Being able to pursue higher education remotely can open up possibilities for many individuals. But it can be a good idea to consider how online school will mesh with your life. Here are some tips that can help you find your best fit.

Talk with Other Students

It can be helpful to speak with current students who are in a similar position as you. Talking with a student who is also juggling family or a career can help you see how the process plays out in real life.

Sit in on a Lecture

Will the program allow you to virtually sit in on the lecture or see some course materials? Doing so can help you see how the program plays out in real life.

Take an Online Course

In some cases, online school can be an expensive undertaking. Prior to applying to an official degree program, consider taking a virtual course, either for fun or for credit hours. Taking a virtual course without the pressure of a degree can help you take stock of the pros and cons for yourself, and assess whether or not online learning is right for you.

Consider How You’ll Cover the Cost

If you are planning to do a degree program alongside working, you may want to speak with your employer. It may be possible that they can subsidize the cost of the degree if it is relevant to your career.

If your employer won’t cover the cost, you may want to consider the potential salary advancement you might get out of the program, which could offset your out-of-pocket expenses. It’s also a good idea to fill out the Free Application for Federal Student Aid (FAFSA®) to find out what financial aid (including scholarships, grants, and federal student loans) you may qualify for.

You may then be able to fill in gaps in funding using private student loans. These are available through 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, which gives you more borrowing power than with the federal government. Interest rates vary depending on the lender. Generally, borrowers (or cosigners) who have strong credit qualify for the lowest rates.

Just keep in mind that private loans may not offer the borrower protections — like deferment or forbearance — that automatically come with federal student loans.


💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

The Takeaway

Going to school — whether it’s online or in-person — is a major decision. It’s important to consider pros and cons, including cost, as you assess whether it’s right for you. Speaking with people who’ve done the degree or work in your chosen career field can help you assess whether or not the program could help you achieve your goals and aspirations.

Taking the time to do the research, and potentially dipping your toe into online learning with one or two courses, can help you decide how online school may fit into your life and future plans.

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.

Photo credit: iStock/insta_photos

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.

SOIS1123006