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College planning is an exciting time for you and your child. But, as exciting as it may be, there is a lot of preparation involved.

So, whether your child is entering into their freshman year of high school or a few months away from graduation, there is no better time to start planning than the present.

From figuring out your financials to helping your child prepare for admission exams, this college planning checklist for parents can help streamline your child’s transition from high school to college.

Starting a Savings Plan

College can be expensive. According to the Education Data Initiative, the average cost of college in the U.S. is $36,436 per year, including books, supplies, and daily living expenses. Indeed, the cost of going to college has more than doubled over the past two decades.

As prices continue to soar, it’s easy to become worried about how your child will pay for college or that they will have to take out a crushing amount of student debt in order to pay for the college of their dreams.

With this reality top-of-mind, it’s wise to start saving for your child’s college tuition and fees. But, while many parents may have the best intention of helping their children pay for their college expenses, they often fail to prepare.

So, even if your child is just now entering high school, you can still start saving and preparing for college costs. It’s never too late to start setting money aside for your children’s education.


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

Paying Close Attention to Grades and Curriculum

Since grades and curriculum are crucial to getting an acceptance letter, you may want to keep close tabs on your student’s grades and study habits. From helping with studying to supporting homework expectations, getting involved with your kid’s coursework may help them perform better in school.

You may also want to encourage them to take Advanced Placement courses. Since AP courses allow you to tackle college-level material while your child is still in high school, your student may get ahead by taking some.

Also, if your student passes the AP exam at the end of the class, they could be rewarded with college credits. Racking up college credits could save you time and money in the future.

For example, if your child takes AP English in high school, they might be able to skip freshman-level English once they get to the college or university of their choice.

There are fees associated with taking AP exams. Fee reductions may be available for qualified applicants.

Recommended: ACT vs. SAT: Which Do Colleges Prefer?

Encouraging Involvement with the Community

College applications were up sharply for fall 2023, according to data collected by the Common App. With the increase in competition, your child will need to stand out. While the top factors in admission decisions tend to be academics, the next most important factors typically include a student’s demonstrated interest and extracurricular activities.

Encouraging your child to get involved in the community could also potentially help them write a solid college application, and even help them decide what they want to do with the rest of their lives.

For example, if your child loves to run, they may want to try out for the track team to round out their classes or volunteer as a track coach for a youth team. Or, if they prefer journalism instead of sports, they may want to try writing for the school newspaper.

Not only will getting involved help with their college application but it will help sharpen their skills. So, don’t be afraid to encourage them to explore their passions and get involved with the school and/or local community. You might even want to get involved with them.

Planning for the SAT and ACT

Another key component to receiving acceptance letters from colleges and universities is having acceptable SAT and ACT scores. Some schools require the Scholastic Aptitude Test known as the SAT, while others may require the American College Testing, known as the ACT. Some schools will accept either one, but it’s a good idea to check the preference of the schools your child will apply to.

To help your child prepare, you can encourage them to sign up for an after-school prep class or practice at home by using online resources such as Khan Academy’s free SAT practice program in partnership with The College Board.

Recommended: How to Help Your Child with SAT Practice

Researching Schools

One of the most important components of college planning for your child is helping them decide which university or college is the right fit. Fortunately, there are plenty of options available to help you find a school that will fit your child’s education and experience needs.

To get started in the decision-making process you may first want to help your child decide what degree they would like to achieve. If they know they want to be an engineer, you may want to focus on schools with good engineering programs.

Even if you may think their degree is too niche, there is often a program that will support it. Whether they want to study astrobiology or comic art, there is often a program for your child. However, if they are unsure of a major, they may want help finding a school with more program options available.

It’s also wise to consider factors such as location and the type of college experience your child wants to have. For example, if they want to go to a school close to home and commute to save money, that desire will limit the search parameters.

Remember, while you may be the voice of reason, the ultimate decision is up to your child — the student. Simply help them evaluate all of the key factors in making an informed decision.

Scheduling College Visits

College visits can be a big help when it comes to finding the right fit. With this in mind, you may want to help your child plan a college visit well in advance of making a decision. The College Board recommends scheduling your visits during your child’s junior year in the spring if you have already researched schools.

For seniors, it may be best to schedule visits in the fall through the winter months. This may help seniors narrow down their options.

Since you want your child to get a feel of the college experience, you’ll want to make sure classes are in session. Therefore, it’s also wise to avoid visits during holidays or break weeks.


💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

Investigating Financial Aid Options

Even if you have saved for your child’s education, you may want or need to explore other funding options, which could include your child taking on some of the cost.

Completing a Free Application for Federal Student Aid (FAFSA) is one of the first recommended steps to applying for student financial aid, whether that is in the form of grants, scholarships, federal loans, or work-study. Filing for the 2024-2025 school year opens in December, 2023 (a delay from the usual October 1) and will continue until June 30, 2024.

It’s recommended to complete the form as soon as possible because there are differing deadlines to be aware of, including for individual colleges as well as federal and state deadlines. The sooner you submit your FAFSA, generally, the better your chances of receiving aid will be.

Colleges and universities will use the information reported on the FAFSA to determine how much aid a student is eligible for. Even if your child has not applied to a school yet, they can list that school on the FAFSA, so encourage them to include their dream school as well as those they consider safety schools.

A Student Aid Report (SAR), which is a summary of information provided on the FAFSA, will be sent within three weeks — sometimes sooner. Corrections to the FAFSA, if needed, can be made after reviewing this report. The SAR contains information about a student’s Expected Family Contribution (EFC) (which will soon be called the Student Aid Index or SAI). It is recommended that the report be kept for your records.

The schools listed on the FAFSA will have access to the information within a few days of when the form is submitted. If your student is approved for financial aid, they will receive financial aid award letters from each school they applied and were accepted to. These letters will include information such as the cost of attendance (COA), EFC/SAI, grants, scholarships, loans, and other financial aid that your child might be eligible for.

Comparing each financial aid award letter can help you and your child determine the financial obligation of attending each school. It is recommended to exhaust all federal aid options before considering a private loan. But if you are looking for supplemental funding for your child’s education, private student loans may be an option.

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.

SOIS0723026

Ambitious high school students do everything they can to stand out amongst the very crowded crowd of college applicants. Standardized testing is just one of many challenging hoops students have to jump through on their way to higher education. Which is why some students and their parents may be wondering exactly where their dream colleges stand on the age-old issue of ACT vs SAT.

While in many ways the ACT and SAT are similar exams, they have some differences that you’ll want to keep in mind when choosing which test to take. Keep reading to learn more about how these tests compare, which one you should take, and how colleges feel about these two exams.

Purpose, Structure, and Cost

The SAT and ACT are two exams that serve the same purpose. Colleges utilize both exams to determine admission and award merit-based scholarships. Both tests are similar in length and structure, with the SAT taking three hours and the ACT taking 2 hours, 55 minutes (without essay), and 3 hours, 40 minutes (with essay) to complete.

For the 2023-2024 school year, it costs $60 to register for the SAT. There are additional charges if you change test centers ($25) or you register late ($30). Your first four score reports are free if you order them within nine days after the test date. After that, any additional reports you want to send to multiple colleges cost $14 each.

The cost to register for the ACT for the 2023-2024 school year is $68.00 (with no writing) and $93.00 (with writing). There are additional charges if you change test centers ($42) or you register late ($36). Your registration fee covers reports for you, your high school, and up to four colleges (if you provide the codes when you register). Additional score reports are $18.00. To add or remove the writing test, the fee is $25.00.


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

The Subject Matter

These two exams cover similar subject matter and include an optional essay portion, although there are some key differences worth noting when it comes to preparing to take these exams. The main difference between the ACT and SAT subject matter is that the ACT has a “science reasoning” section of and an optional essay, whereas the SAT doesn’t.

However, both exams cover topics relating to math reading, and writing type subjects. More specifically, the SAT covers “Reading” and “Writing and Language,” and the ACT covers “English” and “Reading.”

When it comes to the mathematics portion of the exam, the SAT focuses on arithmetic, algebra I and II, geometry, trigonometry, and data analysis. The ACT tests students on their arithmetic, algebra I and II, geometry, trigonometry, and probability and statistics knowledge. Each exam has differing calculator policies. For the ACT, students can use their calculator for all math questions. Whereas with the SAT, only select math questions allow calculator usage.

How Each Exam is Scored

Both the SAT and ACT have unique scoring systems. Here’s a bit of information on each.

How the SAT is Scored

The SAT is scored on a scale of 400 to 1600. Breaking down the scoring process a bit further, the SAT has not just a “total score,” but “section scores.” Each of the main sections, reading/writing and math, may be scored up to 800 points. These scores are then combined for the total.

Last but not least, students will receive subscores, evaluating their performance of certain or subject areas. These scores are included as a part of the total score, but this breakdown can be insightful for students looking to retake the test and improve their skill set.

Recommended: How to Help Your Child with SAT Practice

How the ACT is Scored

The ACT is scored on a scale of one to 36. The ACT scoring system begins by taking into account how many questions a student answers correctly. The “raw scores” which represent the number of correct answers on each test are then converted to “scale scores.” Each subject section—English, Math, Reading, and Science—receives a scale score.

The “composite score,” which ranges from one to 36, is an average of each subject test, rounded to the nearest whole number. The scoring process is completed after identifying the percentage of correctly answered questions.

Recommended: Ultimate College Application Checklist

Do Colleges Prefer the ACT or SAT?

Both the ACT and SAT are widely accepted by U.S. colleges and schools generally don’t have a preference for one over the othere. Many people believe that the SAT is more popular, especially with elite colleges, but that is a higher education urban legend.

There may, however, be some regional preferences between ACT vs SAT. College Raptor analyzed the numbers of students who applied to colleges with ACT or SAT scores (numbers that colleges and universities report to the government) and found that, while many states were split down the middle, a few lean more in one direction towards ACT or SAT. For example, Wisconsin leans heavily towards an ACT preference — there, 95.27% of applicants submitted ACT scores.

Knowing Which Test to Take

While some students opt to take both the SAT or ACT, some choose just one in order to focus on preparing for the test they believe they are more likely to score higher on. Neither test is generally easier than the other, but some students may find their different structures suit their needs better.

The ACT is considered by some to be more appealing to students with strong English skills as the exam focuses more on verbal skills, whereas the SAT may be a better fit for those who excel in math.

Taking a full-length practice test of each exam can give you a better idea of which test you’ll score higher on. Once you’ve determined which is a better fit, you can spend their time and resources preparing for just one test instead of two. If you feel comfortable preparing for and taking both exams, doing so can be beneficial as you will have two scores to choose between to send to colleges.


💡 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.

Paying for College

The options don’t stop after you complete the test (or tests) of your choice. Once you use your solid scores to get into the college of your dreams, you and your family may be faced with some other big decisions, especially when it comes to paying for college.

Luckily, there are options — including grants, scholarships, subsidized loans, and even unsubsidized federal student loans — that can help offset the out-of-pocket costs. If you’ve exhausted those avenues and still have a funding gap, you may want to explore private student loans and or parent loans.

Private student loans are available through banks, credit unions, and online lenders. Unlike federal loans, applying for a private loan requires a credit check. Students who have solid financials (or a cosigner who does) typically qualify for the best rates and terms. Just keep in mind that private loans don’t come with the same protections, like government-sponsored forgiveness programs, that you get with federal 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.

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.

SOIS0723024

College tuition can be costly whether you are seeking an undergraduate and graduate degree, attending an out-of-state public university, or taking classes at a private university.

If you do not have adequate savings to pay for classes, room and board, food, travel and other necessities, then you may be considering how to pay for college.

The costs of attending college continue to rise each year for both public and private colleges and universities. In 2023, average annual tuition and fees came to $9,377 at public in-state colleges, and $38,768 at private universities. Obtaining financial aid is one way students can afford to attend college.

One common type of financial aid is called gift aid and typically comes in the form of federal and state grants and a wide range of scholarships that are given by private donors, foundations, non-profit organizations and even the universities themselves.

These grants and scholarships do not have to be paid back, which is helpful for students who are on a tight budget or are considering obtaining a graduate degree.

Another type of aid is called self help aid and usually comes in a form of work study programs and student loans. Some work study programs are sponsored by the federal government and they provide part-time jobs for students who need help paying their tuition. These jobs can be either on the campus of the college or university or off campus nearby.

Self help aid also includes federal student loans which have to be paid back after a student graduates.

There are advantages and disadvantages of both gift aid and self help aid. Undergraduate and graduate students may only qualify for one type of aid, depending on their financial circumstances, where they are obtaining their college degree or other factors.

What Are The Pros and Cons of Gift Aid?

Grants and scholarships are considered gift aid. One common form of grants are called Pell grants. These are grants provided by the federal government and Pell grants are given to undergraduate students who have demonstrated financial need.

The maximum federal Pell grant award is $7,395 for the 2023-24 academic year with amounts changing annually.

The main drawback of gift aid is that you may not know what amount you will receive and you may need to supplement paying for college by seeking more scholarships and grants or getting a part-time job.

If you received a Pell grant the previous academic year, there is no guarantee that you will receive it again for the next academic year.

There are thousands of scholarships that are available to students who are obtaining various degrees. There are a variety of scholarship databases where students can search to find scholarships.

The amount of money that you can receive from scholarships can range a couple thousand dollars to larger amounts that will cover the majority of your tuition and other costs.

Scholarships may require that you reapply annually and there is no guarantee that you will receive a scholarship again the following academic year.

What Are The Pros and Cons of Self Help Aid?

Self help aid includes both work study programs and federal and private student loans.

Work Study Program

Federal work study programs are available for both undergraduate and graduate students to help them pay for tuition and other educational costs. The program’s jobs are related to the student’s course of study and also include community service work.

Both full-time or part-time students may qualify for part-time employment while they are enrolled at their university or college and it is available to undergraduate and graduate and professional students who demonstrate financial aid.

The work study programs are operated by a college and university financial aid office and you will receive at least the federal minimum wage. These jobs are available both on-campus and off-campus which can be beneficial for students who do not have other means of transportation.

Students who work off campus typically work for a nonprofit organization or a public agency and the goal of the job is geared to be in the public interest. The number of jobs is limited, so students should apply early to ensure that they have a position for the following academic year.

Federal and Private Student Loans

Another type of self-help aid are federal and private student loans. Federal student loans are based upon the financial need of a student and their family. They are either subsidized or unsubsidized direct loans and may offer lower interest rates than private loans. One drawback is that the federal government will limit how much money you can borrow.

Undergraduate students may qualify for subsidized loans that are given based on their financial need. One benefit is that the federal government will pay the interest on these loans while you are attending school or at least taking classes half-time, during your grace period or when you have deferred the loan.

Both undergraduate and graduate students may qualify for unsubsidized loans and they are not based on financial need. These loans accrue interest while students are taking classes, during the loan’s grace period, or when you have deferred the loan.

Private student loans can be used to help make up the gap in what is needed to pay the remainder of tuition or living expenses. While both federal and private student loans may help students pay for their tuition; they must be repaid once a student graduates.

If you do not complete your course study and do not receive a degree, the student loans still have to be repaid.

Federal student loans have protections that private student loans do not offer. Students who have received federal student loans can seek several options after graduation to repay their loans including income-driven repayment programs.

Federal student loans also offer borrowers’ the ability to put loans in forbearance or deferment, allowing them to temporarily pause payments in certain situations.

Some borrowers will choose to refinance student loans into new private student loans. But this option means that you lose the protection of the federal repayment plans. Private student loans have both fixed and variable interest rates.

Fixed interest rates are beneficial for people who want to know the exact amount of their loans each month helping them to budget more easily. The interest rate on variable student loans are sometimes lower than fixed rates but that means your payment amounts can fluctuate from month to month.

Shopping around can help you find the best private student loan that fits your financial needs and the amount that you can repay each month.

Qualifying For Gift Aid or Self Help Aid?

Qualifying for either gift aid or self help aid might depend on your financial circumstances. Students may want to apply early for grants, scholarships, work-study programs and student loans.

The first step in applying for federal aid, such as the Pell Grant, work study, and federal student loans is completing a FAFSA®, or Free Application for Federal Student Aid. This application must be completed every year.

Some states and colleges may have their own FAFSA deadlines , so double check to avoid missing any. Missing a deadline can mean forgoing some financial aid.

While some gift aid such as scholarships are given to students based on merit, grades or other accomplishments, grants, work study programs and student loans are typically based on your financial needs and the cost of tuition at your university.

Some universities use data from the FAFSA to determine gift aid like scholarships too. Students can also apply for scholarships and grants that aren’t associated with the FAFSA®.

Private Student Loans with SoFi

In some cases gift aid and federal aid aren’t enough to help students pay for their tuition. In that case, some students may consider private student loans.

SoFi offers private student loans with no late fees or origination fees with flexible repayment options. There are also interest rate discounts for eligible SoFi members.

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.

When a student fills out the Free Application for Federal Student Aid (FAFSA®) form, it’s important that they understand their dependency status. A student’s dependency status will affect the information they need to report on their FAFSA.

Dependent students have to report both their own and their parent’s information during this process. Independent students will only have to report their own information, the exception being if they are married. In which case, they will provide their spouse’s information as well.

Here’s how it works for independent vs. dependent students.

The Difference Between Independent and Dependent Students

There are a few key differences between independent and dependent students.

What Is an Independent Student?

An independent student meets one or more of the following criteria. They are:

•   24 years old or older
•   Married
•   A graduate or professional student
•   A veteran
•   A member of the armed forces
•   An orphan
•   A ward of the court
•   Someone with legal dependents other than a spouse
•   An emancipated minor
•   Someone who is homeless or at risk of becoming homeless

What Is a Dependent Student?

Basically, a dependent student is any student who doesn’t meet the criteria to be considered an independent student. The U.S. government bases their federal student aid programs on the belief that it is primarily the student and their family’s responsibility to pay for the student’s higher education pursuits.

Even though it may not be the case in reality, dependent students are assumed to have the support of their parents which is why the parents’ information must be included in the student’s FAFSA form. Providing this information gives FAFSA a more complete picture of the family’s financial strength.

Just because someone is considered a dependent student does not mean that their parents have to contribute financially to their higher education costs, but the government assumes that parents will contribute in some way if financially possible.

Determining Dependent or Independent Student Status

While that brief overview begins to paint a picture of what it looks like to be a dependent or independent student, the Federal Student Aid office, which is an office of the U.S. Department of Education, asks key questions that help students determine their official status.

Their answers to the questions on the FAFSA form will help determine whether they are considered a dependent or independent student. The questions do change slightly each year, but are published by the Federal Student Aid office.

These questions include things like:

•   As of today, are you married?
•   Are you a veteran of the US armed forces?
•   At any time since you turned age 13, were both your parents deceased, were you in foster care, or were you a dependent or ward of the court?

These questions can help guide students to determine whether or not they qualify as an independent or dependent student. Essentially, if a student answers “yes” to any of the questions in the FAFSA, they are considered an independent student.

Dependent Students

Students that answered “no” to all of the questions above are considered to be dependent students and while applying for federal student aid must provide information about their parents on the FAFSA form.

Students who are considered a dependent student by the FAFSA but are not in contact with their parents and don’t know where they live, can discuss their situation with the financial aid office at the college or career school they are planning on attending.

Their school’s financial aid administrator will usually be able to help them determine next steps. The same process applies if a student has left home due to an abusive situation. They will fill out the FAFSA form and contact their school’s financial aid office for assistance.

Even if a dependent student doesn’t live with their parents, they still need to provide accurate information about their parents. If their parents won’t provide the information they need, the student risks having their application rejected which may make them ineligible to receive any federal student aid.

Students in these circumstances may be able to qualify for an unsubsidized loan at most, but this option depends on what the financial aid office at their specific college decides.

Even if a student’s parents won’t help pay for college, if they answered “no” to all of those questions, they are still considered dependent.

Independent Students

Students that answered “yes” to any of the above questions are considered to be independent students during the federal student aid process. Independent students do not have to provide information about their parents on the FAFSA form.

When Federal Student Aid Falls Short

Colleges use the FAFSA to determine a student’s federal aid eligibility. While the FAFSA is a great place to start, sometimes federal aid can’t fully cover the cost of a college education. This is where private student loans can step in and cover the expenses that gift aid and Federal loans could not.

Related: A Guide to Private Student Loans

SoFi strongly believes students should exhaust all of their Federal grant and loan options before they look at private loans. Once a student has exhausted their options, they can look at SoFi private student loans which are easy to apply for, allow students to add a cosigner to their application in minutes, and never have fees.

No origination fees, no late fees, and no insufficient fund fees. Ever. With flexible repayment plans and exclusive rate discounts, SoFi Private Student Loans can provide a good option for covering the costs of attending college.

The Takeaway

In order to fill out the FAFSA, students will need to determine if they are an independent or dependent student. For example, students aged 24 and older, those attending graduate school, students who are married, or who have dependents are all generally considered independent students.

For a full list of questions to help you determine whether or not you are a dependent student, check out this resource from the Federal Student Aid website.

The distinction between independent and dependent students is important because they are required to submit different information to the FAFSA. Dependent students are required to submit their parent’s information in order to be considered for federal aid opportunities. This is the case even if a dependent student’s parents are not contributing financially to tuition costs. Independent students are not required to submit any of their parent’s financial information.

In situations where federal aid may not cover the cost of college, private student loans could be an alternative option to look into.

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.

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

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

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

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.

SOPS21001

A Direct Subsidized Loan is a type of federal student loan available to students who demonstrate financial need. The federal government subsidizes this type of loan by paying the interest that accrues while the student is enrolled in school at least half-time and during qualifying periods of deferment, such as the grace period.

The Direct Subsidized loan is one of three federal student loans available to student borrowers. The others are the Direct Unsubsidized Loan, Direct PLUS Loan, and Direct Consolidation Loan. Read on for more information about the benefits of Direct Subsidized loans and details about other types of student loans available to eligible students.

What Are the Benefits of a Federal Direct Subsidized Loan?

Like other types of student loans, you will be responsible for paying back your Federal Direct Subsidized Loan after you finish school. Unlike many other student loans, however, having a Direct Subsidized loan means you won’t be responsible for paying interest while you are in school or during a six-month grace period after graduation (or during other deferment periods). The U.S. Department of Education subsidizes this type of loan by paying the interest on your behalf during those periods.

Since the government is paying the interest that accrues while you are in school and during the grace period, no interest will be added to your balance before you begin repayment. This might sound like a minor detail, but not having to pay interest while you are in school and for six months after you graduate can significantly reduce the overall cost of your loan.

Like an Unsubsidized Direct loan, you’re not obligated to make payments during school — and the interest rate is relatively low. For the 2023-24 academic school year the interest rate for a Subsidized or Unsubsidized Direct Loan is 5.50%.


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

How Do You Apply for a Federal Direct Subsidized Loan?

To apply for a Federal Direct Subsidized Loan, you will need to complete the Free Application for Federal Student Aid (FAFSA). The FAFSA is available for free online, and contains questions about you and your family’s financial circumstances.

The information you submit through the FAFSA is transmitted to your school and then used to determine what types of aid (including federal loans, grants, scholarships, and work-study) you are eligible to receive. The FAFSA must be completed annually.

There is no credit check involved in applying for a Federal Direct Subsidized (or Unsubsidized) loan, and you don’t need to worry about having a certain credit score.

How Is Your Eligibility for a Federal Direct Subsidized Loan Determined?

After your FAFSA has been reviewed, your selected school will send you an award letter that tells you your total cost of attendance, the award money you’ve been given, and what federal aid programs and loans you qualify for based on your FAFSA information.

You school will determine exactly how much you are eligible to borrow in federal loans based on a number of factors, including the amount the federal government expects you and your family to contribute to your educational costs, your current enrollment status, the school’s cost of attendance, any other financial aid you receive, and whether you are a dependent or independent student.

However, there are limits on the amount you can borrow with a Direct Loan, regardless of your financial need. If you are a dependent student, you can borrow a total of $31,000 for your undergraduate education in federal loans, but no more than $23,000 of this amount may be in Direct Subsidized Loans. Graduate and professional students cannot borrow subsidized loans.

Beyond Subsidized Loans: Other Options Available to Student Borrowers

Since eligibility for Direct Subsidized Loans is based on borrower need, and there are annual borrowing limits, you may be interested in learning about other available loan options. There are three other types of federal loans, and some borrowers may also want to consider private student loans.

The three types of federal loans available outside of Direct Subsidized Loans are:

•   Direct Unsubsidized Loans These loans are available to undergraduate and graduate students, and eligibility is not based on financial need. Unlike Direct Subsidized Loans, however, interest starts accruing as soon as the money is disbursed to your school. You may choose not to pay this interest while you’re in school and during your six-month grace period, but any unpaid interest that accumulates during this time will be added to your total balance. How much you can borrow with an unsubsidized loan depends on your year in school as well as if you’re a dependent or an independent student.

•   Direct PLUS Loans PLUS Loans are options for graduate/professional students and parents of students who are interested in borrowing a loan to help their child pay for college. Eligibility for this type of loan is not based on need, but the application process does require a credit check. The terms of these loans are somewhat less favorable than Direct Loans, which is why families will want to look at Direct Unsubsidized and Subsidized loans first. The interest rate on PLUS loans for the 2023-24 academic year is 8.05%. These loans also have an origination fee of 4.228%.


💡 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.

•   Direct Consolidation Loan This federal loan isn’t awarded to borrowers as a part of their financial aid package. Instead, a Direct Consolidation Loan allows borrowers with multiple federal loans to combine (or consolidate) them into a single loan, usually after school. The loan’s new interest rate is the weighted average of the current interest rates on the student loans that will be consolidated, rounded up to the nearest one eighth of a percent.

Private student loans are available through private lenders, including banks, credit unions, and online lenders. They come with a variety of terms and can offer competitive interest rates for students (or parent cosigners) with good or excellent credit. Unlike federal student loans, which offer only fixed rates, private student loans can have fixed or variable interest rates.

Also unlike federal student loans, private student loans often don’t charge any fees, such as an origination fee. However, private student loans don’t come with the same protections, such as government-sponsored loan forgiveness and income-driven repayment plans, as federal loans. Because of this, you may want to consider private loans only after you’ve exhausted federal loan options like Direct Subsidized loans and other sources of federal aid.

To apply for private student loans, potential borrowers will need to fill out an application directly with the lender of their choice.

The Takeaway

Borrowers with Federal Direct Subsidized Loans are not responsible for the interest that accrues while they are enrolled in school at least half-time or during the grace period or other qualifying periods of deferment. The interest is subsidized by the U.S. government. To qualify for this type of federal student loan, borrowers must be qualifying undergraduate students who demonstrate financial need.

Other options for students looking to pay for college may include Federal Direct Unsubsidized loans and PLUS Loans, scholarships and grants, and federal work-study programs, 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.

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

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

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