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

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

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

•   Standard Repayment Plan

•   Extended Repayment Plan

•   Graduated Repayment Plan

•   Income-Driven Repayment Plans

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

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

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

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

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

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

Student Loan Repayment Plan Options for Federal Student Loans

Standard Repayment Plan

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

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

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

Student Loans Eligible for the Standard Repayment Plan

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

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Extended Repayment Plan

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

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

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

Student Loans Eligible for the Extended Repayment Plan

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

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

Graduated Repayment Plan

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

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

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

Student Loans Eligible for the Graduated Repayment Plan

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

•   Direct Subsidized Loans

•   Direct Unsubsidized Loans

•   Direct PLUS Loans

•   Direct Consolidation Loans

•   Subsidized Federal Stafford Loans

•   Unsubsidized Federal Stafford Loans

•   FFEL PLUS Loans

•   FFEL Consolidation Loans

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

Income-Driven Repayment Plans

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

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

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

•   Income-Based Repayment Plan (IBR)

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

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

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

Another Option to Consider: Student Loan Refinancing

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

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

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

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

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

Repayment Plans for Private Student Loans

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

The Takeaway

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

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

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

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

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

How Did We Get Here?

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

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

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

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

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

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

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

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

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

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

•   Expansion of student financial aid to the middle class.

•   Widening eligibility for Pell Grants.

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

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

•   Increasing the borrowing limits for federal student loans.

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

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

3 Factors Affecting Your Student Loan Interest Rates

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

1. How Legislation Affects Student Loan Interest Rates

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

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

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

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

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

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

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

How Does This Affect Your Rates?

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

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

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

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

◦   Direct Subsidized Loans for student borrowers with financial need.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How Does This Affect Your Rates?

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

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

3. How You Can Affect Your Student Loan Interest Rates

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

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

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

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

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

How Does This Impact Your Rates?

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

The Takeaway

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

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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

Many students rely on student loans to help them pay for college. In addition to charging interest, student loans may also have additional fees associated with them. Fees charged may include origination fees — a fee charged by the lender for processing the loan — or late payment fees.

When students sign up for loans or are in the midst of repayment, they may not even be aware of fees that accompany many private and federal student loans. But by learning about these fees, they can better prepare themselves financially and avoid headaches.

What Are Student Loan Fees?

As briefly mentioned, student loan fees are charged to borrowers and are not the same as the interest rate. Interest rates on student loans are fixed or variable, and will increase the cost of the loan over time.

Student loan fees may include:

•   Origination fees

•   Late payment fees

•   Returned-check fees (aka insufficient-funds or non-sufficient-funds fees)

•   Loan collection fees

•   Forbearance and deferment fees

Can a Student Loan Fee Be Waived?

For the most part, student loan fees cannot be waived. In some instances, lenders may be willing to waive late payment fees for borrowers who have not previously made a late payment. Fees and policies may vary by loan type and lender, so contact your lender with specific questions. Continue reading for an explanation of different types of fees that may be associated with a student loan.

Origination Fees

Origination fees cover the cost of processing the loan. They are typically a small percentage of the loan amount.

What Is an Origination Fee on a Student Loan?

An origination fee on a student loan functions similarly to origination fees on other types of loans. Origination fees are generally charged as a percentage of the loan.

How Are Student Loan Origination Fees Assessed?

Student loan origination fees are charged as a percentage of the loan amount. Federal student loans do have an origination fee, and the information will be included in the master promissory note. For federal student loans, the origination fee is deducted from the amount borrowed, so when you receive the loan it will actually be for less than the amount you borrowed.

Private student loans may or may not charge an origination fee, the policy will depend on the lender.

How Much Are Student Loan Origination Fee?

For federal student loans, the origination fee (also known as disbursement fee) is dependent on the loan type. Direct Subsidized and Unsubsidized loans disbursed between October 1, 2020 and October 1, 2024 have a 1.057% origination fee. During the same timeframe, Direct PLUS Loans have a ​​4.228% origination fee. Direct Unsubsidized and Subsidized Loans are types of student loans for undergraduate programs. Unsubsidized loans and Direct PLUS Loans are student loans for graduate programs.

The origination fee on private student loans will vary based on the lender, and not all private lenders charge an origination fee. Review the terms and conditions closely and contact your lender with any questions.

Late Payment Fees

Making a loan payment past the due date for a federal student loan can result in a late fee. After 30 days, the late fee may be up to 6% of the loan amount due. Review your Master Promissory Note or contact your loan servicer with questions.

The late fee for a private student loan depends on the lender and loan program. Some private student loan lenders do not charge late fees.

Returned-Check Fees

If a borrower pays using a check that bounces, the student loan servicer could charge a returned-check fee.

Loan Collection Fees

If a borrower defaults on a loan by not making payments for a certain amount of time (270 days for most federal student loans), the loan may be placed with a collection agency and be subject to loan collection fees. Any fees incurred will be in addition to the outstanding principal balance, interest, and fees.

Private student loan companies may charge even higher loan collection fees. Generally private student loans also enter default sooner than federal student loans. The default period is described in the loan contract.

Forbearance and Deferment Fees

Borrowers who cannot make payments temporarily can request student loan forbearance or deferment. Typically, loan holders can avoid a fee, but they will need to contact their loan provider.

Forbearance and deferment are available for most federal student loans. Private lenders are not obligated to offer either program, but may offer some forms of deferment. If you are struggling to make payments on a private student loan, contact your lender to evaluate the options available to you.

Federal Student Loan Fees

When students want to apply for a loan, they can do it through the federal government or a private company, depending on their circumstances. The loan providers charge different types of fees.

Students will pay an origination fee for a federal student loan. As mentioned previously, for Direct Subsidized and Unsubsidized Loans, the fee is about 1.057% of the loan amount. For Direct PLUS Loans (including Grad PLUS and Parent PLUS Loans), the fee is about 4.228% of the loan amount.

A late payment fee will typically be charged within 30 days after the payment is due. The late fee could be up to 6%. At that rate, if your monthly minimum payment is $250, your fee would be $15.

Private Student Loan Fees

Loans for students from private lenders may not charge origination fees, though there may be an origination fee for a specialty loan, like a loan for medical school.

Some lenders charge late fees — generally a percentage of the late payment amount or a flat fee. They also typically charge for returned checks.

Additionally, most private student loan companies charge a fee for forbearance, a flat fee determined by the lender.

Collection fees will vary from lender to lender. If there is a collection fee on a private student loan, it will typically be included in your loan agreement.

A lender like SoFi® has staked its reputation on no fees: no late fees, insufficient-funds fees, or origination fees for private student loans.

Avoiding Student Loan Fees

If students need to take out private or federal student loans, they can at least avoid some of the fees.

Federal student loan origination fees are pretty unavoidable. With other loans, even if a student can persuade a company to take off the origination fee, that could mean a higher interest rate, which is usually not worth it.

Paying on time is always recommended, not only to avoid late fees but to keep a credit report healthy. To avoid late fees, returned-check fees, and collection fees, borrowers can set up automated payments from a bank account. Otherwise, they can set up reminders on their phones and calendars that go off when their payments are about to come due.

In terms of deferment fees, borrowers having trouble making payments on time can call their student loan servicer and ask for extensions or other options so that they don’t go into default.

Going into default can cause a credit score to drop significantly and hurt the chances of getting a mortgage, other loan, or credit card in the future. (Student loan deferment or forbearance do not hurt an overall credit score.)

Students shouldn’t be afraid to reach out to their loan servicer as soon as they can’t make a payment.

Plenty of borrowers end up in a tough spot financially and need a little help. Even if borrowers have to pay more interest over time by extending the loan term, that is almost always better than defaulting.

Some student loan companies don’t charge fees. Signing up for a loan with one of these companies could put money back into your pocket that could go toward repaying the loan.

Fee-Free Student Loans

Undergraduate and graduate school loans. Law school and MBA loans. Parent loans. SoFi offers all of those private student loans with no fees — no origination fees, returned-check fees, or late fees.

A loan comes with a fixed or variable rate and a flexible term. And there is no prepayment penalty.

As a bonus, SoFi members can access perks like financial advice, career coaching, and Edmit Plus, a tool that helps estimate financial aid, compare cost of attendance, and highlight merit aid and scholarships available.

Paying for College

Paying for college may require a combination of resources. One of the first places for students to start their financial aid journey is by filling out the Free Application for Federal Student Aid (FAFSA®) every year. This application allows students to find out if they are eligible for federal financial aid, including federal private loans, grants, scholarships, and work-study.

When comparing your options, it’s important to understand the difference between grants vs. scholarships vs. student loans from a private lender. Continue reading for information on these three categories of aid and additional strategies for paying for college in addition to federal student loans.

Private Student Loans

Private student loans, as mentioned, are offered by private lenders such as banks, credit unions, and other financial institutions. To apply, potential borrowers will need to file applications with individual lenders.The interest rate and loan terms are generally determined based on the applicant’s personal information such as their income and credit score, among other factors. It’s generally worth shopping around to find the best rate and loan terms for your personal situation.

Private student loans can be helpful tools to pay for college. However, when comparing private student loans vs. federal student loans, it’s important to note that private student loans lack the borrower protections afforded to federal student loans – things like income-driven repayment plans or deferment options. For this reason they are generally considered an option after all other financial resources have been depleted.

Credit Card

It can be possible to pay for college tuition using a credit card. While schools may accept payment by credit card, there is generally a fee associated. This fee can be between 2.5% to 3% depending on the school, which likely offsets the rewards you may be earning on your credit card.

Credit cards could be helpful for students while they are paying for other college related expenses, like textbooks, food, or other living expenses. Credit cards, when used responsibly, can be tools to help individuals build or establish their credit history. If you plan on using a credit card to pay for expenses, aim to pay off the card each month to avoid accruing interest. Credit card interest rates can be very high — the average interest rate for new credit cards was 22.45% as of July 2023, according to WalletHub.

Personal Savings

Some students may have the money saved to go to college, or someone in their family might be able to finance their education. For instance, perhaps their parents or grandparents opened a 529 savings plan for them when they were younger and funded it with money to put toward college.

Grants

Grants are a type of funding for school that typically don’t need to be repaid. Grants are generally awarded based on financial need and can be found from sources such as the federal or local government, college, or even nonprofit organizations.

Each grant application may have different application and eligibility requirements so be sure to read the instructions closely.

Scholarships

Scholarships are another type of aid that recipients are not required to repay. Often, they are awarded based on merit though can be awarded based on other criteria as well.

Students can look for scholarships in a variety of places, schools, nonprofit and community organizations, companies, and more all offer scholarships.

Take a look at your school’s financial aid website to see what scholarships are available at your school. There are also online databases like Scholarships.com that aggregate information on available scholarships, including basic eligibility criteria. Some scholarships can be quite competitive, so it may be worth applying to a variety of scholarships.

The Takeaway

Student loan fees like an origination fee or late payment fees can increase the total cost of borrowing the loan. The types of fees on student loans will vary based on the loan type. For example, federal student loans do charge an origination fee which varies based on the type of federal loan and there are late payment fees associated with payments that are 30 or more days late.

Private loans may or may not have an origination fee or late payment penalties. The policies will vary by lender. If you’re interested in a private student loan, be sure to shop around and compare fees in addition to interest rate and loan terms to fully understand the cost of the loan.

Private student loans with SoFi have no fees, including no origination fees or late payment penalties. Qualifying borrowers can secure a competitive interest rate and SoFi members are eligible for other benefits like career coaching and member events.

FAQ

How much is the origination fee for student loans?

The origination fee on a student loan will likely vary depending on the loan type and lender. For federal student loans, the origination fee from October 1, 2020 through October 1, 2024 is 1.057% for Direct Subsidized and Unsubsidized Loans and ​​4.228% for Direct PLUS Loans.

The origination fee on a private student loan will vary by lender.

Do unsubsidized student loans have an origination fee?

Yes, unsubsidized loans through the federal government’s Direct Loan Program do have an origination fee of 1.057% for loans disbursed between October 1, 2020 and October 1, 2024.

Can a student loan origination fee be waived?

Federal student loans have an origination fee and it’s unlikely to have this fee waived. Some private student loans may not charge an origination fee and lenders that do may be willing to negotiate with borrowers.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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

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Sending your child off to college is a major milestone towards their independence. But if your kid decides to get a private student loan, they will most likely need to have a cosigner. Typically, that means mom and dad step up to the plate.

Should parents cosign on student loans? The answer will depend on such factors as your risk tolerance, your child’s probable ability to repay the loan, and if it makes sense for your family and your finances.

Cosigning for a student loan has benefits and disadvantages. There are also other options that can help bridge the gap between the cost of higher education and what you’re able to pay.

This guide will provide important facts to know about being the cosigner on a private student loan.

Why Are Student Loans Cosigned So Often?

It’s no secret that the cost of college education has skyrocketed. Consider these statistics:

•   The average cost of college has doubled since year 2000.

•   The current average cost for one year of college at a public institution is $26,027, including living expenses, with tuition and fees costing $9,678 in-state and $27,091 on average out-of-state.

•   For a private, nonprofit university, that number rises to $55,840 on average, with tuition and fees accounting for $38,768 of that sum.

There are many kinds of funding and different types of student loans to contemplate when budgeting for college. When savings, federal student loans, federal work-study, and scholarships or grants can’t fill the gap, students may look to private lenders to help them cover the rest.

Unfortunately, students just starting out usually don’t have the credit history needed to get a loan from a private lender, so cosigners sometimes step in.

But do students have to have a cosigner for a private student loan? Almost always. Since many lenders won’t lend money to young adults with no or little credit history, they typically require cosigners. Roughly 92% of all private undergraduate student loans have a cosigner.

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

What Are the Downsides to Cosigning My Child’s Loan?

If you’re looking to privately fund your child’s education costs, it means they likely need the help to pay for college, just like many Americans do. But cosigning for your child’s private student loan is not without potential repercussions. Think over the following:

•   When wondering “Should I cosign a student loan?” do consider your relationship with your child. If something goes wrong — missed payments, extended unemployment, or worse, default — the potential for financial stress could create the possibility of misunderstandings and hurt feelings. If your relationship with your child is already tenuous, bringing financial stress into it will likely not help.

•   Cosigning could put your own finances at risk. You may have the most responsible young adult in the whole state, but if something goes awry and the loan goes into default, the lender may sue you or hire a collection agency to try to recoup the debt.

A student loan default might also tarnish your credit score. Simply signing the loan also affects your score. Even if you’re not the one making payments, you’re still responsible for the loan, according to the major credit bureaus.

Recommended: What Is a Credit Bureau?

What Are Alternatives to Cosigned Loans?

Do parents have to cosign student loans? Not necessarily. And so you may wonder what options you have to cosigning a loan for your child’s education. Here, a few to know about:

The First Step for Federal Aid: FAFSA®

Do parents have to cosign a private student loan? The answer in the previous section was “almost always.” The “almost” part of that answer is “not if they can find other sources of funding.” Scholarships and grants, which don’t have to be repaid, are a good place to start, but they often don’t cover the entire cost of an entire college education. The first source of funding that should be exhausted before any others is federal student aid.

Filling out the Free Application for Federal Student Aid (FAFSA®) is the first step to figuring out how much federal (and frequently state) financial assistance your child is eligible for. You’ll add your financial information that will determine the amount of federal assistance, which includes Direct Subsidized Loan, Direct Unsubsidized Loans, and other student aid from the federal government, like grants and work-study.

Some states and colleges also base merit aid on FAFSA information, so the application is an important one for all types of financial aid, not just federal.

Establishing Their Credit Score

There are also some other pathways to consider when trying to find loans without a cosigner. One good idea is to have your child start building their credit history. A credit score is typically enhanced over time as the record of their successful payments grows, along with other factors like their outstanding debt, credit mix, and more. A couple of pointers:

•   Your student might start by either getting a secured credit card at a credit union or other financial institution, then showing they can make timely monthly payments on a purchase.

•   If your student is trustworthy and mature, you could also consider adding them as an authorized user to a credit card you already have. You’ll be responsible for making the monthly payments, but they could benefit from your financial behavior.

Scholarships

Loans and scholarships can go hand-in-hand to make college affordable. Like the real estate mantra concerning location, the college payment mantra might be, “Scholarships, scholarships, scholarships!” Money you don’t have to pay back? Yes, please.

The FAFSA will help colleges determine what federal student aid, scholarships, and grants your child might qualify for, but don’t let your student stop there.

Merit scholarships come in all sizes and from diverse sources, including local and national organizations, heritage associations, and various writing and other contests sponsored by nonprofits and other organizations. It might help to look at groups that your family might be closely associated with, such as unions, professional associations, or alumni organizations.

Keep in mind that your child can apply for scholarships while they are still in college, because some are tied to college majors, and your student is likely to have settled on a major after the first year or two. This could open up scholarship options that couldn’t be considered before they declared a major.

Recommended: Pennsylvania Student Loan and Scholarship Information

Budgeting

You might also be able to forego cosigning a student loan by making strategic decisions about education costs. Can your student reduce the overall cost of college by ditching the meal plan, living off campus, or even attending a significantly less expensive college?

Or, instead of paring down expenses, maybe your student could consider boosting their income to avoid the need for a cosigner on a student loan. One idea might be to start a low-cost side hustle. Another could be to take a year off to work — this may be enough to close the gap, avoiding the need for a loan altogether.

Loans for Parents

Parents who don’t mind shouldering more of the cost can also take out their own federal student loans with the Direct PLUS Loan , sometimes referred to as a “parent PLUS loan.”

Even though your student benefits from the loan, they are not the borrower, and you’ll be solely responsible for paying it back. Some parents may consider working out a repayment arrangement between themselves and their student. If this will be the expectation, however, it’s a good idea to discuss the arrangement with your student before taking out this type of loan.

Direct PLUS Loans can also be taken out by graduate or professional students. Whether a parent or a graduate student, there is a downside for the borrower. The interest rate for Direct PLUS Loans is often higher when compared to other federal student loans — 8.05% for the 2023-2024 school year versus 5.50% for Direct Subsidized Loans and Direct Unsubsidized Loans.

However, in this scenario, you won’t be asking yourself, “Should a parent cosign a student loan?” because you’re helping fill the gap without depending on your student to pay the loan back.

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

The Takeaway

There are options available to eligible students before considering a private student loan. However, if all other options have been exhausted, a private student loan can be a good choice to help your child complete their college education.

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

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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It can sometimes seem like there are an endless amount of student loans, but there are borrowing caps in place. Students face both annual and lifetime borrowing limits for federal student loans. The lifetime aggregate limit for undergraduate students is $57,500, of which no more than $23,000 can be in subsidized loans. For graduate students, the lifetime borrowing limit is $138,500, of which, no more than $65,500 can be in subsidized loans.

Private lenders may also have lifetime and annual borrowing limits, though those limits will be set by the lender. It’s possible to hit the maximum amount of loans allowed before finishing school, so it’s helpful to understand how much you may be eligible to borrow.

What Is the Lifetime Limit for Student Loans?

Students have the option to borrow federal student loans, private student loans, or both. Depending on factors like your year in school, there are aggregate and lifetime limits for borrowing.

Federal Student Loan Lifetime Limits

Federal loans have both annual and lifetime limits. The limits can vary by student, depending on three factors, including:

•   Your year in school

•   The type of loan you are eligible to borrow choose (subsidized vs. unsubsidized)

•   Your dependency status

Independent students, who the U.S. Department of Education considers to be on their own financially, can borrow more than dependent students who can typically get help from their parents.

Even if you’re financially independent of your parents, the definition of an independent student is fairly strict, and if you are under the age of 24, you’ll need to confirm you qualify as an independent student. If you’re not sure what you qualify as, see your guidance counselor or an admissions counselor who may be able to help.

If you’re not sure what you qualify as, see your guidance counselor or an admissions counselor who may be able to help. Here’s how the loan limits shake out depending on your status and year in school, straight from the U.S. Department of Education:

^*Except students whose parents are unable to obtain PLUS Loans.

^**And dependent undergraduate students whose parents are unable to obtain PLUS Loans.

Note that the lifetime limit for graduate and professional students includes the amount in federal loans you borrowed during your undergraduate studies.

Private Student Loan Lifetime Limits

If you choose to borrow private student loans, know that the annual and lifetime limit may vary by lender. That said, the annual limits typically cannot exceed the cost of attendance at your school, less any financial aid you have already received.

The total cost of attendance is a number determined by your school and typically includes tuition and fees, on-campus room and board, books, supplies, transportation, and dependent care.

As for lifetime limits, it may depend on whether you’re an undergraduate student or a graduate student. Some private lenders may offer higher limits if you’re doing an MBA or going to law or medical school, for example.

Some lenders have just one limit for all loans. But in some cases, you may even see two-lifetime limits: one for loans through the private lender and one for total federal and private loans.

So, if you’re considering borrowing from a private lender, ask about their loan limits before applying to make sure you get the funding you need.

What to Do If You’ve Hit the Maximum Federal Student Loan Amount

If you’ve reached your lifetime limit for federal student loans or you’re close to it, it’s probably time to start thinking about how you’re going to repay your student loans. Here are some options if you’ve maxed out your options for federal loans.

Consider Student Loan Refinancing

One way to make progress toward paying off your student loans and potentially save money along the way is to refinance them with a private lender (provided you haven’t reached your limit with these loans, too). Student loan refinancing can allow you to replace your current loans with a new one.

In some cases, you may qualify for a lower fixed or variable interest rate than what you’re currently paying. You could also adjust your repayment schedule to pay off your student loans faster or take some more time to fit your budget better.

With a lower interest rate, you could reduce the amount of money you spend on interest over the life of the loan. If you lengthen the term of your loan you’d decrease your monthly payments but will pay more in interest over the life of the loan.

In other words, if you refinance your student loans, you may get more flexibility with your payments as you eliminate your debt. However, it is important to note that if you refinance your student loans with a private lender, you may forfeit eligibility for federal benefits, such as student loan forgiveness.

Check Out Federal Assistance Programs

If you’ve maxed out your federal student loans because your income isn’t where you’d like it to be, you may want to take a look at federal programs like income-driven repayment plans, deferment, or forbearance instead — all of which you’d give up access to if you refinance with a private lender.

Consider a Private Student Loan

If you’ve reached your limit on federal student loans but still need some assistance paying for your tuition, you might consider taking out a new private student loan. There are options for fixed or variable private student loans, and some lenders like SoFi offer flexible repayment options. Partial, deferred, or interest-only payments put a bit less strain on your budget.

The Takeaway

There are both annual and lifetime borrowing limits for federal student loans, the lifetime limit for undergraduate students is $57,550, of which no more than $23,000 can be in subsidized loans. Private lenders may also have borrowing limits, but they will be set by the lender. Generally speaking, private student loans are limited to the cost of attendance.

SoFi is one of the leading private student loan lenders and offers fee-free private student loans with competitive interest rates for qualifying borrowers. The simple application can be completed entirely online.

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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