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So you want to go to medical school and become a doctor? Then you know that the MCAT, a rigorous test, is likely in your future. Since it’s an important qualifying test for medical school and can be challenging, you likely want to arm yourself with info and prepare well for it.

Here, you’ll learn some of the most important information, such as:

•   What are the MCATs

•   How to start studying for the MCATs

•   How to pay for the MCATs and medical school.

Read on, and hey: You’ve got this!

What Are the MCATs?

MCAT stands for Medical College Admission Test® (MCAT®). The test, which the Association of American Medical Colleges (AAMC) creates and administers every year, is multiple-choice and standardized. Some important facts:

•   Medical schools have been utilizing it for more than 90 years to determine which students should gain admission.

•   Most medical schools in the United States and some in Canada will require that students take the MCATs. Every year, more than 85,000 prospective medical school students take it.

•   There are four sections to the MCATs:

◦   Critical analysis and reasoning skills

◦   Biological and biochemical functions of living systems

◦   Chemical and physical foundations of biological systems

◦   Psychological, social, and biological foundations of behavior.

•   Students will receive five scores: one for each section, and then one total score.

◦   In each section, they can get a score ranging from 118 to 132, and the total score ranges from 472 to 528.

◦   Generally, a competitive MCAT score is a total of 511 or above, which would place a student in the 81st percentile.

The average MCAT score for all medical school applicants is currently 501.3. Usually, students will receive scores 30 to 35 days after they take the exam.

Keep in mind that MCAT scores, while important, are just one part of a medical school application. Medical schools often review other factors, including things like a student’s:

•   GPA

•   Undergraduate coursework

•   Experience related to the medical field, including research and volunteer work

•   Letters of recommendation

•   Extracurricular activities

•   Personal statement.

Because of this array of inputs, If a student has a high GPA from a competitive undergraduate school, for instance, and they don’t score very high on the MCATs, they may still have a chance of getting into a medical school.

Getting a competitive score on the MCAT can give applicants an edge, especially when applying to ultra-competitive medical schools. One way students can help improve their chances of getting a desirable score on the MCAT is to learn how to study for the unique demands of this test.


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Studying for the MCAT

One of the first things a student can do when determining how to prepare for the MCAT is to create a study plan. A well-crafted study plan will review what materials the student should review in order to prepare for the exam.

That said, there’s no one best way to prep for the MCAT. Consider these options; you might use one or a variety of techniques.

The AAMC Website

One great place to get started is the AAMC website, which provides an in-depth outline of the test on their website. Obviously, the same questions students will see on the actual exam won’t be listed, but sample questions that are similar to the real questions are. Students may find helpful tutorials and other content as well.

Online Resources

There are a variety of other online resources students can explore to help them review. For example, the AAMC currently recommends students take a look at Khan Academy’s MCAT Video Collection, where there are more than 1,000 videos as well as thousands of questions that students can use to review.

There are also MCAT study apps like MCAT Prep from Varsity Tutors and MCAT Prep by Magoosh that students can download and use to study.

Books, Textbooks, and Class Resources

How else to prep for the MCATs? It may also help to buy or borrow books from the library that go into detail on the MCAT. One word of advice: Students should just make sure that the books they’re reading are up to date. Information (and the MCAT) get refreshed often; you don’t want to be studying yesterday’s medical data.

It can also be helpful to review class notes and study guides from courses you’ve taken that are related to MCAT materials. Some schools have study groups and other academic support resources for students who are studying for the MCAT. If you’re currently enrolled in classes, take a look to see what might be offered at your campus. You might luck out with some great ways to learn more.

Practice Tests

AAMC offers official sample MCAT practice exams online. You can access two for free, and others for a cost of $35 each. Taking practice tests can help students familiarize themselves with the exam. Taking practice tests can also be important in helping students understand the timing of each section.

Study Groups and Tutors

Here are other ideas for how to start studying for the MCAT:

•   Getting an MCAT tutor who has taken the test could also be helpful. A tutor will generally be able to provide guidance on what kind of questions a student can expect. Plus, they will likely have hands-on experience with effective methods and tips for studying.

If you decide that how to prep for the MCAT should involve a tutor, ask friends and fellow students who have taken the MCATs recently for recommendations. There are also test preparation companies that provide resources for students to find tutors online or in person. Do check reviews and references.

•   Study groups can also be a tool to help students who are preparing for the MCATs. Students can find others who are on the same path and work together to build proficiency. If possible, find a group where each student has a different strength and weakness. This can maximize students learning from one another.

•   It may help to use a shared calendar or another tool to make sure everyone is on the same page for dates, times, and locations for when the study group will meet.

•   Want to find a study group as part of how to prepare for the MCATs? Search engines, professors’ recommendations, school bulletin boards/online groups, and fellow students are good bets.

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Important Dates to Keep in Mind

Now that you know the ins and outs of preparing for the MCAT, what about taking the test itself? Students can take the MCATs several times throughout the year, from late January through September. There are hundreds of test locations around the U.S. and Canada as well as select locations around the globe.

If a student’s preferred MCAT test date or location is not available, they can sign up for email notifications to see if it becomes available down the line.

Recommended: Refinancing Student Loans During Medical School

Paying for the MCATs and Medical School

As you explore the best way to prepare for the MCAT and plan your medical school journey, you’ll likely be keeping costs in mind. Here are details to note.

Paying for the MCATs

The registration fee for the MCAT exam is $330, and that includes distribution of scores. There may be additional fees for changes to a registration, a late registration, and for taking the test at international sites.

The AAMC does offer a Fee Assistance Program to students who are struggling to pay for the test and/or medical school applications. To be eligible for the Fee Assistance Program, students must meet the following eligibility requirements:

•   Be a US Citizen or Lawful Permanent Resident of the US.

•   Meet specific income guidelines for their family size.

Note that the Fee Assistance Program will review financial information of the student and the student’s parents, even if the student is considered independent.

Keep in mind that along with the MCAT fee, applying to medical school can be quite expensive. Most medical schools in the US utilize the AAMC’s American Medical College Application Service® (AMCAS®). To apply to medical schools, students will generally pay a first-time application fee of $170, as well as $40 for each additional school.

Some medical schools may require a secondary application, and those fees range depending on the school. Students may also need additional money to travel to and tour schools.

Recommended: Cash Course: A Student Guide to Money

Medical School Costs

The application process is just one portion of the expense of med school. After being accepted, there’s the cost of tuition, books, and more, and these medical school costs have been rising steeply lately.

•   The average cost of the first year of medical school at a public school with in-state tuition is $67,641, which includes tuition, fees, and living expenses.

•   The average cost for the first-year at a private medical school is $93,186. The average debt for medical school graduates is currently $202,453. Debt after medical school can go even higher when you add in undergraduate loans.

Obviously, that’s a significant number and can make you wonder how to pay for medical school. First, do remember that medical school is a path to a rewarding and challenging career, as well as potentially a lucrative one. The average medical school graduate earns more than $150,000, with high earners enjoying salaries above the $400K mark, according to ZipRecruiter data.

Paying for School with the Help of SoFi

Paying for the MCATs and medical school can be a challenge. SoFi understands this, which is why they offer students private student loans and the opportunity to refinance their current student loans.

Keep in mind, however, that if you refinance with an extended term, you may pay more interest over the life of the loan. Also note that refinancing federal student loans means forfeiting their benefits and protections, so it may not be the right choice for everyone.

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.

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

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The growing cost of college means that parents or grandparents who intend to pay part or all of the tab for a child need to chart a course. A tax-advantaged 529 plan is one way to save for future education costs.

Although 529 plans have been around since 1996, many parents still aren’t sure how they work. Yet they are worth knowing about in detail.

Read on to get the full story on 529 plans and whether opening one is the right move for you.

529 Plan Basics

Also known as a qualified tuition program, a 529 plan allows a parent (or anyone else) to prepay a student’s college tuition or contribute to an education savings account.

Contributions are not tax-deductible at the federal level, but some states do offer a tax deduction for a state-specific plan. Distributions are tax-free if they are used for qualified education expenses for the beneficiary.

There are two kinds of 529 plans — named, by the way, for Section 529 of the federal tax code — and every state offers at least one. Learn the difference.

Prepaid Tuition Plan

A prepaid tuition plan allows you to prepay tuition and fees at certain colleges and universities at today’s prices for a child’s future educational needs. Such plans are usually available only at public schools and for in-state students. Only nine are accepting new applicants, and the funds saved are typically not able to be used for room and board.

The main benefit of a prepaid college plan is that you could save big on the price of college by prepaying before prices go up. And contributions are considered gifts, so deposits up to a certain threshold each year ($17,000 in 2023, or $34,000 for a married couple splitting gifts) qualify for the annual and lifetime gift-tax exclusion.

A few special-case guidelines to note:

•   If your child doesn’t attend a participating college or university, you will likely be able to use the funds you set aside at another school. Another option may be to transfer the plan to an eligible sibling. What if no one in the family plans on attending college? Most plans will refund your money, perhaps minus a cancellation fee.

•   If your state government doesn’t guarantee the plan, you may lose the payments you’ve made if the state runs into budget shortfalls.

•   Prepaid tuition plans may charge an enrollment fee and ongoing administrative fees.

•   Although most of the plans can’t be used for room and board, Florida Prepaid Plans, for example, offer a prepaid dormitory plan of two semesters of dorm fees for each year of state university coverage.

An alternative to the state-sponsored plans is the Private College 529 Plan, which has over 300 participating institutions nationwide.

Recommended: Private vs Public College

Education Savings Plan

The second type of 529 plan is an education savings plan. Here’s how it works:

•   You can contribute monthly, quarterly, or annually, or deposit a lump sum. Beyond parents making regular payments, 529 plans can be a clever way for the extended family to give a meaningful gift on birthdays or holidays. There is no limit on how much you can add yearly, but you’ll have to fill out gift tax Form 709 if you contribute more than the annual gift amount.

•   While contributions are not deductible on the federal level, many states provide tax benefits for saving in a 529 plan, such as deducting contributions from state income taxes or giving matching grants. Check your local tax laws to see if you qualify.

•   Once you contribute, you will likely have a range of investment options to choose from. These vary from state to state and may include mutual funds and exchange-traded funds (ETFs).

•   You may want to tailor your choices to the date you expect to withdraw the money — you can possibly be more aggressive if you have a longer timeline, but may sway more conservatively if you only have a few years. One option is to choose a target-date fund, which would automatically adjust your portfolio to become more conservative as your child’s college years approach. That usually means a greater share of stocks initially and more bonds and cash over time.

•   Money can be withdrawn tax-free from a 529 savings plan to pay for any “qualified higher education expense,” which includes tuition, fees, books, computers, and room and board.

•   You can make withdrawals as long as your child is enrolled at least half-time at an accredited school, regardless of where in the United States it is, and occasionally abroad. Parents can also withdraw up to $10,000 a year to pay for K-12 tuition expenses and for student loan repayment.

•   If you withdraw money for the above expenses, you won’t have to pay federal income tax, and often state income tax, on your earnings. If you withdraw the funds for other reasons, you’ll have to pay taxes, and you may or may not be able to avoid the 529 withdrawal penalty, a 10% federal tax penalty on the earnings.

•   Starting in 2024, families with leftover savings in a 529 college savings account may be able to roll it to a Roth IRA tax- and penalty-free. That is one of several retirement savings changes that are part of the Secure 2.0 Act.

One last note: It is possible to change the beneficiary of a 529 plan to another eligible family member. For example, you can switch to a younger child if your oldest got a scholarship. That’s another 529 account benefit to note.

How 529 Savings Plans Compare With Other Options

Why create any investment plan for your child? Time. By investing funds, 529 accounts give your money the chance to grow over time.

If you just leave your savings in cash or even a high-interest savings account, you may actually be losing money as the years go by, as it likely won’t keep up with inflation.

The 529 plan also has advantages when it comes to calculating financial aid. When you complete the FAFSA, the Free Application for Federal Student Aid, money in these accounts owned by either a dependent student or by a parent is considered a parental asset on the FAFSA. Approximately the first $10,000 won’t be counted toward the expected family contribution.

For more than that, only up to 5.64% of the amount saved counts when the government calculates the “expected family contribution” in deciding on the financial aid package. (For other student assets, up to 20% of the savings can count in the calculation.)

So while a 529 may slightly reduce financial aid, it will likely save more overall by reducing the number of federal or private student loans needed.

New rules affect grandparent-owned 529 plans. Distributions have counted as student income on the next year’s FAFSA, assessed at up to 50%. But starting with the 2023-2024 school year, grandparents’ 529 plan savings will have no impact on the student, which might incentivize parents to contribute to grandparent-owned plans instead of the other way around.

Now let’s look at some options.

Recommended: Financial Aid for Higher-Income Families

Coverdell Account

Like a 529 plan, a Coverdell account, also called an Education Savings Account (ESA), is a tax-advantaged savings account to pay for qualified education expenses.

Unlike a 529 account, total contributions from all sources to a Coverdell account cannot exceed $2,000 annually per beneficiary. Another difference is income limits: You can only use an ESA if your modified adjusted gross income is less than $110,000 (singles) or $220,000 (married couples filing jointly).

You can only make contributions until the child reaches age 18, and all funds must be withdrawn by the time the beneficiary reaches age 30. A 529 plan generally does not restrict the age of the beneficiary.

Basic Brokerage Account

Instead of a 529 plan, some families may favor a brokerage account, which affords the freedom to choose whatever investments they want and the ability to use proceeds for any need a young person has.

The main benefit of a 529 plan is that you don’t have to pay capital gains tax on any distributions used for qualified education expenses. Many families, however, pay a 0% long-term capital gains tax rate anyway. (Long-term capital gains apply to a security held for a year or more. The day-to-day increases or decreases in an asset’s value before it is sold are unrealized gains and losses.)

For 2023, married couples filing jointly with taxable income of $89,250 or less and single filers with $44,625 or less may qualify for the 0% long-term capital gains rate.

A 529 account, then, may be of greatest use to families that need an additional tax shelter.

Recommended: How to Reduce Taxable Income for High Earners

Traditional IRA

Withdrawals from a traditional IRA before age 59½ that are used for qualified higher education expenses are not subject to the 10% early distribution penalty — but you will still pay income tax on the distribution.

Money in a qualified retirement plan is not reported on the FAFSA, but distributions may be reported as untaxed income, and income is weighted much more heavily than assets for financial aid. Remember that a 529 savings plan will have a limited impact on the financial aid offer a student receives.

It is generally thought that retirement plans should be used for just that, and not for college expenses.

Roth IRA

With a Roth IRA, you can withdraw contributions tax- and penalty-free at any time, but distributions will be reported as untaxed income on the FAFSA, reducing eligibility for need-based financial aid.

You generally must be at least age 59½ and have had the Roth account for at least five years to withdraw earnings tax- and penalty-free. If you are under 59½, you may be able to avoid a penalty (but not taxes) if you withdraw earnings to pay for qualified education expenses.

Some people opt to max out their Roth IRA contributions and then invest additional money in a 529 plan.

UGMA and UTMA Accounts

You can open a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act account on behalf of a child under age 18. The adult custodian controls the money, but gifts and transfers irrevocably become the property of the child.

As with a 529 plan, annual contributions to a UGMA or UTMA account are unlimited, and gifts below the annual gift threshold do not need to be reported to the IRS on gift tax Form 709.

Unlike college savings plans, there is no penalty if the account assets aren’t used to pay for college. Once the minor reaches adulthood, the money is turned over to the former minor, who can use the assets for college or anything else.

But custodial accounts have drawbacks when compared with 529 savings plans: The accounts offer no tax benefits when contributions are made. Earnings are subject to taxes. And a custodial account is counted as a student asset on the FAFSA and will weigh more heavily against financial aid eligibility than parents’ assets or assets held in a 529 account or an ESA.

Choosing a 529 Savings Plan

Every state offers a 529 savings plan, but not all are created equal. When trying to find the best 529 college savings plan, you may want to think about the tax benefits and the fees.

First, you may want to understand whether you qualify for a state income tax deduction or credit for your contributions, based on your state of residence and the plan. Check your state laws and consult a tax professional to learn more about your particular situation.

Some states, such as New York, only offer deductions to in-state taxpayers who use their plan. Other states, including Pennsylvania, allow residents to take a deduction regardless of which state’s plan they use.

Some states, like Indiana, offer income tax credits instead of deductions. And other states, such as North Carolina, don’t offer any deductions for 529 contributions.

The next thing you could consider are the fees associated with your plan, which could include enrollment fees, annual maintenance fees, and asset management fees. Some states let you save on fees if you have a large balance, contribute automatically, are a state resident, or opt for electronic-only documents.

The Takeaway

For many students, the cost of college can be eased with a tax-advantaged 529 savings plan. The accounts allow for tax-free growth of funds that can help dreams of affording higher education come true.

529 plans are still rarely used, though, whereas most college students take on loans to get through school. If savings and federal student aid don’t cover all the costs of college, a private student loan could be a solution.

Federal programs like income-driven repayment and deferred interest on some federal student loans do not apply to private student loans, but a private student loan can help fill gaps in need.

SoFi offers private student loans for undergrads, graduate students, parents, MBA and law students, and future health care professionals that come with competitive rates and no fees.

Check your rate on a student loan from SoFi, named a best private student loan company by U.S. News and World Report.

FAQ

Are 529 plans worth it?

A 529 plan can be a worthwhile college savings vehicle, depending on a family’s situation. If the student is definitely going to attend college and if the state of residence offers tax benefits for these savings, or a prepaid tuition plan, it can be a good option.

Why shouldn’t you invest in a 529 plan?

For some people, a 529 may not be the best option. If a family is unsure whether a child will attend college, lives where there aren’t state-level tax breaks for these programs, or thinks they can earn higher returns elsewhere, they might not want to open a 529 college savings plan.

Is a 529 plan better than a savings account?

A savings account offers more flexibility than a 529 college savings plan, but it won’t offer the tax advantages that a 529 does. With a 529 account, contributions will grow tax-free, and withdrawals for qualified education expenses are also not subject to taxes.

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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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

* The SoFi 0.25% autopay interest rate reduction requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the discount is applied to the principal loan balance and is intended to help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi.

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College is a major expense. Even with years of thoughtful saving and planning, the costs can add up quickly. Prepaid college plans are one option families are choosing to work out a smoother financial process for students and parents alike. These plans used to be more readily available in the past. Still, it’s worth looking at prepaid college plans, where you can get one, and whether they’re a smart financial decision.

What Are Prepaid College Tuition Plans?

If you have a student who definitely plans on going to college someday, a prepaid college tuition plan can help set them up for success. You, as a parent, guardian, or relative, can start paying for college now, long before the student actually attends. This locks in the current tuition rate. Even as tuition costs go up in subsequent years, these plans allow you to keep paying the tuition rate you initially locked in.

You can think of it as a loan of sorts. You pay up front, and the state earns money off of those payments. When it comes time for your student to attend college, the state pays the tuition out of the funds you provided.

Of course, you need to be confident in your student’s plans for this to work. You will probably need to live in the same state as the college the student will attend since these plans tend to apply only to in-state tuition.

Pros and Cons of College Prepaid Plans

Obviously, locking in a lower tuition rate can be a tremendous financial benefit. With college costs constantly on the rise, a prepaid tuition plan offers the potential of a steep discount. And you might even enjoy some tax breaks if you choose this approach, such as a deduction based on your contribution to a prepaid plan, depending on where you live.

However, this sort of plan can be somewhat inflexible. You may be limited in the choices you have in terms of schools. While you can get a refund if your student chooses a different school than you all expected, you may end up feeling some pressure to stay the course when investing in a plan like this.

And you can’t use the money freely. There are restrictions to how you can use the funds in a prepaid college plan. For example, room and board probably aren’t covered. These plans generally focus specifically on tuition and fees.

Despite this, many choose prepaid college plans to lock in a rate. They also enjoy the high contribution limits and tax benefits. Here are the major pros and cons of these plans.

Prepaid College Plans vs 529 Program

College prepaid plans and 529 college savings plans are similar. They serve the same basic function. However, when you look closer, they can be quite different. Prepaid tuition plans are a type of 529 plan, in fact, but 529 savings plans have distinct features that might sway your decision about investing in one or the other. Here are three of the biggest differences.

The National Prepaid College Plan

While many prepaid college plan options are state-run, there is also a national program called the Private College 529 Plan. Unlike other prepaid college plans, there’s no state residency requirement to join this plan. It applies to nearly 300 colleges and universities. However, they are all private institutions, not public. They span 30 states plus the District of Columbia.

The national plan offers a bit more flexibility than state plans, and you don’t need to choose a school to start saving. That decision can wait until your student is actually enrolling, in fact. As long as it’s one of the private institutions that are part of the plan, you can use your funds there.

Recommended: How to Start Saving for Your Child’s College Tuition

States With Prepaid College Plans

Only nine states still have prepaid college plan options, and each state will offer something a little bit different. You can compare all of the options below to see if any of these state plans work for you.

Are Prepaid College Plans Tax Deductible?

It depends on the state and plan, but in many cases, yes! There may be stipulations, though. For example, you’ll probably have to use the funds for higher education only. However, withdrawals for educational purposes may be tax-free. Moreover, your contributions to the plan could earn you deductions.

Are Prepaid College Plans Worth It?

That depends on where you live and what your student’s goals are. If the future is pretty certain, or you live in a state with a very flexible plan, a prepaid college plan can be a safe, stable way to save up money for college.

Because of the limitations and lack of flexibility, though, it may not be right for everyone. If, for example, you want to be more aggressive about your college planning, a 529 savings plan might suit your goals better. Plus, you can spend that money on things beyond just tuition and fees.

Recommended: Parent PLUS Loans vs Private Parent Student Loans for College

Alternative Methods for Prepaid College Plans

Beyond a prepaid tuition plan, you can also try a college savings plan to build up cash for college. This allows you to save up money and spend it on qualified education expenses. It doesn’t lock in a tuition rate, but because it’s a more aggressive type of savings plan, you could end up saving up more money in the long run.

There is also a national option. This plan applies even in many states that don’t have their own prepaid tuition plans. It also locks in rates, but you will have to choose one of the schools covered by the plan. Luckily, there are almost 300 to choose from.

Of course, if your child is headed to college in the next few years, you may not have time to save much money. Parent PLUS loans can help. When an undergraduate’s financial aid doesn’t meet the cost of attendance at a college or career school, parents may take out a Direct PLUS Loan in their name to bridge the gap.

The Takeaway

The thought of large student debt scares off many who would otherwise attend a college or university. But with some strategic and long-term planning, college can fit in the budget. You can mix and match approaches to find what works for you. For example, you could combine a prepaid tuition plan with a private student loan to pay for college. No matter what you ultimately choose, it will help to start planning well in advance.

Photo credit: iStock/dangrytsku

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Let’s talk about student loan payments. Woo-hoo! OK, it’s not the most thrilling topic, but know what is serotonin-boosting? Paying off that very last loan.

How to Pay Off Your Student Loans

It’s the unglamorous work that goes on behind the scenes that make or break every business owner, athlete, or creative person. It is helpful to think about student loan repayment like any other big feat worth accomplishing.

It begins with knowing that paying down student loans in a smart and effective way can take a lot of planning, budgeting, and adapting.

While there is no single smartest way to pay off student loans, because everyone’s situation is different, there are steps that will put most borrowers in a position to pay off their student loans without too much pain and on a timeline.

Another goal could be to create a financial plan that includes your loans.

Strategies to Pay Off Student Loans

Here are nine steps to consider including in your student loan repayment plan.

1. Organizing All Of Your Debt, Including Student Loans

Keeping track of your student loans and other sources of debt can be tricky, especially if you are a recent graduate. Consider listing them. Include the student loan servicer, amount of the loan, monthly payment, interest rate, and when the loan should be paid in full.

If you aren’t sure what your monthly payments will be, you can use this student loan calculator to get a rough idea, or you can call your loan servicer.

If you have credit card debt or personal loans, include them on your debt list. With all of your sources of debt, you can then mark on a calendar the date that the monthly payments are due.

While you always need to make the monthly minimum payments on all debts (unless your student loans are within their grace period or are in forbearance), listing them allows you to identify which debts you may want to pay off first.

If you have high-interest credit cards adding up each month, a credit card consolidation loan may be a great option to look at, too.

Once your credit cards are paid off, you’ll want to think about whether your goal is to pay your loans off quickly, or to simply make the monthly payments until the loans are done. The former is one way to save on interest over time.

Some folks do prefer to pay only the minimum monthly amount on their student loans so that they can save a little for other things.

2. Budgeting to Include Loan Payments

It can take time and effort to develop a monthly budgeting system that works for you, but it is doable, and totally worth it.

To get started, track your monthly cash inflows and outflows for two months. Total how much money you spent in each category, including debt payments like student loans.

Once you have a general idea of what you’re spending in each category, you can begin to build a budget framework. For example, if you spend $300 on groceries one month and $350 the next, you can now set a realistic grocery budget. Leave room for annual and quarterly expenses as well as incidentals.

With a budget that is built to include student loan payments, you’ll be more equipped to make all of your payments on time and know how much is available to spend on other wants and needs. Also, understanding how you’re spending will allow you to identify the areas where you’re overspending.

3. Setting Up Automatic Payments

Hopefully your student loan payments are set up to be automatically deducted from your bank account. If they aren’t, you can contact your student loan servicer to set up autopay. That way you won’t miss a payment because you forgot or are somewhere where you can’t access the internet.

Remember, missed or late payments will negatively affect your credit score. Damaged credit could preclude you from opportunities in the future, such as being able to refinance your loans.

Many loan service providers offer a discount if you arrange to autopay. When you sign up, ask if such a discount is available.

4. Paying More Than the Minimum Monthly Amount

Paying more than the minimum monthly payment can be a great strategy if your goal is to pay off your loan faster than the stated term. You’ll also save on interest over the life of the loan by paying it off sooner. Even small amounts can make a difference.

To do this, instruct your loan servicer to apply any extra payments to the loan principal, or adjust your automatic monthly payment to a higher amount and clarify that you want that extra money dedicated to the principal.

Make sure, after the next month’s payment, that the money was indeed put toward the loan’s principal.

Recommended: Why Making Minimum Student Loan Payments Isn’t Enough

5. Paying a Lump Sum Toward Student Loans

Increasing your monthly payment isn’t the only way to put a dent in your loans; at any point, you are allowed to make a lump sum payment toward the principal.

You could put your tax refund, holiday or birthday money, work bonuses, or inheritance money toward your student debt.

6. Adjusting Your Repayment Plan If Needed

Most federal student loans come with a 10-year repayment plan unless you choose otherwise.

Income-driven repayment plans base payments on discretionary income and family size. The plans lower monthly payments by extending the length of repayment to 20 or 25 years, after which any remaining loan balance is to be forgiven.

Even though your monthly payments are lower, you will pay more interest over time (longer loan terms mean more interest payments, after all). So it’s not a great choice if you want to pay off your student loans quickly or pay as little interest as possible, but it is available to those who are having trouble making their monthly payments.

If you are planning to use the Public Student Loan Forgiveness (PSLF) program for your federal student loans, you will need to select one of the income-driven repayment plans.

7. Considering Refinancing Your Loans

When you refinance one or more student loans, a private lender like a bank, credit union, or online company pays off your current loans and issues one new student loan, ideally at a lower interest rate. A lower rate could mean substantial savings over the life of the loan.

With federal student loan consolidation, on the other hand, the government bundles your federal student loans into one, using a weighted average of the interest rates, rounded up to the nearest one-eighth of a percentage point.

It’s important to note that by refinancing your federal student loans to a private student loan, you will not be able to access federal programs like income-driven repayment plans, PSLF, and government deferment or forbearance. If you don’t need any of those benefits, a lower rate gained by refinancing could be worthwhile.

Exploring refinancing with a private lender takes little time and doesn’t cost anything.

8. Knowing Your Worth and Asking for a Raise

With any pay raise, you can use the extra income toward your financial goals. This could mean increasing the monthly amount you pay toward your student loans or making a lump sum payment.

How much money you earn is an important factor contributing to your financial stability and ability to pay down your student debt. While budgeting is important, so is knowing your worth and asking for more when you deserve it.

If you haven’t already, start keeping track of your successes so that at your next compensation conversation, you have concrete examples on why you deserve a salary bump.

9. Understanding Your Employment Benefits Package

Although student loan repayment help is not as widespread as retirement or health care benefits, more employers are offering that perk to attract and retain employees.

Whenever you’re comparing job offers, it’s a good idea to compare benefits packages; although they’re not flashy like a big salary or company equity, benefits can be just as valuable.

If you’re looking for a new job, you could include student loan repayment help in your search. While it obviously shouldn’t be your only consideration, it’s great to have an idea of what you’re looking for in an employer.

Recommended: Finding Jobs That Pay Off Student Loans

Refinancing Student Loans

Refinancing is among the ways to pay off student loans, and SoFi is a standout in that field. SoFi refinances federal and private student loans with fixed or variable rates and a range of loan terms.

Take a close look at your student loan balance and the rates you’re paying, and then check your refinance rate in two minutes.

FAQ

What is the smart way to pay off student loans?

To pay off any loan, it’s smart to look at the interest rate and repayment term. If you can manage the monthly payments, a short term and a low rate is a winning combo.

If the payments are too painful and a longer term is needed, it could be smart to make extra payments of any amount whenever you can.

The PSLF program forgives any remaining Direct Loan balance after 10 years of on-time payments and qualifying employment. That could be seen as a smart way to pay off federal student loans if a graduate commits to working for a government or nonprofit employer, but the program has had a 98% applicant denial rate.

How can I pay off $100k in student loans in five years?

Say what? Well, it has been done. It might take sacrifice (moving in with relatives, no eating out, no new car), putting chunks that would normally go to rent toward student loan debt, staying motivated by watching and listening to others’ stories of debt repayment, refinancing one or more times, and getting aggressive about payments.

Most refinance lenders will offer a lower rate for a shorter loan term. Of course, the shorter the term, the higher your monthly payments will be, but the less costly the loan will be. A borrower might find that a variable rate, which usually starts lower than a fixed rate, pays off with a short-term loan.

How do I pay off a five-year loan in two years?

By paying extra toward the principal, in dribs and drabs or in a lump sum, and/or refinancing to a lower rate. Federal law prohibits prepayment penalties for federal or private student loans, so that’s not a worry.

To keep your student loan servicer from applying extra amounts to the next month’s payment, tell your servicer, by phone, mail, or online, to apply any extra payments to the loan principal.

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

SoFi 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.