SoFi

The dean’s list is a list of undergraduate students recognized for outstanding academic achievement in a given semester, quarter, or year. Each college and university has different dean’s list requirements, but students who finish the term with a high grade point average (GPA) and are in the top percentile of their class for academic performance can earn a spot on the dean’s list.

Not only is having the dean’s list award on your transcript a remarkable personal achievement, but it could also make a big impact on grad school admissions and future employers.

Dean’s List Meaning

The dean’s list is a scholarly award for undergraduate students who achieved high scholastic standing during the academic year. The award is released after each semester, quarter, or academic year and is typically based on a student’s GPA. However, specific dean’s list requirements will vary by institution and can change each term.

Dean’s List Requirements

Dean’s list requirements vary by college and can change each term, but there are typical conditions that a student must meet. To meet basic dean’s list requirements, students must:

•   Meet the minimum GPA requirements set by the school.

•   Be in the top percentile of their class for academic achievement.

•   Be taking a minimum number of credit hours. Most schools require students to be enrolled full-time, but some schools may include part-time students in the dean’s list.

•   Have zero incompletes, no shows, or late grades.

What GPA Is Needed to Make the Dean’s List?

While schools may base eligibility for the dean’s list on the student’s GPA, the award is comparative rather than absolute. The award is only given to the top percentile of students rather than everyone who earns a certain GPA. This means that the required GPA can change each semester based on the academic performance of the student body.

Students can strive for a GPA of 3.5 or higher on a 4.0 scale and be taking a minimum of 12 credit hours, but this may be different depending on your school and your degree program. Check with your school to determine the minimum GPA requirement to make the dean’s list.

Recommended: How Much Does GPA Matter When Applying to College?

What Is the Benefit of Being on the Dean’s List?

Earning a spot on the dean’s list is one of the highest levels of recognition for academic achievement. Students who earn the award can enjoy a variety of benefits that can continue throughout their educational career and beyond.

Personal Achievement

Making it onto the dean’s list requires academic commitment and dedication. Being on the dean’s list means you’ve ranked in the top percentile amongst your peers, which will be noted on your school record and should be seen as a great personal achievement.

Prestige

Having your name on the dean’s list, especially for multiple terms, is one way to help you stand out from the crowd. The dean’s list award is a testament to your academic success and has traditionally been looked upon favorably by the school’s administration as well as by other students.

Recognition

Some schools recognize students who made it onto the dean’s list by posting students’ names on the school website and sometimes local publications. Outstanding academic performance can also help you build relationships with your professors, who may be able to write letters of recommendation and references later on.

Special Events

Because your GPA is ranked among the top of your class, you might receive invitations to special events. These are typically networking events with top company executives. Networking can allow you to form connections with other people in your field of study and open the door to possible employment opportunities.

Attract Prospective Employers

Some colleges may include your dean’s list award on your school transcript, and you can also attract potential employers by mentioning this award on your resume. However, employment website Indeed doesn’t recommend adding this achievement to your resume if you were only on the dean’s list for one or two semesters or inconsistently.

Even if you don’t include the dean’s list on your resume, prospective employers may still consider your GPA when making hiring decisions. According to the National Association of Colleges and Employers’ Job Outlook 2022 Spring Update report, 43.5% of employers screen by GPA when making interviewing and hiring decisions.

Scholarships

While being on the dean’s list doesn’t guarantee any financial aid, a high GPA could make you eligible for merit scholarships. Merit-based scholarships typically use your GPA, test scores, leadership capabilities, and other factors to determine your eligibility.

Are There Any Student Loan Benefits When Getting on the Dean’s List?

There usually aren’t any financial perks for getting on the dean’s list with federal student loans or most private lenders. Some private lenders may offer a reward for a certain GPA, but most lenders typically only consider your GPA if it’s too low.

Your GPA could affect your eligibility for other types of financial aid, like scholarships and grants, though. You’re required to make Satisfactory Academic Progress (SAP) to meet the basic eligibility criteria for certain types of financial aid. A higher GPA also makes it easier for you to receive more financial aid.


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

What Other Academic Awards Can You Earn in College?

The dean’s list isn’t the only academic award that you can earn in college. There are several other awards that are given to students in recognition of outstanding achievement and as a means to further encourage academic excellence. Here are a few academic awards for college students.

The Honors List

The honors list is similar to the dean’s list; however, it may have different GPA requirements — usually lower. For example, students may be eligible for a spot on the dean’s list if their GPA is 3.5 or higher, while students on the honors list have a GPA between 3.25 and 3.5.

The President’s List

Undergraduate students earn the president’s list award if they get straight A’s in college and earn a 4.0 GPA. Part-time and full-time students may be eligible for this award.

The Chancellor’s List

At schools that offer this award, the chancellor’s list is typically ranked slightly higher than the dean’s list. Both full-time and part-time undergraduate students may usually qualify for the chancellor’s list.

Ways to Pay for College

If you’re aiming to see your name on the dean’s list, financial stress can hinder your ability to succeed academically. According to Inside Higher Ed, 48% of students who experienced financial challenges while in school admitted they had difficulties focusing on their academics.

Luckily, there are options out there for prospective and current students who are struggling with how to pay for college. Here are a few options:

•   Fill out the Free Application for Federal Student Aid (FAFSA®) to see if you qualify for financial aid. Make sure to read our FAFSA Guide and fill this out as soon as possible because many colleges award money on a first-come, first-served basis.

•   Search for scholarships, which are a form of merit aid to help pay for tuition and other education expenses. There are thousands of available scholarships to students with some even offering a full-ride to a four-year institution.

•   Apply for grants. Grants are another form of financial aid that doesn’t need to be repaid. Students can apply for federal, state, or school grants.

•   Find a work-study position. The federal work-study program offers funds for part-time employment to help college students in financial need.

•   Look at student loans. If you are still struggling to afford school-related expenses after exhausting all other forms of financial aid, there are a variety of federal and private student loan options to help.

Recommended: FAFSA 101: How to Complete the FAFSA

The Takeaway

Students who make the dean’s list are recognized for outstanding academic achievement. Benefits include personal achievement, prestige, public recognition, the opportunity to attend special events, being granted scholarships, and standing out on job applications.

And, students who are less stressed financially tend to do better in school. Options for paying for college include scholarships, grants, federal student loans, and private student loans.

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

FAQ

What GPA is required to get on the dean’s list?

The minimum GPA for the dean’s list varies by school and it can change every term. However, most schools require at least a 3.5 GPA on a 4.0 scale.

What does it mean when you get on the dean’s list?

What it means to be on the dean’s list is that you’ve ranked in the top percentile of your class. The dean’s list is one of the highest levels of recognition for scholarly achievement.

What is the benefit of being on the dean’s list?

Earning a spot on the dean’s list comes with several benefits. Not only is it a prestigious award and a significant personal achievement, but you could be invited to special events, network with others in your field of study, and attract prospective employers.

Photo credit: iStock/Prostock-Studio

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOIS0124002

There are typically no withdrawal penalties associated with leaving leftover funds in a 529 plan after college. In fact, 529 plans allow you to withdraw up to $10,000 per year, per student.

But still, the earnings portion of a non-qualified 529 plan distribution can be subject to income tax and a 10% penalty for 529 withdrawal.

Keep reading to learn more about what a 529 plan withdrawal penalty is, which 529 withdrawal penalty exceptions exist, and a few other college financing options for students and parents without 529 plans.

What Is a 529 Plan?

A 529 plan is a college savings investment account that comes with unique tax benefits if it’s used to pay for qualified education expenses. It can help cover the costs of a beneficiary attending college, K-12 school, an apprenticeship program, or even to pay back student loans.

When someone uses a 529 plan to save up for college, the funds generally have little impact on their ability to receive financial aid.

In addition, there are several other benefits to using a 529 plan:

•   Funds in the account are invested and grow over time.

•   Depending on the type of 529 plan, beneficiaries can prepay for college in advance to lock in current tuition prices before they go up.

•   529 college savings accounts are listed as assets when the beneficiary applies for Federal Student Aid.

•   Certain 529 plans let beneficiaries deduct their contributions on their state income taxes.

•   529 plan contributions can be considered “completed gifts” to the beneficiary, allowing families to use them as estate planning vehicles. For 2023, the annual gift tax exclusion can be applied up to $17,000 per donor, per beneficiary and in 2022 the annual exclusion was $16,000.

What Are Qualified 529 Plan Distributions?

Let’s start with the education expenses that are considered qualified within a 529 plan:

•   Tuition and associated fees

•   Room and board (if the student is enrolled at least half-time)

•   Books

•   Technological equipment and computers

•   Equipment for special needs

•   Student loan payments

•   Up to $10,000 per year, per beneficiary in eligible K-12 expenses

•   Apprenticeship program tuition and fees

•   Up to $10,000 in K-12 tuition expenses (per year, per beneficiary)

Recommended: Using Student Loans for Living Expenses and Housing

What Are Non-Qualified 529 Plan Distributions?

Non-qualified 529 plan distributions describe any portion of a plan withdrawal in which the funds were not used to pay for qualified education expenses like the ones listed above.

As such, here are some of the education expenses that are considered non-qualified:

•   Costs associated with transportation

•   Costs associated with college application and testing

•   Costs associated with extracurricular activities

•   Health insurance costs

•   Any cost that doesn’t fall under the umbrella of the qualified education expenses listed above

Are Distributions Taxable?

Generally, contributions can be withdrawn tax-free because taxes are paid at the time of contribution. The earnings portion (the money earned from investments) of a non-qualified 529 program plan distribution could be subject to a 10% federal income tax penalty on top of any associated income taxes that may be due. It would be taxable to whomever received the payment, whether that’s the account owner or the designated beneficiary.

If the non-qualified distribution is not paid out to either the designated beneficiary or the eligible educational institution, it’s assumed to have been given to the account owner who will be subject to the 10% withdrawal penalty and tax.

What Is a 529 Early Withdrawal Penalty?

A 529 early withdrawal penalty occurs when investment gains are withdrawn from a 529 account before the beneficiary incurs any qualifying expenses, or if they withdraw funds for any of the non-qualified reasons listed above.

When this happens, the IRS can assess a steep early withdrawal penalty of 10%.

In California, an extra 2.5% state income tax penalty is imposed on the earnings portion of non-qualified 529 plan distributions.

Can I Make a Withdrawal From 529 Without Penalty?

In certain cases, it’s possible to execute a withdrawal from 529 without penalty, such as if:

•   A plan beneficiary passes away, becomes disabled or decides to attend a U.S. Military Academy.

•   A family must pay income tax on a portion of their 529 withdrawal due to their claiming the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC).

•   A plan beneficiary receives certain other types of educational assistance, such as a scholarship exception.

529 Withdrawal Penalty Exceptions

Here are a couple of circumstances in which a 529 withdrawal penalty may not apply to a non-qualified distribution.

Scholarship

It may come as a surprise to learn that the 10% 529 early withdrawal penalty doesn’t apply when a beneficiary no longer needs to use their 529 funds because they received a scholarship.

This particular 529 withdrawal penalty exception allows funds to be withdrawn from the 529 plan without penalty up to the amount of the scholarship itself.

While this is one way to avoid a penalty for 529 withdrawal, account owners will still owe taxes on the earnings after the initiation of the withdrawal if they are used on non-qualified expenses.

Death or Disability of Account Beneficiary

If the 529 account beneficiary passes away, the withdrawal fees are generally waived.

The additional fee is also generally waived in the event that the designated beneficiary becomes disabled. According to the IRS, someone is considered disabled if they are able to prove that they are unable to participate in any significant gainful activity due to a physical or mental condition.

Recommended: Student Loan Disability Discharge Eligibility

Beneficiary Enrolls in a US Service Academy

If the designated beneficiary enrolls in a U.S. service academy, such as the United States Naval Academy at Annapolis, the withdrawal fee may be waived. Note that the exception to the withdrawal fee only applies so long as the distribution amount does not exceed the cost of attendance as defined by the IRS.

Time Limit

There’s a decent amount of debate around the timing of a 529 plan distribution when it’s based on a scholarship. There are no clear instructions from Congress or the IRS, which means tax professionals and other financial experts may vary in their guidance. If you have specific questions, consider consulting with a tax professional who can provide a personalized recommendation.

What if My Child Doesn’t Go to College?

If you’re a parent who’s saving for your child’s college tuition and they don’t decide to go to college, there are certain specifications and limitations around what else the 529 funds can be used for.

For example, in some states, 529 funds can be used to cover K-12 expenses or professional schools.

That said, if the beneficiary decides to take a gap year to travel or join the armed forces, the funds can’t be withdrawn for personal use by the parents for something like a major renovation.

Still, there are a few ways to take advantage of 529 savings when the intended dependent doesn’t want to attend a college or university:

Changing the Beneficiary

In instances where the account owner has more than one dependent, they may be able to change the beneficiary of the existing 529 plan from one child to another. All they need to do is fill out the associated paperwork, which can typically be found on the 529 plan provider’s website, or give them a call and have them send it in the mail.

Apprenticeships

In 2019, the Setting Every Community Up for Retirement Enhancement (SECURE) Act expanded the scope of qualified educational expenses for 529 plans to include student loan repayment and registered apprenticeships.

If an apprenticeship is registered and certified with the U.S. Secretary of Labor , it is considered a qualified higher education expense and, as such, associated program fees, supplies, books, and equipment may be considered qualified higher education expenses as well.

Recommended: What Is an Apprenticeship? Do They Pay? Pros & Cons

Repay Student Loans

As briefly mentioned above, student loan repayment is now included as a qualified education expense for 529 plans. Under the SECURE Act, it is possible to use a lifetime maximum of $10,000 from a 529 plan to pay down student loan debt. This money can be used to repay student loan debt that belongs to the 529 plan account holder, their spouse, children, or grandchildren.

Other College Financing Options

If you or a dependent missed the boat on setting aside funds in a 529 college savings plan, there are still plenty of options to secure financial support.

If you’re looking for another way to pay for your child’s college education, you might consider:

•   Federal student loans. There are many types of federal student loans funded by the federal government and, in order to qualify, you must fill out the Free Application for Federal Student Aid (FAFSA®) form every year you want to receive federal student loans. Federal loans offer an array of flexible payment options, the ability to earn student loan forgiveness, and the option to defer payments or put the loan into forbearance.

•   Parent Plus loans. A Parent Plus Loan is a federally funded student loan that can be taken out by parents to help their undergraduate dependents pay for college. There are no annual or lifetime borrowing limits and, with the Parent Plus Loan Forgiveness Program, borrowers are eligible for an income-contingent repayment plan or relief from the Public Service Loan Forgiveness program. There is no federal program that allows for parents to transfer a parent plus loan to the student.

•   Private student loans. A private loan for students can help cover the cost of a college education based on the borrower’s credit score and can be obtained from a variety of private lenders.

When you opt for a private student loan with SoFi, you can check your rate instantly, apply in minutes, and there are no hidden fees. While private student loans can help fill funding gaps for students who are paying for college, they don’t always offer the same borrower benefits or protections as federal student loans, such as the option to pursue Public Service Loan Forgiveness or deferment options. For this reason, they are generally borrowed only after all sources of financing have been thoroughly reviewed.

Recommended: A Guide to Unclaimed Scholarships and Grants

The Takeaway

A 529 plan is a college savings investment account that comes with unique tax benefits if it’s used to pay for qualified education expenses. Qualified expenses include tuition, fees, school supplies, and room and board. Non-qualified expenses include health insurance, extra-curricular activities, and fees for applications and testing — to name a few.

When someone withdraws funds from their 529 plan for non-qualified expenses, they are subject to a 10% early withdrawal penalty. In some cases, though, there are 529 withdrawal penalty exceptions, including when a plan beneficiary passes away, claims a specific tax credit, or receives a scholarship.

In cases where a dependent decides not to go to college, 529 plan account owners have the option to change the plan beneficiary to another dependent, use the funds for a dependent’s apprenticeship, or cover K-12 expenses.

Other college financing options include federal student loans, Parent Plus Loans, and private student loans.

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

Photo credit: iStock/FG Trade

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOIS0124006

Student loans are considered installment loans, or loans that are repaid through regularly scheduled payments or installments.

Revolving options, like credit cards, let borrowers take out varying amounts of money each month, repay it, and take out more money as they go. Learn more about installment loans and revolving credit below.

Learn more about installment loans and revolving credit below.

What Is Revolving Credit?

Revolving credit is an agreement between a lender and an account holder that allows you to borrow money up to a set maximum amount. The account holder can choose to pay off the balance in full or make minimum monthly payments on the account.

As the account holder makes repayments, the amount available to borrow is renewed. Account holders can continue to borrow up to the maximum amount through the term of the agreement. Examples of revolving credit include credit cards and home equity lines of credit (HELOCs).

Recommended: The Different Types Of Home Equity Loans

What Is Installment Credit?

Installment is a type of credit that allows a borrower to make fixed payments on a loan over a set period of time. Before the borrower signs the installment loan agreement, the lender will decide on the interest rate, fees, and repayment terms, which will determine how much the borrower pays each month.

Common examples of installment loans include student loans, mortgages, auto loans, and personal loans.


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

Revolving Credit vs Installment Credit

Here’s a high level overview on the differences between revolving credit and installment credit.

Revolving Credit

Revolving credit is a more open-ended form of credit obligation. Let’s use the example of a credit card:

1.    The cardholder uses the card to make purchases as they please, pays them off either in-full or partially each month, and continues to make charges on the line of credit.

2.    The amount of money the cardholder spends is their decision (up to their credit limit), and the amount of money they repay each month isn’t set in advance by the lender.

3.    The cardholder can pay off the account balance in full each month, or they can opt to pay the minimum and “revolve” the balance over to the next month (though this will accrue interest on the account).

An important note: To avoid any late fees or potential dings to their credit score, people who are borrowing from revolving credit are advised to pay their monthly bill on time. Revolving credit can play a major role in calculating a person’s credit utilization rate, which is considered the second biggest factor in determining their credit score. For FICO® scores, it is generally suggested that borrowers use no more than 30% of their available credit.

Installment Credit

Installment credit is less open-ended than revolving credit. Installment credit is a loan that offers a borrower a fixed amount of money over a predetermined period of time. When a borrower signs the loan agreement, they know exactly what the monthly payments will be.

Let’s use the example of a student loan:

1.    The student borrows a specific dollar amount. The lender specifies the interest rate and repayment terms. In the case of federal student loans, interest rates and terms are set by federal law.

2.    The predetermined funds are released to the borrower. Typically, the funds are released in a single lump sum payment.

3.    The borrower repays the loan based on the agreed upon terms. Terms will be set by the lender, for private student loans, or by law for federal student loans.

An important note: Having an installment loan on their credit report can help some borrowers diversify their credit mix, which is a factor in determining an individual’s credit score. The amount of the installment loan, however, won’t play a major role in the borrower’s credit utilization rate (versus with revolving credit).

Is a Student Loan an Installment Loan?

Student loans for undergraduate school are considered installment loans, which means they come with a starting balance, are disbursed to the qualifying borrower, and are repaid over a set amount of time through a fixed number of payments.


💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

Pros and Cons of Installment Credit

There are advantages and disadvantages to taking out an installment loan:

Pros of Installment Credit

Here’s a brief breakdown of a few installment credit pros:

Payments

Installment credit payments are made on a set schedule that’s determined by the lender. This makes them a predictable, long-term strategy for paying off debt, and also makes it easier to factor them into your budget, especially if the installment loan has fixed interest rates.

The monthly payment for an installment loan with a variable interest rate may change from month to month, depending on how the variable interest rate changes.

Borrowing Cost

In terms of the loan amount and length of the loan, installment loans can be tailored to the borrower’s specific financial circumstances. This means the cost of the installment loan is fairly flexible based on what the borrower needs. Additionally, interest rates are generally lower on installment loans than with revolving credit, so borrowers may find that borrowing an installment loan with a competitive interest rate is a more affordable option.

Cons of Installment Credit

And here’s more info on the cons of installment credit:

Expensive

If the borrower takes out an installment loan over a longer period of time, they may end up making payments at an interest rate that’s higher than the current market rate, unless they’re able to refinance the loan.

Either way, the borrower is locked into a long-term financial contract with an installment loan. If they encounter a financial pitfall, they may be unable to make the scheduled payments or risk defaulting on the loan and damaging their credit.

Prepayment Penalty

Some loans impose prepayment penalties if a borrower pays their loan off early. This isn’t necessarily the case for all installment loans, but it’s important to read the fine print in the loan agreement to determine whether a prepayment fee will be triggered if the loan is paid off early.

Recommended: How to Avoid Paying a Prepayment Penalty

Ways to Pay for School

When looking for ways to pay for school, undergrads and grad students often look to installment loans. Tuition and living expenses may also be covered by savings and scholarships and grants.

Recommended: How to Pay for College

Federal Student Loans

Federal student loans are installment loans available to students. To apply, students fill out the Free Application for Federal Student Aid (FAFSA®) each year. Federal student loans have fixed interest rates that are set annually by Congress, offer flexible repayment options, and have some borrower protections and benefits such as deferment and the option to pursue Public Service Loan Forgiveness.

However, there are borrowing limits for federal student loans, so students may need to review other sources of financing when determining how they’ll pay for college.

Recommended: FAFSA 101: How to Complete the FAFSA

Private Student Loans

Private student loans are installment loans you can use to pay for a college education. Private student loans are not funded by the federal government. To apply for them, borrowers can browse the offerings of individual lenders like banks, credit unions, and online lenders and decide which private student loan works best for their finances. As a part of the application process, lenders will generally review the applicant’s credit history and credit score among other factors.

Private student loans can help fill the gap between the cost of college and their total financial aid, like federal loans, grants, and scholarships. However, private loans are generally considered only after all other options have been depleted. This is because private lenders are not required to offer the same borrower protections as federal student loans. If you think private student loans are an option for you, shop around to find competitive terms and interest rates, and be sure to read the terms and fine print closely.

Personal Savings

Using personal savings to pay for college means less debt and more flexibility. Not only that, but it costs significantly more to borrow money to pay for college than it does to use personal savings.

Still, this isn’t financially feasible for everyone, as evidenced by the fact that there are 43.2 million student loan borrowers in the U.S. as of the first quarter of 2024. Sometimes, going into debt is the only reasonable option.

Grants

Unlike student loans, which require repayment, and work-study programs, which allow students to work on campus, grants are a type of financial aid that doesn’t require repayment.

Grants may be awarded by the federal government, states, or colleges. The amount of aid a student receives depends on a number of factors, such as the student’s financial needs and the type of school they’re attending.

Recommended: The Differences Between Grants, Scholarships, and Loans

Scholarships

A scholarship is a lump sum of funds that can be used to help someone pay for school. The key stipulations with scholarships are that a) they’re contingent on a particular qualification, i.e. a grade point average (GPA), act of service, or athletic performance, and b) they never have to be repaid.

Scholarships are usually awarded by colleges, universities, corporations or organizations.

The Takeaway

Student loans are installment loans, meaning borrowers receive a set amount of money from a lender and are required to repay the loan over a fixed period of time.

For those looking for ways to pay for college, there are other alternatives to installment student loans — such as scholarships, grants, personal savings, and private student loans.

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

FAQ

Is a student loan an installment loan?

Yes, a student loan is a type of installment loan, which means you pay it back in set amounts, over a fixed period of time, and it shows up on your credit report.

Is a student loan a revolving loan?

No, a student loan is not a revolving loan. It is considered an installment loan.

What are the benefits of an installment student loan?

A few of the benefits of installment student loans include being able to easily factor the loan into your monthly budget, the same payment terms for the life of the loan, and a longer period of time to pay off the loan.

Photo credit: iStock/SDI Productions

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

SOIS0224001

If you, like many students, have taken out loans, it’s important to know the answer to, “Do student loans accrue interest while you are still in school?” The answer is often yes. The main exception to this rule is for those who hold Federal Direct Unsubsidized Loans. While a student is taking classes, the interest on these loans is covered by the US government.

It can be important to understand exactly what type of student loan you have to make sure you understand the terms of the loan and when interest accrues. This, as you might guess, impacts how much you will be paying back.

Read on for a guide to how student loan interest works while you are still in school.

Understanding How Federal Student Loan Interest Works

Do federal student loans accrue interest in school? In many, but not all, cases, the answer is yes. The first step of understanding how student loan interest works is to know what type of student loan you have exactly, because interest may accrue differently, depending on the type of loan it is.

Subsidized vs. Unsubsidized Loans

Federal student loans may be subsidized or unsubsidized. The accrued interest on Direct Subsidized loans is covered by the government while a student is enrolled at least half-time. Direct Subsidized loans are only available to undergraduate students.

For Direct Unsubsidized Loans, students are responsible for paying the interest that accrues on their student loans. Interest begins accruing as soon as the loan is disbursed, or paid out to the borrower.

You won’t be required to make payments while in-school, but be aware that if you don’t, you may graduate with a higher balance than when you started. That’s because the accrued interest is capitalized on the original balance of the loan. Direct Unsubsidized Loans are available to undergraduate and graduate students.

Direct PLUS Loans are available for graduate students or their parents. The interest on these loans begins accruing when the loan is disbursed and continues accruing while the student is enrolled in school.

How Does the Grace Period Impact Interest Accrual?

Both Direct Unsubsidized and Subsidized Loans have a six-month grace period after the borrower graduates. On subsidized loans, the borrower is not responsible for paying interest during the grace period. On an unsubsidized loan, interest continues to accrue during the six-month grace period.

Direct PLUS Loans do not have a grace period. Graduate students do receive an automatic deferment after graduation and interest does accrue during this time period.

How Does Capitalized Interest Work?

While payments are not required on most federal student loans while the student is enrolled in school, students with Direct Unsubsidized or PLUS loans have the option of making interest-only payments. This can be helpful because, as mentioned previously, after the grace period, and at the end of periods of deferment or forbearance, the accrued interest is capitalized on the loan.

Capitalized interest on student loans occurs when the accrued interest is added to the principal balance of the loan (the amount that was originally borrowed). This becomes the new balance of the loan, and interest will continue to accrue based on that new balance.

Think of all that accumulating interest like a snowball rolling down a mountain. You might be able to stay ahead of it for a while, but it also might catch up with you.


💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

Understanding How Private Student Loan Interest Works

When thinking about private vs. federal student loans, know that private loans are not subject to the same rules as federal student loans. They’re offered by private companies, and each lender will likely have its own terms and conditions.

Wondering, “Do private student loans accrue interest while still in school?” Yes, the majority of private student loans will accrue interest while the student is enrolled in school. Some lenders may allow borrowers to defer payments until after they graduate. In this case, the accrued interest from while the borrower was in school will likely be capitalized on the loan. To be sure of the terms on your loan, review the loan agreement or check in with the lender directly.

Keep in mind that, as mentioned, private student loans don’t always offer the same benefits or borrower protections (things like income-driven repayment options) that federal loans do. Because of this, they are generally considered after all other sources of financing, including federal student loans, have been exhausted.

This table provides an overview of how interest accrues on the various types of loans discussed in this article.

Recommended: Tips to Lower Your Student Loan Payments

Can You Minimize Student Loan Interest Accrual While in School?

One way to limit accrued interest is to limit what you borrow in the first place. When it comes to student loans, aim to borrow only what you really need.

Work-Study or a Part-Time Job

A work-study, for those eligible, or part-time job in another way to help take the sting out of student loan payments. You may have the best intentions when it comes to getting a job to help make those loan payments, but it can be tough to manage when you’re busy with academics, extracurriculars, internships, and more.

Make Interest Only Payments

Do you need to pay student loans while in school? That isn’t likely to be a requirement, but as mentioned earlier, many loans allow borrowers to make interest-only payments while they’re in school. While this won’t really eliminate accrued interest, it may help minimize the amount of interest paid over the life of the loan, because the interest is paid as it accrues instead of being capitalized onto the loan.

Recommended: Are Student Loans Tax-Deductible?

The Takeaway

Interest on many types of student loans accrues while the student is in school. Federal Direct Subsidized Loans are an exception, as the accrued interest is paid for by the government while the student is enrolled in school and during the grace period.

Generally speaking, interest other types of student loans, including Direct Unsubsidized and PLUS Loans, begin accruing interest when they are disbursed, and continue accruing interest while the student is enrolled. For private student loans, each lender will likely have its own terms and conditions. The surest way to confirm how interest accrues on a private student loan is to check directly with the lender.

Depending on your situation, student loan refinancing might lower your monthly payment. However, it’s important to note that if you refinance for an extended term, you may pay more interest over the life of the loan. Also, when you refinance federal loans, you forfeit federal loan protections. Refinancing may not be the right decision depending on your particular needs.

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.

SOSL1123004

There are many types of scholarships, from academic to athletic and need-based to identity-specific scholarship programs. Recipients typically don’t need to repay the funds they receive in the form of scholarships, which makes this type of funding particularly appealing.

In a 2023 Sallie Mae survey, How America Pays for College, it found that 61% of U.S. families used scholarship funds to partly pay for college. The average scholarship award amount across school, state, and company or nonprofit sources was $8,005.

Despite this available aid, 29% of students who didn’t use scholarship funding said they didn’t apply because winning didn’t seem plausible. However, with so many different types of scholarships available, you might find one that can help you pay for school.

1. Academic Scholarships

Academic scholarships, also referred to as merit scholarships, are awarded to students who’ve demonstrated academic excellence or exceptional skill in an area. For example, a merit-based scholarship might be based on an applicant’s cumulative GPA.

This kind of scholarship is provided by numerous sources, including:

Schools

Some high schools provide academic scholarships to their top graduating seniors. Additionally, the college you’re attending might have scholarships available.

Federal

Nationally recognized organizations offer federal academic scholarships based on different criteria and specifications.

Local

Students might also find scholarships sponsored by their state, county, city, or local associations.

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

2. Athletic Scholarships

Athletic scholarships are offered to student-athletes by their college. These full- and partial-scholarship programs are offered to a select few students who have shown exceptional skill in their sport.

Typically, when participating in an athletic scholarship you’re expected to maintain satisfactory academic performance to continue receiving funding. Note that fewer than 2% of high school athletes are awarded athletics scholarships to compete in college.

Recommended: Balancing Being a Student Athlete & Academics in College

3. Scholarships for Extracurriculars

Students who participate in extracurricular activities might be able to find scholarship opportunities for their unique interests. For example, scholarships for students who dance, act, draw, or participate in Boy Scouts, Key Club, and more exist.

💡 Recommended: Looking for scholarships? Use SoFi’s Scholarship Search Tool for college scholarships in every state, along with fellowships, grants, and other financial aid award opportunities.

4. Student Specific Scholarships

There are many types of scholarships that are based on the student’s personal situation or affiliation. Some of these kinds of scholarships include:

Religious Scholarships

For example, your specific religious denomination. These scholarships are generally available to students who are actively involved in a faith-based community, or who are pursuing religion-based college courses.

First-Generation Scholarships

Students who are the first in their family to attend college may qualify for specific scholarships.

Legacy Scholarships

These scholarships are exclusively for students whose parents or close family members are alumni of the same institution.

Identity-Based Scholarships

In addition to the student-specific scholarships discussed above, scholarship programs are also available based on a student’s personal identity. Some identity-based categories include BIPOC, Women, and LGBTQIA+.

Hispanic Heritage

Scholarships are available based on heritage. Students of Hispanic or Latinx heritage may be able to qualify for specific heritage-based scholarships like those offered by the Hispanic Scholarship Fund.

African American

Specific scholarships are available for African American students as well.

Women

Scholarships for women are another subset of options.

LGBTQIA+

LGBTQIA+ identifying students may be eligible for scholarships as well.

Learning Disabilities

These scholarships are available to select students who have diagnosed learning and attention issues. For example, the National Center for Learning Disabilities offers scholarships.

5. Need-Based Scholarships

One of the most popular types of scholarships for college are need-based. These scholarships are accessible to applicants who have a demonstrated financial need, and a program might ask for proof, such as income documentation or FAFSA® information.

You can find need-based scholarships from national organizations, as well as within your state, local community, and even through your own school.

Recommended: What is Need-Based Financial Aid?

6. Employer Scholarships

Employer scholarships are offered to employees of a company or an employee’s college bound student. Aside from having an affiliation with the employer, students might need to meet other eligibility criteria to be selected for an award.

7. Military Scholarships

Private and public entities sponsor military scholarships for students who currently serve or have served in the U.S. armed forces. If you’re a first-time freshman and participated in Reserve Officer Training Corps, consider reaching out to your school’s ROTC officer to learn about your options.

8. STEM Scholarships

STEM scholarships are accessible to students who are pursuing a college education in a science, technology, engineering, or math discipline. Some scholarships programs are offered specifically to students who identify with a particular group; for example, STEM scholarships for minority students.

9. Scholarships Based on Major

Regardless of what you’ve chosen as your college major, there’s likely a scholarship suited for you. These scholarships are provided by some college departments, the school itself, or private organizations who want to encourage students to pursue a particular area of study.

10. No Essay Scholarships

This kind of scholarship explicitly doesn’t include a written essay or personal statement component. You might prefer this type of scholarship if writing isn’t your forte, but there might be another required component in its place, such as a video or other creative submission.

Applying for Scholarships

There are various types of scholarships for college, which means there are just as many different requirements and deadlines to stay on top of. When applying to a scholarship, double check that you meet the basic eligibility criteria as a student.

Depending on the type of scholarship, it might require a minimum GPA, or it might ask for proof that you have financial needs, for example. After confirming that you meet the applicant requirements, review the steps needed to apply.

Some scholarship programs might ask for a personal statement or other academic or creative submissions. Similarly, some might request additional paperwork as part of your application, like a copy of your school transcripts.

Finally, make sure you note each scholarship’s deadline and submit your application on time. The last thing you want is to have done all of the work only to be denied because of a missed deadline.

You can also look into $2,500 SoFi Scholarship Sweepstakes to help cover the costs of college.

Alternatives to Scholarships

If you’d like to diversify your financial aid sources, there are alternative aid options, like loans for undergraduates and graduate students, as well as grants. To apply for federal financial aid, fill out the Free Application for Federal Student Aid (FAFSA) each year. Schools may also use the information provided on the FAFSA to award school-specific scholarships. Here are a few other options for paying for college.

Grants

Grants are provided by federal, state, school, and private sources. Like scholarships, they typically don’t need to be repaid.

Federal Student Loans

Federal student loans are available to undergraduate and graduate students, as well as parents of dependent undergrads. They’re funded by the U.S. government, and most federal loans don’t require a credit check. In addition to offering fixed rates, they provide access to income-driven repayment plans and loan forgiveness programs.

Private Student Loans

When scholarships, grants, and federal student loans aren’t enough to cover the total cost of college, a private student loan could help. These loans are funded by private lenders, and offer fixed- or variable-rate loans at different terms. These loans typically require a credit check or the addition of a creditworthy cosigner. Keep in mind that private student loans aren’t required to offer the same benefits, like income-driven repayment plans, as federal student loans.

The Takeaway

If you’re short on aid for your upcoming academic year, consider searching for unclaimed scholarships. There are a variety of scholarship types to consider, so you’ll likely come across at least a handful that you’re eligible for.

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.

FAQ

What are the three most common types of scholarships?

Common types of scholarships for college are merit-based scholarships, need-based scholarships, and athletic scholarships. However, within these categories are sub-categories of scholarships based on specific eligibility factors.

How many different scholarships are there?

There are millions of scholarships being offered each year. According to Educationdata.org, more than 1.7 million scholarships are awarded annually.

What are competitive scholarships?

Competitive scholarships are prestigious national scholarship programs. They are often merit-based and are awarded to exceptional students who’ve demonstrated academic excellence, leadership, and who are considered the nation’s top students.

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

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

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

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

Photo credit: iStock/Edwin Tan
SOIS0324001