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Americans currently owe a total of over $1.63 trillion in federal student debt, with the average student borrower graduating with $29,100 in loans to pay off, according to the College Board.

If you have student debt, refinancing is one way you can change your repayment terms, which may make it easier or more affordable to pay off your student loans.

Student loan refinancing is when your existing loans are paid off by a new loan from a private lender, such as a bank, online lender, or other financial institution. The new loan may have a new term, a better interest rate, and adjusted monthly payments.

But there are pros and cons of refinancing student loans. While it may save you money, you can lose access to federal loan benefits and protections if you refinance federal student loans. Here’s what to consider to decide if this option is right for you.

The Pros of Student Loan Refinancing

Refinancing student loans has a number of potential benefits that could make it easier to repay your student loan debt. Here are some of the most common pros of refinancing student loans.

Lowering Your Interest Rate

Perhaps the biggest benefit of refinancing student loans is the potential to secure a lower interest rate than the ones your loans currently have. If you’re paying a high interest rate, refinancing could be worth considering, especially in a low-rate environment

Rates vary by lender, but most offer the best rates to borrowers with strong credit and a steady source of income. If you’re earning a stable income and have a good FICO score of 670 or higher, you may qualify for a competitive student loan refinance rate.

And, when you refinance to a lower interest rate, you could end up reducing the amount of money you spend over the life of the loan. Lowering your rate can also result in a more affordable monthly payment.

Reducing Your Monthly Payment

When you refinance your existing student loans, you’re given the option to adjust your repayment term. You can often choose terms anywhere from five to 20 years, depending on the lender.

Extending the term of your loan could result in more affordable monthly payments. That said, you may pay more interest over the life of the loan if you refinance with an extended term. When choosing a new repayment term, try to strike a balance between a monthly payment you can afford and a repayment term that won’t rack up a burdensome amount in interest charges.


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

Getting a Single Monthly Payment

Paying your bills consistently and on time is key if you want to improve your credit or maintain good credit. Payment history is an important factor in your credit score so you don’t want to miss payments.

If you owe multiple student loans, refinancing can help you combine them into one, streamlining your bills to a single payment each month. With a single monthly student loan bill, it may be easier to stay organized, make your payments on time, and stick to your debt reduction plan.

Keep in mind that you don’t have to refinance multiple student loans. You can choose to refinance a single loan if it would yield you a better interest rate. And if you do owe several loans, you can cherry-pick which ones you would like to refinance (if any) and leave the others as they are — the choice is up to you.

What’s more, federal loan borrowers also have the option of federal loan consolidation, which involves combining federal loans into a single Direct consolidation loan. This process won’t lower your interest rate, but it will keep your loans federal and help simplify repayment. Note that private student loans are not eligible for federal loan consolidation.

Choosing Between Variable and Fixed Rate Loans

When you refinance your loans, you might have the option to choose a fixed or variable rate loan. If you prefer the security of a stable rate over a longer period of time, consider choosing a fixed rate loan.

If you plan on repaying your student loans ahead of the term, you might consider choosing a variable rate. Variable rates often start lower than fixed rates, but could increase over time.

Applying With a Cosigner — or Releasing One From Your Loan

If you’ve recently graduated and haven’t built up much credit, you may benefit from applying with a cosigner. A cosigner accepts legal responsibility for your loan in the event that you’re not able to pay it.

If your cosigner has better credit and a higher income than you do, they may look more favorable to the lender, which could ultimately help you qualify for a lower interest rate. Even if you aren’t required to borrow with a student loan cosigner, some lenders might still give you the option to have one on the loan.

On the flip side, refinancing also gives you the opportunity to release a cosigner from your existing student loan. Not all lenders allow you to remove a cosigner from your loan, and those that do often have a set of eligibility requirements in order to apply for one, such as a year or two of on-time payments, a credit check, or proof of employment.

If you can refinance a co-signed student loan in your own name, you can assume full responsibility for the loan and let your student loan cosigner off the hook. Some lenders also let students take over Parent PLUS loans from their parents through refinancing, if they can meet eligibility requirements on their own.


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

The Cons of Student Loan Refinancing

While refinancing your student loans might end up lowering your interest rate or making payments easier to manage, it’s not the right decision for everyone. As mentioned earlier, there are both pros and cons of refinancing student loans. Here are some of the possible disadvantages of refinancing student loans:

Losing Access to Federal Repayment Plans

When you refinance your federal student loans with a private lender, you lose access to federal repayment plans. This includes the Standard, Graduated, and Extended Repayment plans. This could be especially important if you are planning on taking advantage of any federal income-driven repayment plans, as you would no longer be eligible.

The government offers four income-driven plans: PAYE, Income-Based Repayment, Income-Contingent Repayment, and the new SAVE plan. The SAVE plan offers the most affordable structure for borrowers to date, and it’s worth exploring if you’re having trouble paying your student loan bills on your current plan.

Since refinancing federal student loans replaces them with a private loan, you’ll also lose the opportunity to qualify for programs such as the Public Service Loan Forgiveness program, which forgives the loans of graduates working in the public sector after 10 years. It’s important to review your student loans in detail and determine which federal plans you may want to take advantage of before you consider refinancing federal student loans.

No Longer Eligible for Federal Repayment Protections

If you refinance your federal student loans with a private lender, you won’t be eligible for repayment protections like student loan deferment or forbearance. Both deferment and forbearance might give you the opportunity to temporarily pause or lower your monthly payments.

When your loan is in deferment you may or may not be responsible for paying the accrued interest on the loan. However, if your loan is in forbearance you will be responsible for paying the accrued interest on the loan.

Starting in the spring of 2020, the Department of Education offered emergency forbearance at 0% interest on all federal student loans. However, that forbearance came to an end in the fall of 2023. President Biden’s federal loan forgiveness initiative was also struck down by the Supreme Court, so that offer is no longer an option for borrowers.

Losing Any Remaining Grace Periods

Most federal student loans have a grace period — usually the first six months after you graduate — where you don’t have to make any loan payments. If you refinance your loan shortly after graduation, you might lose out on that benefit if the private lender doesn’t honor existing grace periods.

Difficult to Qualify

Unlike most federal loans, you’ll need to show that you’re creditworthy to secure a student loan refinance with a private lender — or have a cosigner with good credit who is willing to take full responsibility for your loan if you’re not able to.

The better your credit history, the more likely you are to qualify for competitive interest rates. Eligibility requirements vary from lender to lender, so it’s a good idea to shop around and compare your options. SoFi, for example, evaluates factors including employment and/or income, credit score, and financial history.

Refinancing Can Cause Repayment to Take Longer

When you refinance a student loan, you can change the terms of your loan, such as the interest rate or the term of the loan. If you increase the term of your loan, it will take longer to repay it. And even though you may lower your monthly payments, you’ll likely pay more total interest over time.

Federal Student Loan Consolidation

Student loan consolidation is different from refinancing. A Direct Consolidation Loan allows you to combine multiple federal student loans into one federal loan, resulting in a single monthly payment.

When you consolidate your loans into a Direct Consolidation Loan, you won’t necessarily lower your interest rate. The new interest rate will be a weighted average of the interest rates on your previous loans, rounded up to the nearest one-eighth of 1%.

When you consolidate your federal loans through the federal government, however, you should still have access to most federal loan benefits like income-based repayment, deferment, and forbearance.

Student Loan Refinancing With SoFi

Everyone’s financial situation is different, and it’s important that you make the best decisions for your individual circumstances. When you refinance, lenders will review your current financial situation, earning potential, and credit score (among other financial factors) to determine your new interest rate.

If you decide to move forward with student loan refinancing, consider SoFi. When you refinance with SoFi, there are no origination fees or prepayment penalties. See what you could save by refinancing with the SoFi student loan refinance calculator.

FAQ

How hard is it to qualify for student loan refinancing?

Private lenders take into account a range of factors when considering eligibility for student loan refinancing, such as your credit history, debt-to-income ratio, and employment. Applying with a qualified cosigner can help you qualify or access better rates if you can’t meet a lender’s credit requirements on your own.

Do refinanced student loans have lower interest rates?

When you refinance your student loans, a private lender pays off your existing loans and issues you a new loan with new terms. One of the potential benefits of refinancing is that you may be able to secure a lower interest rate than your existing loans. The best rates typically go to borrowers with strong credit or a creditworthy cosigner.

Can you refinance student loans with a cosigner?

Applying for student loan refinance with a creditworthy cosigner may help you qualify if you don’t meet a lender’s eligibility requirements for refinancing. Having a cosigner may also help you secure a more competitive interest rate.

Can refinanced student loans still be forgiven?

No, refinanced student loans are not eligible for federal loan forgiveness programs. Once you refinance a federal student loan, you lose access to federal benefits and protections, such as forgiveness.

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.

Oops! As with any lengthy application, it’s easy to make mistakes or omissions on the Free Application for Financial Student Aid (FAFSA®). In some cases, an applicant’s personal information changes and has to be updated on the form. Some corrections are more important than others — like a typo in your Social Security number — and need to be handled with special care.

Luckily, most errors can be corrected fairly easily. We’ll discuss when you need to update your information, how to make FAFSA corrections, and some special cases that require guidance from your school of choice’s financial aid office.

How To Make Simple Updates to FAFSA

The FAFSA asks for your personal information as it stands on the day you sign your form. It’s understood that details may change, and making updates is not a problem. (Of course, it’s best to avoid FAFSA mistakes altogether.)

Some FAFSA changes are easier to make than others. A good example is adding or dropping colleges on your schools list. The process begins with correcting your FAFSA online, followed by submitting an updated Student Aid Report (SAR) by mail. Here are the steps:

1. Make Changes Online

You can make simple changes to your FAFSA on the Federal Student Aid website.

•   Go to FAFSA.gov and log on with your FSA ID

•   On the “My FAFSA” page, choose “Make Corrections”

•   Create a save key

•   Enter your updates and corrections

•   Submit the form

2. Mail in a Corrected SAR

The SAR is a document summarizing the info on your FAFSA. When you first submitted your FAFSA, you should have received either an email with a link to your SAR or a paper copy by mail. You can also find it on the FAFSA site by choosing “View SAR.”

After you’ve made changes online, it’s a good idea to correct your SAR (there’s a field for updates), sign it, and mail it to the address listed on your form. Now you have two separate records of your changes, which should ensure your updates get made.

Recommended: Ca$h Course: A Student’s Guide to Money

Deadlines for FAFSA Updates

The federal deadline for submitting the FAFSA is June 30, but corrections are accepted several weeks after that date. For the 2022-2023 academic year, the last day for corrections and updates was Sept. 9, 2023. For 2023-2024, the deadline is Sept. 14, 2024.

Keep in mind that state and college deadlines vary, and that some financial aid is given out on a first come, first served basis. If you need to make substantial changes, call your financial aid office to find out about any other deadlines you should be aware of.

For more important dates, check out our guide to FAFSA deadlines.

Important Updates

Some corrections and updates need to be handled with special urgency and care. This includes your contact information and anything that affects your dependency status — including if you become pregnant.

To make updates, follow the steps above and watch out for your updated SAR to confirm the changes have been made.

Other important updates require a call to your school of choice’s financial aid office. The office will tell you whether your FAFSA needs to be updated and the best way to do it. In some cases, the office can make changes electronically, so the student doesn’t have to do anything.

Call the financial aid office first for the following:

•   Change in marital status.

•   Significant changes to income (yours or your parents’) for the current year.

•   Change in the number of family members in the household (yours or your parents’).

•   Change in the number of people who are in college in the household (yours or your parents’).

•   You or your parents filed an amended 1040-X tax return.

•   Other changes in circumstance that cannot be reported on the FAFSA.

Recommended: SoFi’s Scholarship Search Tool

Updating Your Social Security Number

Your SSN is a special case, since you cannot update it on the FAFSA website. If you entered your number wrong on your FAFSA, the Department of Education recommends that you complete and submit a whole new FAFSA form. This is the most foolproof way to ensure the mistake doesn’t haunt you longer than it should. Just be aware that this method will change the submission date for your FAFSA, which can affect your eligibility for state and college aid.

Another option is to call one of the schools on your FAFSA list and ask them to try and update your SSN on their system. If successful, this will update your record across all schools, without changing your submission date.

You may also want to mail in an updated SAR. If so, follow the instructions above.

Recommended: FAFSA Guide

If You Miss the Deadline for Updates

If you made an error on your FAFSA that results in you receiving less financial aid than you should have, there’s not much you can do. Still, it’s a good idea to call your school’s financial aid office and explain your situation. They may be able to help you find any remaining financial aid — especially state grants and scholarships — to cover your cost of attendance until the following year.

Another option is private student loans. Educational loans disbursed by a private lender can help students who didn’t qualify for enough federal aid. It’s important to note that private student loans do not come with the same protections that are baked into federal aid, such as deferment and income-based repayment plans. Here’s a good summary of the differences between private student loans vs. federal student loans.

Still, for students who do not qualify for federal loans or who need additional funds to cover the cost of college, private student loans can help bridge the gap.

The Takeaway

Making corrections and updates to your FAFSA is typically straightforward. Simple changes can be made on the FAFSA website even after the deadline for submitting the application. It’s a good idea to follow up by mailing a corrected Student Aid Report (SAR) to the address listed on the back. A new SAR will confirm that your changes were made.

For some important updates, it’s recommended that you call your school of choice’s financial aid office. They include changes in marital or dependency status, and significant financial changes. For changes to your SSN, the DOE recommends filing a whole new FAFSA.

Once your federal student aid options have been tapped out, other student loan options may still be needed to pay for college.

Private lenders like SoFi offer in-school loans to help cover the cost of attending college. SoFi’s no-fee private student loans come with flexible repayment plans and competitive rates.

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.

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

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.

SOIS1023007

Spending a couple of hours filing the Free Application for Federal Student Aid, more commonly known as the FAFSA®, may not seem like your idea of fun. However, skipping the FAFSA could mean losing out on need-based grants. If you qualify, grants can be an incredibly helpful addition to your financial aid award for one main reason: You don’t have to repay them.

Let’s jump into some specific details about grants, including the connection between the FAFSA and grants, types of grants, and more information about this worthwhile addition to your financial aid award.

Does FAFSA Give Grants?

The FAFSA itself doesn’t give grants because the FAFSA is an application. When you file the FAFSA, the colleges and universities you have on your list will award you money based on your individual FAFSA data. Filing the FAFSA can qualify you for grants from the federal government. Many states and colleges use FAFSA data to award their own aid. Grants can come from:

•   The federal government

•   State governments

•   College or career schools

•   Private or nonprofit organizations

Recommended: SoFi FAFSA Guide

Does FAFSA Give Grants for Graduate School?

As a graduate or professional student, you may wonder, “Does FAFSA give grants for graduate school?” Certain grants, such as Pell Grants, go to undergraduate students only. However, graduate students can tap into a few federal programs, though these are usually need-based. Here are two examples:

•   TEACH Grants: Graduate students can get a TEACH Grant as long as they agree to teach in a high-need field in a school for low-income students. They must also agree to fulfill a few other requirements, as well.

•   Fulbright Grants : Qualified graduate students can tap into Fulbright Grants for study/research projects or for English teaching assistant programs. Fulbright Grants are sponsored by the U.S. Department of State and can help students expand upon their international studies.

Some corporations and other organizations also offer grants for graduate students, though it’s important to note that the FAFSA isn’t necessarily needed to qualify. Take a close look at the qualifications for corporate grants and other organizations as you find them.

Recommended: Finding & Applying to Scholarships for Grad School

Is Pell Grant the Same as FAFSA?

No, the Pell Grant is not the same as the FAFSA, which is simply an application. The FAFSA is not the actual entity that gives you financial aid. Federal grants, like the Pell Grant, come from the federal government through the U.S. Department of Education.

Types of FAFSA Grants

Let’s walk through a few types of grants and their requirements that you may become eligible for when you file the FAFSA.

Pell Grants

The Pell Grant program is the largest federal grant program available to undergraduate students. In order to qualify for the Pell Grant, you must demonstrate financial need.

How much can you receive from the Pell Grant? Right now, the maximum Federal Pell Grant award is $7,395 for the 2024-25 award year. Check from year to year because the award amount might change slightly.

Recommended: What Is a Pell Grant?

What are the Pell Grant eligibility requirements? The exact amount you’ll get depends on your Student Aid Index (SAI), formerly known as Expected Family Contribution (EFC), the amount your family should pay for college, and the cost of attendance. The amount you can receive depends on your status as a full- or part-time student and whether you plan to attend school as a full- or part-time student.

Federal Supplemental Educational Opportunity Grants (FSEOG)

The need-based Federal Supplemental Educational Opportunity Grant (FSEOG) gives each participating school a certain amount of FSEOG funds, and these schools give FSEOG Grants to students who have the most financial need.

You can receive between $100 and $4,000 a year, depending on factors beyond financial need, including:

•   Application timing

•   Amount of other aid you receive

•   Availability of funds at the institution you attend

Teacher Education Assistance for College and Higher Education (TEACH) Grants

The Teacher Education Assistance for College and Higher Education (TEACH) Grant Program gives you funds through a TEACH Grant-eligible program at a school that participates in the program. You must agree to teach:

•   Full time for at least four years

•   In a high-need field

•   At a low-income elementary school, secondary school, or educational service agency

You must also undergo TEACH Grant counseling and complete the TEACH Grant Agreement to Serve or Repay to qualify.

Iraq and Afghanistan Service Grants

If your parent or guardian died during or as a result of military service in Iraq or Afghanistan, students may be able to take advantage of Iraq and Afghanistan Service Grants .

You can receive the same amount of grant money for an Iraq and Afghanistan Service Grant as the maximum Federal Pell Grant for your award year. However, you cannot exceed your cost of attendance for that award year. The maximum Federal Pell Grant award is $7,395 from July 1, 2024 to June 30, 2025.

Take a look at the eligibility requirements:

•   You may not receive a Federal Pell Grant but must meet the remaining Federal Pell Grant eligibility requirements.

•   Your parent or guardian died as a result of military service in the armed forces in Iraq or Afghanistan after the events of 9/11.

•   You were under 24 years old or enrolled in college at least part-time at the time of your parent or guardian’s death.

To qualify, you must file the FAFSA form every year you remain in school.

Recommended: How to Complete the FAFSA Step by Step

Do You Have to Pay Back FAFSA Grants?

Do you have to pay back FAFSA grants? (It’s a common question — and a good one!) Like scholarships, you generally do not need to repay FAFSA grants, unless you withdraw from school and owe a refund. Filing the FAFSA is the only way you can qualify for federal grants.

FAFSA Grant Repayment

While grants generally do not require repayment, there are a few circumstances in which the grant may need to be repaid. Briefly, here are some reasons you may have to repay a FAFSA grant:

•   You left or withdrew early from the program for which you received grants.

•   Your enrollment status changed, which impacts your eligibility for the grant.

•   You received outside scholarships or grants that reduced your need for grants.

It’s a good idea to look carefully at the requirements for each grant. You can ask a financial aid professional at your college or university for specific information about grant eligibility, award amounts, and other requirements.

Additional Funding Options for College

When you receive a financial aid award from a college, it will include financial aid such as FAFSA grants and scholarships, work-study, and federal student loans. Some students may also consider borrowing private student loans. Let’s walk through the definition of each. Note that you can also get financial aid for a second bachelor’s.

Scholarships

A scholarship is a type of financial aid that you don’t have to repay. Scholarships can be need-based or merit-based (based on talents or interests, independent of your financial need).

Federal Work-Study

Undergraduate, graduate, and professional students with financial need may be eligible for work-study programs. You can tap into part-time jobs, usually on campus, during your enrollment in school. Full- or part-time students can qualify for work-study jobs.

You cannot go over your work-study award limit. In other words, let’s say you receive $1,500 in work-study. You can work as many hours as you can up to that limit. Many schools offer you payment in the form of a check or direct deposit into your bank account.

Your school must participate in the federal work-study program, so check with your school’s financial aid office for more information.

Federal Student Loans

Most financial aid awards contain federal student loans, which come from the federal government, through the U.S. Department of Education.

Take a look at three main types of federal student loans:

•   Direct Subsidized Loans: Direct Subsidized Loans are federal loans that have a low interest rate (currently 6.53% for undergraduate students and 8.08% for graduate or professional students). The U.S. Department of Education pays the interest on Direct Subsidized Loans while you are in college. The amount of loan money you can qualify for depends on your year in school and whether you are a dependent or independent student. For example, dependent undergraduates can qualify for $5,500 to $7,500 per year in Direct Loans. However, you cannot receive more than $3,500 to $5,500 of this amount in subsidized loans. Take a look at the Direct Subsidized Loan website for more information or ask the financial aid office at your school.

•   Direct Unsubsidized Loans: The major difference between Direct Subsidized Loans and Direct Unsubsidized Loans is that the U.S. Department of Education does not pay the interest on Direct Unsubsidized Loans while you are in college. However, the interest rate is the same as with Direct Subsidized Loans (currently 6.53% for undergraduate students and 8.08% for graduate or professional students). Learn more about Direct Unsubsidized Loans from your college or university’s financial aid office or through the federal student loan website.

•   Direct PLUS Loans for parents and graduate/professional students: Parents and graduate or professional students can take out Direct PLUS Loans through the U.S. Department of Education. The borrower must pay the interest on the loan. You (or your parents) must undergo a credit check. You can receive up to the cost of attendance for a Direct PLUS loan, though your school will likely subtract any other financial aid received.

Federal student loans offer benefits such as fixed interest rates and income-driven repayment plans.

Private Student Loans

Private student loans differ from federal student loans because they don’t come from the federal government, but instead can come from a bank, credit union, state agency, or school. Private student loan interest rates vary and you can usually borrow up to the cost of attendance (the amount of money it costs to attend your school), including living expenses.

It’s a good idea to shop around among lenders for the best interest rates. Once you land on the right lender for you, go through the lender’s application process. It’s worth noting that private student loans lack the borrower protections afforded to federal student loans, so they’re typically considered an option only after borrowers have reviewed all of their other choices.

You may also need a cosigner when you get a private student loan. A cosigner signs for the loan with you — they are just as responsible for the repayment of your loan as you are. Not everyone who takes out a private student loan needs a cosigner, but if you don’t have any credit (or if you have less than stellar credit), you may need to ask a trusted adult to cosign a loan with you.

Recommended: Do I Need a Student Loan Cosigner? — A Guide

The Takeaway

If you’re wondering whether you want a FAFSA grant on your financial aid award letter, the answer is yes! You do not have to repay grants, so they’re a lot like scholarships in that way. You must file the FAFSA in order to qualify for federal grants for college, so take the time to fill it out carefully and apply as soon as you can.

When federal aid isn’t enough to pay for college, students may consider private student loans. If you’re interested in a private student loan, consider SoFi. SoFi offers competitive rates with flexible repayment options and no origination fees. It takes just a few minutes to check your rate.

Photo credit: iStock/syahrir maulana

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

SOIS1023006

Sometimes, life throws you a curveball. If you’re in college when that happens, you might find yourself dropping out of school. In some situations, you may have no other choice. At other times, you can weigh the pros and cons while deciding how to proceed.

What happens to student loans if you withdraw isn’t widely discussed. We’ll walk you through the consequences of dropping out when you’ve already incurred debt, and show you ways to pay off outstanding student loans.

Do I Have To Pay Back My Student Loans If I Drop Out of School?

Regulations dictate that if you leave college or drop below half-time enrollment, you have to start paying back your federal student loans. You may have a grace period (generally, six months) before your first payment is due. Even if payments aren’t due yet, interest may still accrue during the grace period, depending on the type of loans you have.

If you have private student loans, check with your lender to determine when you need to start paying back your loans.

If you’re currently still in school or left very recently before earning a degree, you may be able to request student loan exit counseling from your school, a service normally provided only to graduates. This can help you understand your options, including potential tuition reimbursement. Each school has a different refund policy.

What Happens If I Don’t Pay My Student Loans?

The consequences of late or “delinquent” payments vary by lender, but you can generally expect to be charged late fees each time you miss the due date. If a payment is late by 30 days or more, that information can be reported to the three credit bureaus—Experian, Equifax and TransUnion—which will negatively affect your credit score.

And if you stop paying your student loans for 270 days (about 9 months), your federal loans go from being delinquent to in default. When that happens, the balance is due in full, including accrued interest, collection agency fees, and any other fines, fees, and penalties. Student loans generally cannot be discharged during bankruptcy.

The government can go to great lengths to get their money back, including:

•   Garnishing your paycheck, up to 15% of wages after deductions

•   Withholding your tax refund

•   Going after co-signers for the amount due

•   Suing you in court for the outstanding amount, plus court fees and other expenses

Note on temporary exception: Following the reinstatement of student loan payments after a pause lasting more than three years, the Biden administration instituted a 12-month “on-ramp” period to ease the transition. From Oct. 1, 2023 to Sept. 30, 2024, the most financially vulnerable federal student loan borrowers are protected against the consequences of missing payments. During this period, missed payments will not lead to loans being considered delinquent or in default, will not be reported to the credit bureaus, and will not be referred to collections agencies.

However, once the on-ramp period is over, any missed payments will be due, and the normal rules surrounding student loan delinquency and default will be reinstated.

Private student loans generally go into default after 90 days (and don’t qualify for the on-ramp protections). Private lenders may also take you to a court or use collection agencies to recoup student loan debt. Defaulting can wreck your credit, making it challenging for you to obtain a mortgage loan, car loan, credit card, homeowners insurance, or new utilities.

💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Way To Pay Off Student Loans If You Didn’t Finish School

Once you leave school, it’s a good idea to begin paying off your loans as quickly as you can, paying more than the minimum payment whenever possible. Before paying ahead, though, check to see if any of your student loans have a prepayment penalty. If so, paying early can cost you money.

Should you refinance your student loans? What about income-driven repayment programs? Below are the best options to help ease financial hardship and avoid default.

Income-Driven Repayment Plans

Income-driven repayment (IDR) plans reduce your monthly federal student loan payments based on your discretionary income and family size. They also extend the length of the repayment period up to 25 years. After that, any remaining loan balance is forgiven, though the canceled amount may be subject to income taxes.

The government offers four income-driven repayment plans:

•   Saving on a Valuable Education (SAVE): This plan replaces another IDR plan known as REPAYE. It cuts payments to just 5% to 10% of discretionary income, and forgives remaining debt as soon as 10 years into the plan, depending on your loan balance.

•   Pay As You Earn (PAYE): This plan caps payments at 10% of discretionary income, but never pay more than you would on the Standard Repayment Plan. Forgiveness is awarded after 20 years of payments under this plan.

•   Income-Based Repayment (IBR): For borrowers who took out their loans on or after July 1, 2014, monthly payments are capped at 10% of discretionary income and any remaining debt is forgiven after 20 years. Borrowers who took out their loans before this date have payments capped at 15% of income, and remaining debt is forgiven after 25 years. Again, payments are never more than they would be under the Standard Repayment Plan.

•   Income-Contingent Repayment (ICR): Under this plan, payments are capped at the lesser of 20% of your discretionary income, or what you’d pay under a 12-year repayment plan. Remaining debt is forgiven after 25 years. This is the only IDR plan that Parent PLUS loans qualify for, though they must first be consolidated into a Direct loan.

Enrolling in an income-driven repayment plan won’t have a negative impact on your credit score or history. However, income-driven plans aren’t always the lowest monthly payment option. And even when monthly payments are lower, you will pay more interest over time (longer loan terms mean more interest payments).

Borrowers must recertify their income each year. If they fail to do so, they’ll be returned to the standard 10-year amortizing plan.

Going Half-Time

Students who are enrolled at least half-time in an eligible college or career program may qualify for an in-school deferment. This type of deferment is generally automatic. If you find the automatic in-school deferment doesn’t kick in, you can file an in-school deferment request form.

Recommended: Refinancing Student Loans with Bad Credit

Refinancing Student Loans

While you’re still able to make your student loan payments and your credit is still good, consider refinancing. You can combine multiple loans into one payment and choose the payback timeline that will give you the lowest monthly payment possible. You can check the interest rate and terms you qualify for by using SoFi’s student loan refinance calculator.

As your financial situation improves, you can make additional payments (as long as you refinance with a company that doesn’t charge a prepayment penalty) or refinance again with a new term that will accelerate payoff and allow you to pay less interest over the lifetime of the loan. You can learn all the ins and outs of that path with this handy student loan refinancing guide.

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

What To Do If You Can’t Afford Any Student Loan Payments

In many cases, the SAVE program is your best bet for reducing student loan payments, since it lowers payments to the smallest portion of income out of all the IDR plans.

However if you’re leaving school because of a temporary financial hardship—for example, you are undergoing cancer treatment or lost your job—you can also request a deferment or forbearance on your federal student loans to give yourself time to address the situation.

Although deferment or forbearance can give you short-term financial relief, these plans will increase the amount of interest you’ll pay on the loans overall, and can extend the length of the loans.

Student Loan Deferment

Student loan deferment allows eligible borrowers to temporarily reduce loan payments or pause them for up to three years, depending on the type of loan. In most cases, borrowers seeking a deferment will need to provide their loan servicer with documentation that supports their eligibility.

Deferments are typically broken down into qualifying categories:

•   Unemployment. Borrowers receiving unemployment benefits or who are actively seeking and unable to find full-time work may qualify. This deferment is good for up to three years.

•   Economic Hardship. Individuals receiving merit-tested benefits like welfare, who work full-time but earn less than 150% of the poverty guidelines for their state of residence and family size, or who are serving in the Peace Corps may qualify. This deferment may be awarded for up to three years.

•   Military Service. Members of the U.S. military who are serving active duty may qualify. After a period of active duty service, there is a grace period of 13 months, during which borrowers may also qualify for federal student loan deferment.

•   Cancer Treatment. Borrowers who are undergoing treatment for cancer may qualify. There is a grace period of six months following the end of treatment.

Student Loan Forbearance

There are two types of federal student loan forbearance: general and mandatory. Private lenders sometimes offer relief when you’re dealing with financial hardship, but they aren’t required to, so check your loan terms.

General forbearance is sometimes called discretionary forbearance. That means the servicer decides whether or not to grant your request. People can apply for general forbearance if they’re experiencing financial problems, medical expenses, or employment changes.

General forbearance is only available for certain student loan programs, and is granted for up to 12 months at a time. After the 12 months are up, you are able to reapply if you’re still experiencing difficulty.

Mandatory forbearance means your servicer is required to grant it under certain circumstances. The Federal Student Aid website has a full list of criteria for mandatory forbearance. Reasons include:

•   Medical residency or dental internship

•   Participating in AmeriCorps

•   Teachers who qualify for teacher student loan forgiveness

•   National Guard duty

•   Monthly student loan payments that are 20% or more of your gross income

Similar to general forbearance, mandatory forbearance is granted for up to 12 months at a time, and you can reapply after each 12-month period. You still have to pay interest on all types of federal loans while they’re in forbearance.

If you’re pursuing federal student loan forgiveness, any period of forbearance probably will not count toward your forgiveness requirements.

The Takeaway

Should you unexpectedly need to drop out of school, you’ll still be responsible for paying back your student loans. If you’re able to work, you may want to enroll in an income-driven repayment plan — though keep in mind that these programs don’t always offer the lowest monthly payment possible.

If you are unable to work, see if you’re eligible for student loan deferment or forbearance. Finally, if you have a strong credit history, refinancing your student loans may save you money on interest while lowering your monthly payment. Just be aware that refinancing federal loans means losing access to federal protections and PSLF loan forgiveness.

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.

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Paying student loans on time can have a positive effect on your credit score and help build a good credit history. On the flip side, when you have a late or missed student loan payment, that can be reflected on your credit report as well. Delinquent payments can lower your credit score and have financial repercussions, such as impacting your ability to qualify for a new credit card, car loan, or mortgage.

If you’re wondering how to remove student loans from a credit report, the answer is that it’s only an option if there’s inaccurate information on the report. Student loans are eventually removed from a credit report, however, after they’re paid off or seven years after they’ve been in default. Here’s what to know about student loans on a credit report, what happens when you default on a loan, and how to remove student loans from a credit report if there’s inaccurate information.

What Is a Credit Report?

Before considering the impact of student loans on your credit report, it’s helpful to review what a credit report is. It’s a statement that includes details about your current and prior credit activity, such as your history of loan payments or the status of your credit card accounts.

These statements are compiled by credit reporting companies who collect financial data about you from a range of sources, such as lenders or credit card companies. Lenders use credit reports to make decisions about whether to offer you a loan or what interest rate they will give you. Other companies use credit reports to make decisions about you as well – for example, when you rent an apartment, secure an insurance policy, or sign up for internet service.


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

Defaulting on Student Loans

It’s also worth reviewing what happens when a student loan goes into default. One in ten people in the United States has defaulted on a student loan, and 5% of total student loan debt is in default, according to the Education Data Initiative.

The point when a loan is considered to be in default depends on the type of student loan you have. For a loan made under the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan (FFEL) Program, you’re considered to be in default if you don’t make your scheduled student loan payments for a period of at least 270 days (about nine months).

For a loan made under the Federal Perkins Loan Program, the holder of the loan may declare the loan to be in default if you don’t make any scheduled payment by its due date. The consequences of defaulting on student loans can be severe, including:

•   The entire unpaid balance of your student loans, including interest, could be due in full immediately.

•   The government can garnish your wages by up to 15%, meaning your employer is required to withhold a portion of your pay and send it directly to your loan holder.

•   Your tax return and federal benefits payments may be withheld and applied to cover the costs of your defaulted loan.

•   You could lose eligibility for any further federal student aid.

And you don’t have to default on your student loans to experience the consequences of nonpayment. Even if your payment is only a day late, your loan can be considered delinquent and you can be charged a penalty fee.

Temporary Relief for Borrowers Behind on Payments

The pandemic-era pause on federal student loan payments that was established in March 2020 finally came to an end in the fall of 2023. After more than three years of having this financial responsibility off their plates, federal student loan borrowers must now fit payments back into their budgets. However, in order to protect financially vulnerable borrowers from facing the steep consequences of missing payments during this transition, the Biden Administration established a 12-month “on-ramp” program to help them adjust.

From Oct. 1, 2023, to Sept. 30, 2024, borrowers who don’t pay their federal student loans will be free of the usual repercussions. Specifically, this means that:

•   Loans will not be considered delinquent or in default.

•   Missed payments will not be reported to the credit bureaus.

•   Missed payments will not be referred to debt collection agencies.

•   Unpaid student loan interest will not capitalize (be rolled into the principal balance) once the on-ramp period ends.

However, payments missed during this period will be due once it ends. Additionally, any missed payments will not count toward forgiveness under income-driven repayment or Public Service Loan Forgiveness (PSLF).

How Long Do Student Loans Remain on a Credit Report?

If you are delinquent on your student loans or go into default, that activity is reported to the credit bureaus. It will remain on your credit report for up to seven years from the original delinquency date.

The good news is that the more time that passes since your missed payment, the less impact it has on your credit score.

The exception to this is a Federal Perkins Loan, which is a low-interest federal student loan for undergraduate and graduate students who have exceptional financial need. This type of loan will remain on your credit report until you pay it off in full or consolidate it.

On the other hand, if you made timely payments on your loan and paid it off in full, it may appear on your credit report for up to 10 years as evidence of your positive payment history and can boost your credit score.

How Do I Dispute a Student Loan on My Credit Report?

It’s a good habit to periodically check your credit report. You can request a free report from each of the three major credit reporting agencies—Equifax, Experian, and TransUnion—by visiting annualcreditreport.com. The bureaus are required by law to give you a free report every 12 months. However, through the end of 2023, you may request your report weekly at no cost.

There are three reasons your student loan might have been wrongly placed in default and reported to the credit bureaus by mistake. Here’s how to begin the process to correct these errors:

1. If You Are Still in School

If you believe your loan was wrongly placed in default and you are attending school, contact your school’s registrar and ask for a record of your school attendance. Then call your loan servicer to ask about your record regarding school attendance.

If they have the incorrect information on file, provide your loan servicer with your records and request that your student loans be accurately reported to the credit bureaus.

2. If You Were Approved for Deferment or Forbearance

If you believe your loan was wrongly placed in default, but you were approved for (and were supposed to be in) a deferment or forbearance, there is a chance your loan servicer’s files aren’t up to date. You can contact the loan servicer and ask them to confirm the start and end dates of any deferments or forbearances that were applied to your account.

If the loan servicer doesn’t have the correct dates, provide documentation with the correct information and ask that your student loans be accurately reported to the credit bureaus. Under the Fair Credit Reporting Act, a borrower may appeal the accuracy and validity of the information reported to the credit bureau and reflected on their credit report.

Recommended: Student Loan Deferment vs Forbearance: What’s the Difference?

3. Inaccurate Reporting of Payments

If your loan has been reported as delinquent or in default to the credit bureaus, but you believe your payments are current, you can request a statement from your loan servicer that shows all the payments made on your student loan account, which you can compare against your bank records.

If some of your payments are missing from the statement provided by your loan servicer, you can provide proof of payment and request that your account be accurately reported to the credit reporting agencies.

Recommended: How to Build Credit Over Time

In all three cases, if you believe there is any type of error related to your student loan on your credit report, it’s best practice to also send a written copy of your dispute to the credit bureaus so they are aware that you have reported an error.

Why Your Student Loans Should Stay on Your Credit Report

You generally can’t have negative, but accurate, information removed from your credit report. However, you can dispute the student loans on your credit report if they are being reported incorrectly.

On the bright side, if you’re paying your student loans on time each month, that looks good on your credit report. It shows lenders that you are responsible and likely to pay loans back diligently.


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

When You’re Having Problems Paying Your Student Loans

If you’re having difficulty making regular payments on your federal or private student loans, there are steps you can take before the consequences of defaulting kick in.

One option is to apply for student loan deferment, which allows you to reduce or pause your federal student loan payments for up to three years. During this time, interest on subsidized loans does not accrue. Or you could pursue student loan forbearance, which allows you to reduce or pause payments for up to a year if you’re facing a temporary financial hardship.

You can also contact your loan servicer to discuss adjusting your repayment plans.

Additionally, if you’re having trouble paying your student loans on time, you may be able to make your loans more affordable through a federal income-based repayment plan. These plans, including the new Saving on a Valuable Education (SAVE) plan, cap your payments at a small percentage of your discretionary income and extend the repayment term out to 20-25 years. Once the repayment period is up, any remaining balance is forgiven (though you may be subject to income taxes on the canceled amount).

Refinancing your student loans may also be an option—if you extend your term length, you may qualify for a lower monthly payment. Note that while these options provide short-term relief, they generally will result in paying more over the life of the loan.

When you start making your payments by the due date each month, you may see that your student loans can become a more positive part of your credit report. Again, while these options provide short-term relief, they generally will result in paying more over the life of the loan.

The Takeaway

While you generally can’t remove student loans from a credit report unless there are errors, it isn’t a bad thing if you make payments on time. If a loan is delinquent, it will be removed from your credit report after seven years, though you will still be responsible for paying back the loan.

If you’re having trouble making loan payments, there are ways to make repayment easier. Borrowers with federal student loans can look into forgiveness, an income-driven repayment plan, or a change to the loan’s terms.

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.

FAQ

Is it illegal to remove student loans from a credit report?

There’s no legal way to remove student loans from a credit report unless the information is incorrect. If you think there’s an error on your credit report, you can contact your loan servicer with documentation and ask them to provide accurate information to the credit reporting agencies. It’s also a good idea to send a copy of the dispute to the credit bureaus as well.

How do I get a student loan removed from my credit report?

If you paid your student loan off in full, it may still appear on your credit report for up to 10 years as evidence of your positive payment history. It takes seven years to have a defaulted student loan removed from a credit report. Keep in mind you are still responsible for paying off the defaulted loan and you won’t be able to secure another type of federal loan until you do.

How can I get rid of student loans legally?

If you have federal student loans, options such as federal forgiveness programs or income-driven repayment plans can help decrease the amount of your student loan that you need to pay back. If you have private or federal student loans, refinancing can help lower monthly payments by securing a lower interest rate and/or extending your loan term. If you refinance a federal loan, however, you will no longer have access to federal protections and benefits. And you may pay more interest over the life of the loan if you refinance with an extended term.

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.

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