Paying for College Without Parents Help

Paying for college without support from parents may seem like an overwhelming proposition, but it’s possible. Making college affordable without parental support may start before you even choose a college, by reviewing tuition and financial aid available to you at the colleges and universities you are interested in attending. Choosing the right college for you can go a long way in helping you pay for your education.

Other strategies that could help you make college more affordable include applying for scholarships and working through college. Each student is in a unique financial situation, and you may find a combination of these strategies can provide the help you need in order to pay for college. These strategies could also be used by students who do have parental assistance.

Strategies to Help Pay for College Without Parental Support

Finding the resources to pay for college can be a challenge and if you’re embarking on this journey alone, it may be stress inducing. These strategies and ideas could help you craft a plan that allows you to pay for college. As mentioned, a combination of these ideas may be required based on your unique financial situation.

Choosing the Right College

The best college for your situation lies at the intersection of ones that provide the programs you need to achieve your career goals and the ones you can afford.

Decisions you’ll need to make include:

•   Living at home or in a dormitory or other housing by the college

•   Choosing between a public or private college

•   Picking between in-state and out-of-state colleges

Living at Home

If you can live near the college, rent-free, or at low cost, then this is likely the most cost-effective choice. Perhaps you have family members who, although they can’t otherwise help you with college, will allow you to live with them while you pursue your education. Or maybe you could rent a cost-effective apartment near a community college or other school that doesn’t require freshmen to live in a dorm.

Considering Private vs Public Colleges

Public colleges are, generally speaking, less expensive than private colleges. According to The College Board, for the 2021 to 2022 school year, the average cost for tuition and fees at four year private institutions was $38,070, compared to the public college average which was $27,560 for out-of-state students attending a state school.

Prices get even more reasonable if you attend school in your home state and receive in-state tuition; The average cost of in-state tuition and fees was $10,740.

In general, in-state universities are more affordable than going out of state. But the difference between out-of-state and in-state students can vary widely, so check into your colleges of choice for confirmation. Factor in traveling costs for out-of-state options and also consider online college programs where you can take classes no matter where you are located.

Starting at a Community College

Completing your first two years of study at a community college is another option that could dramatically reduce the overall cost of college. In addition to less expensive courses, it may be possible for you to live at home, another financial benefit of attending community college.

Applying for Relevant Scholarships

Because scholarships don’t typically need to be repaid, they are a valuable tool to help fund your college education. If you’re finishing high school, talk to your guidance counselor about possibilities. There are often local scholarships provided by businesses and civic groups that you can apply for.

These days, you can also find a lot of scholarship opportunities online. There are often major-specific opportunities and more general offerings. It’s worth investing a bit of time in researching and applying for scholarships — a couple hours could really be worth it when those scholarship offers start rolling in.

Recommended: What Is a Merit Scholarship & How to Get One

As you’re researching scholarships, be sure to find quality opportunities and be wary of scams. Don’t shy away from smaller scholarships. While it would be nice to have one large scholarship to cover your cost of college, smaller scholarships can add up, incrementally chipping away at what you need to afford college. Some scholarships may be location-based. Check out SoFi’s state-by-state financial aid guides for more information on scholarships local to your home state.

When you find a college scholarship of interest, check the guidelines carefully to ensure you qualify and to make sure that you apply in exactly the right way. Fill applications out thoroughly, as early as possible within a scholarship timeline.

Proofread before turning in your applications and note that, although you can often reuse parts of one scholarship application to complete another, each opportunity has unique requirements, formats, and deadlines.

Need to fund your education?
Learn more about SoFi private student loans.

Obtaining Grants to Help Pay for College

Grant funding can come from multiple sources, including state agencies, local organizations, corporations, and more. And as with scholarships, this is money you don’t typically need to pay back. The biggest source of college grant funding comes from the federal government, with one of the best known is the Pell Grant .

Federal grants come in different categories, including:

•   Need-based grants which are based upon financial hardship.

•   Merit-based grants awarded to students who exhibit exceptional scholarship and/or community involvement.

•   Grants awarded to specific groups, including students with disabilities, those from under-represented groups, veterans, National Guard members, foster care youth, and those who select certain careers.

Obtaining federal grant funding without help from your parents can be challenging, though. That’s because most federal grants require students to fill out the Free Application for Federal Student Aid (FAFSA®), which, if you are a dependent student, will be considered incomplete without parental information. In the event that your parents are unable to fill out their portion of the FAFSA , you’ll have to contact your college’s financial aid office and show appropriate documentation that verifies that your parents cannot fill out the form.

In certain circumstances, you can obtain independent student status and complete the FAFSA yourself, but parental refusal to help with FAFSA completion might not be enough to gain this status.

Even if you fully support yourself financially and are no longer claimed as a dependent on your parents’ tax forms, this status may not necessarily be granted. See your guidance counselor if you want to explore obtaining this status.

Applying for Student Loans

As mentioned, students that fund their college educations without assistance from their parents often need to craft a financial aid plan that consists of funding from multiple sources. In certain circumstances, students may have found funding from both the federal government and private lenders.

Applying for Federal Student Loans

Federal and private student loans are available, but most federal loans require a portion of your FAFSA to be completed with parental information, unless you have independent student status.

Effective with the Higher Education Opportunity Act of 2008 , college financial aid departments can offer students unsubsidized Stafford loans even if their parental section on their FAFSA isn’t completed, as long as they confirm that parents are not willing to financially help the student or fill out the FAFSA.

Applying for Private Student Loans

You can also apply for private student loans, although, if you don’t have a built up credit history, you may need a cosigner. Private lenders generally evaluate a potential borrower’s credit history, among other factors, as they make their lending decisions. Adding a cosigner with a strong credit history could potentially help secure a more competitive interest rate. If you aren’t able to find a cosigner, it is possible to apply for a student loan without a cosigner.

Another important note is that private student loans may not offer borrower protections like those offered to federal student loan borrowers, such as the option to apply for Public Services Loan Forgiveness. For this reason, private student loans are generally borrowed as a last resort option.

With determination and a willingness to seek out and accept help, students do find ways to fund their college educations without assistance from their parents.

Cutting Costs While Attending College

Smart budgeting and careful spending can help you stay in line with your means as you pay for college. Cutting costs when possible could allow you to save or funnel more money toward college tuition.

If, for example, you plan to rent a room in a house near your college of choice, you can furnish it in funky, eclectic ways using stylish and affordable finds from thrift stores and garage sales. ​If you’re handy, you can even build your own loft bed and other furniture, with plenty of instructions available online.

Recommended: What Percentage of Parents Pay for College?

Food gets expensive quickly. If you’ll be on a college meal plan, choose one that doesn’t include waste. Or if you’re living somewhere where you can cook your own food, plan thrifty meals in advance and shop in bulk. Watch for a slow cooker at rummage sales, and you can cook plenty of delicious soups and more.

Another considerable expense: textbooks. Do your due diligence and shop around to see if there are any used options you can purchase at a discounted rate. If the book you are buying is directly related to your college major, and you plan on saving it for reference in the future, it could be worthwhile to buy the book. If it’s a textbook for an elective class, you could consider renting the textbook which can often be cheaper than buying it brand new.

Working While Attending School

In addition to potentially helping you qualify for financial aid, your FAFSA may qualify you for federal work-study programs. Of course, finding a part-time job that isn’t associated with work-study is also an option.

You will need to determine how many hours per week you can work and still do well in school. And you’ll also need to find a job that is willing to accommodate the work-school balance you require. For example, it’s important to find an employer who will offer flexibility in scheduling during, for example, midterms and final exams.

The Takeaway

Students who are planning on paying for college without their parents’ help can start by choosing an affordable college option, applying for scholarships, getting a part-time job, and applying for federal student aid. As a dependent student, applying for federal aid may be challenging without your parent’s support, because the FAFSA may be considered incomplete without their information.

In the event that other avenues of funding have been depleted, students may consider private student loans. Note that as previously mentioned, private student loans don’t always have the same borrower protections as federal student loans. This is why they are generally considered an option after all other sources of funding have been evaluated.

If private student loans seem like an option for you, consider SoFi. Private student loans at SoFi have no hidden fees and the application process can be completed entirely online. Potential borrowers can find out if they pre-qualify, and at what rates, in just a few minutes.

SoFi makes the student loan process simple. Find your rates in just minutes.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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 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.

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. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
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 or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

How to Save Money in College – 20 Ways

College is expensive. In the 2020-21 academic year, tuition and fees averaged $38,185 for students at private universities — that’s $152,740 for all four years!

The cost of public colleges for out-of-state students wasn’t much lower, with annual tuition and fees averaging $22,698.

The price tag is a bit smaller for in-state students at public schools (an average of $10,388), but all of these figures have kept climbing every year and show no signs of slowing down.

These numbers don’t include all the other necessary expenses of college life, such as room and board, books, supplies, clothing, and entertainment. At the same time, it’s difficult for college students to earn a lot during these years, given the demands of school.

Plenty of options exist for financing your time in college, including scholarships, loans, and part-time work. But even if you started to save for college early, trimming your expenses while you’re in college can mean owing less in loan repayments (and interest) down the line — and avoiding credit card debt.

Saving Money as a College Student

Luckily, once you adopt a money-conscious mindset, you’ll likely find there are many ways to save money in college. And building the habit of budgeting now can serve you well as you move on to life in the real world. Here are some tips for how to save money in college:

1. Take Advantage of Student Discounts

Lots of businesses and service providers offer special deals to students. You can buy clothing, shoes, and furniture for your dorm or apartment for less at certain retailers with a valid student ID.

Entertainment is another area where you can save. Some movie theaters offer discounts at some locations or on certain days. Some museums and sports events offer discounted access to students, as well. You may also find discounts on certain music and video streaming sites. And you can save on travel with discounts at certain car rental and car insurance companies, as well as on trains and buses.

2. Buy Your Books (and Other Necessities) Used

If you don’t need that new book smell, renting or buying used textbooks is a classic way to save money in college. You can find used books at many campus bookstores or certain online retailers.

Used books often come at a fraction of the price of a brand new book, and many are in perfectly good condition. Plus once you’re done, you can try to resell the book.

You can save by buying other items secondhand as well. You might try looking for used clothing and furniture at thrift stores, garage sales, estate sales, flea markets, or on sites like Craigslist, OfferUp, or even Facebook Marketplace.

3. Cook Meals at Home

Food eats up a big chunk of most people’s budgets — in normal times, Americans spend about 10% of their disposable income on food, and an increasing share of that has gone to restaurant meals.

College students with limited cooking skills and small kitchen spaces may be tempted to eat out for every meal. But restaurant tabs can add up quickly.

Shopping wisely for your own ingredients and making simple meals at home can help you save a lot of money — and leftovers from one home-cooked meal can be lunch the next day!

4. Serve as an R.A.

Becoming a resident assistant can not only be rewarding but also help you cut down on living expenses. R.A.s are a sort of big brother or sister in dorms, organizing social events, advising younger students, enforcing rules, and mediating disagreements. Many R.A.s receive free or discounted housing and meals, and some also get a stipend.

5. Cut Out the Extras

One of the best tips to save money in college is to look for areas in your budget where you can trim by choosing a less expensive option.

If you frequent coffee shops, for example, perhaps you can brew your own java a few days a week, or find a less fancy option with free refills.

Instead of always going out to bars with friends, maybe you can take turns hosting wine and cheese nights at your homes. If you belong to a fancy gym, search for lower-cost options on campus, join a sports league, or do your running outdoors.

Instead of a spring break trip to an all-inclusive resort in Mexico, consider camping, hanging out at the local swimming pool, or volunteering. Don’t be afraid to get creative!

6. Pay Your Bills on Time

When you pay all of your bills by the due date, you can avoid unnecessary fees and help keep interest from piling up. If you’re worried about forgetting, you may be able to set autopay through your credit card, the service provider itself, or your bank.

Staying on top of bills not only avoids added costs, but may also help keep your credit report in good shape. That could help you qualify for better terms on loans and credit cards down the line.

7. Take Advantage of Family Discounts

You may have left home, but maybe don’t cut the cord completely just yet. Many phone and car insurance plans are cheaper if you sign up with family members, rather than as an individual. If your family is on board, this can be one of the easiest ways to go about saving money in college.

If you’re under 26-years-old, you should be eligible to stay on your parents’ health insurance plan, which may be less expensive than purchasing your own. And you might also see if your parents will unofficially keep you on various “family plans” by sharing their logins for things like video streaming services.

8. Sign up for Cash Back Credit Cards

If you’ve decided to use a credit card, you might as well earn some cash back while you’re at it. As long as you pay your bill in full each month to avoid fees and interest, you may benefit from a reward credit card. You could earn points that can be applied as a statement credit, sent to you in check form, or put toward merchandise or gift cards.

When signing up for a cash back credit card, look for one with a low or no annual fee that offers the highest amount of cash back possible. And remember, any benefits will likely evaporate if you do not pay your balance in full every single month.

9. Frequent the Library

Instead of purchasing books, look for them at your local or on-campus library. Your library may also offer magazines and movies so you don’t have to spend money on those, either. Many public libraries now offer digital loans you can download and enjoy instantly on your favorite device.

You might also consider using the library as a free and quiet place to study instead of spending money at the local coffee shop. To make your library experience even more enjoyable, invite friends to form a study group.

10. Give Up Your Car

If you live on campus, you may not actually need a car and all its associated monthly costs (insurance, repairs, gas, and parking, to name a few). Look into free campus shuttles and public transportation to get you where you need to go.

If you need to use a taxi or rideshare service, you can comparison shop to find the cheapest option, and if you’re looking to take a longer trip, split the cost of a rental car with friends.

11. Look Into Work-Study Options

Federal Work-Study is a program for students in financial need that provides student-friendly part-time jobs to help cover school expenses. Before enrolling in college, you can ask about different work-study programs that may be available.

Bonus: You’ll benefit from the work experience when it’s time to jump into the job market!

12. Look for Discounted Banking Products

Some banks offer college savings and checking accounts that don’t charge the same types of fees as normal accounts do. There may not be minimum balance requirement, either.

Look into different banks and what kinds of benefits they are offering to college students before making your decision.

13. Take Advantage of Free Campus Activities

Colleges often host a number of different activities for students throughout the week. There might be dances, plays and musicals, sporting events and more, all for free.

By choosing these activities instead of going off campus, you can have fun and save money at the same time.

14. Stay Focused

Though college can be a lot of fun, you also need to keep your eye on the prize (graduation) and stay on top of your schoolwork.

Taking more than four years to graduate could blow your higher education budget and negatively impact your earning potential. Some hyper-focused students even graduate in fewer than four years!

15. Buy in Bulk

This one requires a little price sleuthing, but for nonperishable items you use a lot of, you’ll typically save money buying in bulk. This is true whether you have access to a membership at a bulk goods store like Costco or Sam’s Club, or you’re choosing between package sizes at a superstore like Target or Walmart. If you can’t use or store an enormous quantity of, e.g. toilet paper, consider going shopping with a friend and splitting the goods.

16. Turn in the FAFSA Every Year

Every year, you need to fill out your FAFSA form to qualify for financial aid. If you don’t turn it in, you could be throwing away free money.

Though the form may be confusing, it’s worth asking your parents or college counselors for help filling it out.

17. Sell Your Textbooks

Once you’ve completed your courses for the year, you can take the books you purchased and resell them to get some of your money back.

To get the best possible price, compare quotes from your campus bookstore against the going online sale rate. Websites like Bookscouter.com help you compare prices before you list your books for sale.

18. Consider Printing Expenses

You may already pay for use of on-campus printers with your student fees. Don’t spend additional money on printers, ink, and paper if it’s cheaper to utilize the printing resources at the library or other places around your campus.

19. Look Into Local Restaurant Deals

To enjoy a nice meal out while saving money, keep your eye out for deals at local restaurants. Many establishments offer happy hour specials or special discount nights.

Apps like Groupon and Yelp can offer discounts on local dining with just a few taps.

20. Find the Free Food!

You can’t get cheaper than free. Departments and organizations on campus will often offer free food like pizza and sandwiches to entice students to attend their events.

Keep an eye out for signs around campus. You could score some free dinner and you might find some interesting people or a new hobby while you’re at it!

Other Ways to Finance College

Saving can get you far. But when it comes to actually paying for college, you have a few options if you or your parents haven’t saved enough to cover the costs in full. One of the most advantageous is to land scholarships or grants that will fund all or part of your tuition.

These are available through state and federal governments, universities, non-profit organizations, and corporations, and many are tailored to students of specific backgrounds or intending to enter certain fields. You can search for some opportunities on FastWeb , FinAid , and Scholarships.com .

One of the most common ways to pay for school is to take out federal student loans. You can apply by filling out a Free Application for Federal Student Aid (FAFSA®), which will help the government and your school determine the amount of federal aid you qualify for.

Private student loans can help fill the gaps in financial aid.

Federal student loans are a likely part of the federal student aid package you receive. They come with fixed interest rates and certain benefits, such as a six-month grace period after graduation, income driven repayment plans, and options for pausing or reducing payments while you’re in school or facing an economic hardship.

The Takeaway

It’s wise to exhaust all your federal grant and loan options before taking out private student loans, since they typically offer less flexibility and fewer borrower protections compared to Federal student loans. However, if you need to fill gaps in paying for school, you can look into private student loans from various financial institutions.

When you apply for a private student loan with SoFi, the process is straightforward and fast. You can choose from several flexible payment options, and there aren’t any fees.

Qualifying for the loan, as well as the interest rate and terms you receive, depend on your credit history (or that of your co-signer) and other factors. You can check your rates before applying — in just minutes.

Looking for ways to make college affordable? Explore your private loan options on SoFi today.


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 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 Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

Student Loan Consolidation Rates: What to Expect

It’s possible to consolidate or refinance your student loans into one loan with a single monthly payment. The major difference between these two options is that consolidation is generally offered through the federal government for federal student loans while refinancing is generally completed with a private lender.

When you consolidate student loans with the federal government through the Direct Loan Consolidation program, the new interest rate is the weighted average of your prior rates. Another option is student loan refinancing, which can be completed with a private lender. If you refinance, the new interest rate on your loans is based on factors like your credit score, employment history, among others.

Understanding the differences between consolidation versus refinancing is critical before deciding to take the plunge — especially since private refinancing means you lose your federal student loan benefits.

What Is Federal Student Loan Consolidation?

You can combine your federal student loans into one by taking out a Direct Consolidation Loan ​from the government.

Consolidating your loans may help simplify your repayment process if you have multiple loan servicers. In some cases, consolidating your loans may also be necessary if you are interested in enrolling in an income-driven repayment plan . In order to use a Direct Consolidation Loan, you must have at least one Direct Loan or one FFEL.

The interest rate on a Direct Consolidation Loan is fixed and is the weighted average of the rates on your existing loans. What you end up with really depends on what rates were when you took out your loans (some Direct Consolidation Loan payment plans also factor in your total education debt, including private student loans).

Using current interest rates, say you took out a Direct Subsidized Loan of $25,000 for undergrad (3.73% interest rate for the 2021-2022 school year), a Direct Unsubsidized Loan of $50,000 for grad school (5.28% interest rate), and another Direct PLUS Loan of $10,000 for grad school (6.28% interest rate). If you consolidated, your weighted average rate would be 4.94%.

You can also use SoFi’s debt navigator tool to explore your student loan refinancing options and get a sense of what might be best for your unique situation.

What is Student Loan Refinancing

When you refinance student loans, it means you are borrowing a new loan which is then used to pay off the existing student loans you have. This new loan will have a new interest rate and terms, which as mentioned, are based on personal factors like an individual’s credit history and their employment history.

Refinancing is completed with a private lender and borrowers may have the choice between a fixed or variable interest rate. In some cases, borrowers who refinance to a lower interest rate may be able to spend less in interest over the life of the loan. To get an idea of what refinancing your student loans could look like, you can take a look at SoFi’s student loan refinancing calculator.

Comparing Student Loan Refinancing and Consolidation

As previously mentioned, consolidation can be completed for federal student loans through a Direct Consolidation Loan. Refinancing is completed with private lenders, and can be done with either federal or private loans. An important distinction is that Direct Loan Consolidation allows borrowers to retain the federal benefits and borrower protections that come with their federal loans while refinancing does not.

Depending on how a borrower’s financial situation and credit profile has changed since they originally borrowed their student loans, refinancing could allow borrowers to secure a more competitive rate or preferable terms. The rate and term on a refinanced loan will be determined by the lender’s policies and the borrower’s financial situation and credit profile, including factors such as credit score, income, and whether there is a cosigner. Generally, borrowers can choose between a fixed or variable interest rate.

The interest rate on a Direct Consolidation Loan is the weighted average of the previous loan’s interest rate and all interest rates are fixed for the life of the loan.

Private Student Loan Refinancing Rates

It may be possible for borrowers to qualify for a more competitive interest rate by refinancing their student loans with a private lender. Student loan refinancing rates vary widely. According to Forbes, in December 2021, the average fixed interest on a 10-year refinanced student loan was 3.40%. On a five-year variable-rate loan the average interest rate was 2.49%. As noted previously, the rate you get typically depends on your total financial picture and credit history, including your credit score, income, and employment history.

Borrowers may also consider applying for student loan refinancing with a cosigner, which could potentially help them qualify for a more competitive interest rate.

Why Interest Rates Aren’t the Only Thing to Consider

Interest rates aren’t the only thing to consider when deciding whether to consolidate or refinance. If you go with a Direct Consolidation Loan, keep in mind that you might pay more overall for your loans, since this usually lengthens your repayment term. You will also lose credit toward loan forgiveness for any payments made on an income-based repayment plan or the Public Service Loan Forgiveness program.

If you refinance with a private lender, you won’t be eligible for student loan forgiveness, because you lose federal loan protections, including deferment or forbearance when you refinancing with a private lender. But some private lenders, like SoFi, offer their own benefits, like a temporary pause on payments if you lose your job through no fault of your own.

It’s important to think carefully before consolidating or refinancing your student loans. Consider things like whether a prospective private lender offers any options for relief if you hit a rough patch.

Even if you get a lower interest rate, make sure you can afford the new monthly payments before committing. And remember that this information is just a starting point for your decision. Don’t be afraid of doing more research and trusting you’ll make the right decision for you.

The Takeaway

Consolidating federal student loans can be done through the federal government with a Direct Consolidation Loan. The interest rate on this type of loan is the weighted average of the interest rates on the existing loans.

Refinancing allows borrowers to combine both federal and private student loans in a single new loan with one interest rate. The rate may be variable or fixed, depending on the lender and will be determined by the lender based on criteria like the borrower’s credit history, among other factors. Again, refinancing will eliminate any federal loans from borrower protections like income-driven repayment plans.

Depending on an individual’s personal circumstances, either consolidation or refinancing may make more sense than the other. If refinancing seems like an option for you, consider SoFi, where there are no hidden fees and borrowers have access to benefits like career coaching.

Check out whether you qualify for student loan refinancing with SoFi in just two minutes.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL MAY 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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SLR18199

Source: sofi.com

Pros and cons of rent-to-own: everything you need to know

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Rent-to-own is an appealing option for many prospective homebuyers, especially those who don’t yet qualify for a mortgage. However, it isn’t suitable for everyone. It’s essential to recognize the advantages and drawbacks of rent-to-own so that you can make an informed decision for yourself. Keep reading for a comprehensive outline of the pros and cons of rent-to-own.

What is rent-to-own?

Rent-to-own is a contract that allows the renter to buy the house they’re renting after a certain period of time has passed. In this contract, a portion of the rental payments that have been made will go toward the home purchase. Additionally, the contract usually stipulates what the home’s price will be when the lease ends. At the end of the lease, the renter acquires a mortgage for the property and finalizes the sale.

In return for being given the opportunity to purchase the home, the renter pays higher-than-average rent and a one-time, nonrefundable option fee of between three and seven percent of the home’s total price. For example, if you’re purchasing a home for $300,000, a five percent option fee would be $15,000.

Lastly, rent-to-own contracts come in two types: lease-option and lease-purchase. A lease-option contract allows you to decide if you want to buy the home at the end of the contract. You won’t get your option fee back or the higher rent you paid, but you can walk away from the deal. In contrast, a lease-purchase locks you into buying the property at the end of the contract. So, if for some reason you change your mind or can’t get approved for a mortgage, there may be legal and financial consequences for not following through with the purchase.

Pros of a rent-to-own home

Here are the positives of having a rent-to-own contract:

1. You don’t have to wait for improved finances

Ultimately, most people who opt for a rent-to-own contract are close to getting a mortgage but there is something holding them back. With Rent-to-own, the contract allows a person to move into the house they potentially want to buy without waiting for their finances to improve.

2. You can build equity

One of the top reasons people consider rent-to-own is for the equity. Many people hate renting because the money they pay toward the rent doesn’t contribute to their equity and financial growth. A rent-to-own contract will often stipulate how much of your rent payments go toward your future home purchase, which allows you to build equity while you rent.

For example, let’s say your rent is $1,500 a month for a one-year rent-to-own contract. Your contract states that $250 a month goes toward your home purchase. So at the end of the agreement, you’ll have $3,000 in equity.

3. You don’t have to buy the house if you don’t want to

If you have a lease-option agreement, you can still decide not to buy the property at the end of the lease. This is an added luxury as you get to live in the property without total commitment. Sometimes, people purchase  homes and later find out that they don’t like the neighborhood or learn that the house has problems. A lease-option doesn’t lock the person in, so they still have the flexibility to decide not to buy the property at the end of the agreement.

Note that this isn’t true for a lease-purchase agreement.

4. You can lock in the house price

A rent-to-own contract often (although not always) stipulates what the price of the house will be at the end of the lease. If the local housing market increases during your rental period, you’ll still get the benefit of purchasing the home at a great price.

Cons of a rent-to-own home

Here are the downsides to a rent-to-own contract:

1. You might lose money

Due to fees and rent credits, you might end up losing money in the deal if you don’t purchase the house in the end. You’ll have paid a nonrefundable option fee that was probably thousands of dollars, in addition to higher-than-average rent for your entire lease length.

Additionally, if you sign a lease-purchase agreement, and you can’t purchase the home—you don’t get approved for a mortgage—you might be subject to fees.

Lastly, if the owner gets foreclosed on while you’re living there, you might also be unable to purchase the home and lose money.

2. You might have to pay more fees

If you’re planning to buy a property, it’s essential to be prepared for all the other fees that come with homeownership, like property taxes, maintenance fees and HOA fees.

Make sure you negotiate all parts of your contract and understand them thoroughly. For example, many rent-to-own contracts have the renter pay for half or all of the home repairs during their lease. If you do so and don’t end up purchasing the property, that was money spent without any benefit to you.

3. You might have to purchase the house

If you’re in a lease-purchase agreement, you may have to buy the house at the end of the lease even if you no longer want it. You’re locked into this decision even if you decide the home isn’t to your liking, you don’t enjoy the area or you want to move to an entirely different city.

Whenever possible, opt for a lease-option agreement so you have some flexibility.

4. You aren’t guaranteed financing

You might pursue a rent-to-own situation because you’re under the assumption that you’ll be able to secure financing and move ahead with the purchase at the end of the agreement. However, if your credit score drops, you fall into financial trouble or mortgage approval requirements change, you might not get your financing at the end of the lease. If this happens, you risk spending all that extra money without the benefit of future homeownership.

Try to keep your credit score high, continue to save for a down payment and monitor the mortgage approval rules in your state.

5. You have to be careful about what you agree to

You have to be careful because less-than-trustworthy rent-to-own programs do exist. Some of the most common rent-to-own problems are:

  • The home has expensive issues that will be costly to fix, such as foundational issues. Get a home inspection before signing a rent-to-own contract.
  • The owner has a history of being foreclosed on or a list of tenants with complaints. Try to research the owner to see if there are any outstanding or previous complaints against them.
  • The contract stipulates a price that’s too high. Get a home appraisal so your contract isn’t pricing you above fair market value.
  • The contract protects the seller more than the buyer. Have a lawyer or a real estate agent review your agreement to ensure your best interests are protected.

Who should consider rent-to-own?

Despite some of the drawbacks, rent-to-own is the right choice for many people. In particular, the following people should seriously consider rent-to-own:

  • Those who want to test out homeownership
  • Those who want to test out a city or a neighborhood before purchasing
  • Those who want their monthly payments to go toward building home equity and not rent
  • Those who can’t make a sizable down payment or who have nontraditional incomes
  • Those with poor credit or without significant savings

If you don’t fit into any of these categories, or if the potential downsides of rent-to-own are too concerning for you, then rent-to-own might not be for you.

For more information on rent-to-own, examples of contracts, red flags to look out for and ways to shop for the best deal, download the Complete Rent-to-Own Guide for Prospective Homebuyers.

What to do if you choose to pursue rent-to-own

Now that you know the pros and cons of rent-to-own, you can better decide if you want to pursue this kind of housing. If you’re interested in a rent-to-own contract, make sure you protect yourself in the process. Always do your research of the property, the area and the seller, and get a home inspection and a home appraisal.

Additionally, don’t sign anything you don’t understand. If you want to, you can work with professionals to make sure the contract protects you. Most importantly, don’t forget to negotiate. You can negotiate the option fee, the amount of the rent payment that goes toward the future home purchase, the lease length, maintenance responsibilities and more. Remember to make sound financial decisions so that you’re ready for a mortgage when your rent-to-own period is over. You want your rent-to-own to turn into homeownership, so start analyzing and working on your credit today. Work with the credit professionals at Lexington Law to ensure your credit report is fair and accurate.


Reviewed by Anna Grozdanov, Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Anna Grozdanov was born in Sofia, Bulgaria, but moved to Arizona with her family. Ms. Grozdanov grew up in Arizona and went on to graduate Magna Cum Laude from the University of Arizona with a B.A. in both Philosophy and Psychology. Ms. Grozdanov finished her first year of law school at Pepperdine University School of Law in California, but returned to Arizona where she graduated from the Sandra Day O’Connor College of Law. Since graduating from law school, Ms. Grozdanov has worked in Estate Planning, Estate Administration, Probate, and Personal Injury. She has extensive experience advising and working closely with clients and applies these skills at Lexington by helping clients achieve their credit repair goals. Ms. Grozdanov is licensed to practice law in Arizona. She is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Lexington Law is not an RTO company. Any content provided on this website regarding the topic of RTO is nothing more than a resource Lexington Law believes might be helpful to readers of its website. Lexington did not write this content. It was provided by a third party. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers. Lexington did not write this content. It was provided by a third party.

Source: lexingtonlaw.com