12 Steps to Filling out the FAFSA Form 2021-2022

For many people, one of the first steps to applying for college is filling out the Free Application for Federal Student Aid, or FAFSA®. This form helps the government determine your eligibility for federal student aid, including subsidized and unsubsidized student loans, as well as grants and work-study opportunities.

Completing The 2021-2022 FAFSA Application

The FAFSA form 2021 may look a bit different if you’ve filled out the form in the past. That’s because of the FAFSA® Simplification Act, which was passed in December 2020 and designed to make the FAFSA more accessible for lower-income students and families. While most of these changes won’t go into effect for the upcoming FAFSA cycle, we’ll point in this article a few changes to FAFSA you will see this year.

Recommended: FAFSA 101: How to Complete the FAFSA

12 Steps to Fill Out the FAFSA

FAFSA opens Oct. 1, 2020, and closes June 30, 2022 for the 2021/2022 academic year. However, FAFSA deadlines may vary depending on the states and schools you’re applying to, so you may want to check with each school to confirm their FAFSA deadline. If you’re ready to fill out FAFSA, we’ve outlined steps required in the process.

Not ready to fill out the FAFSA? You can fill out an abridged Federal Student Aid Estimator to give you an idea of what filling out the actual FAFSA will be like and to estimate your expected student aid package.

1. Required Documents Ready

Before even loading the online FAFSA form, it may be useful to have all your required documents in order to make the application process even easier. The things you’ll need may include:

•   Social security or alien registration ID

•   Drivers license or state ID

•   Federal income tax returns, W-2s and other financial documents for both yourself and your parent(s) if you’re a dependent (more on that later)

•   Bank statements

•   Untaxed income

•   Title IV Institution Codes for schools you’re applying to (again, more on that later)

•   Download app, if you plan on applying on mobile (you can also apply on desktop)

Dependent students will also need to provide similar information for their parents.

2. FSA IDs

There’s one more thing you’ll need in order to apply for FAFSA, and that’s a federal student aid ID, or FSA ID . This is simply the username or password you’ll use to log into FAFSA. Note that if you need to enter parental financial information, whoever is providing that financial information will also need to create an FSA ID .

3. Basic Information

Now that you have a FSA ID, you’re ready to log in and get started. The first few steps of FAFSA will be filling out basic information. The site or app will first ask you if you are a student, parent, or preparer helping a student fill out the FAFSA. Select which one applies to you. You should then be prompted to provide the following:

•   Your full name

•   Date of birth

•   Social security number

4. Starting the Application

Once you fill in this information, you will be asked to accept or decline the disclaimer, which details how the site will use and monitor your data. You should then be prompted to either start a FAFSA for 2021-2022 or 2020-2021. If you’re filing FAFSA for the upcoming year and are not currently enrolled in college, you should choose “Start 2021-2022 FAFSA.”

You’ll also be asked to create a save key, which is simply a four-digit code you’ll use to save your application. If you don’t finish FAFSA in one sitting, then you’ll be asked to enter your save key to continue filling it out at a later date.

5. Section 1: Student Information

Next, you’ll need to enter some information about yourself, including (but not limited to):

•   Social security number

•   Full name

•   Date of birth

•   Email address

•   Phone number

•   Home address

•   State of residence

•   Citizenship status

•   High school completion status

•   College degree level

•   If you’d like to be considered for work-study

6. Section 2: College Search Section

To send your FAFSA information to schools you’re applying to, you’ll need to find the federal school code for each school you want your information sent to. Doing so allows colleges to receive your FAFSA information and use it to provide you a financial aid package. You can find this code either on the school’s website or by searching for it on the FAFSA form itself.

7. Section 3: Dependency Status

You can either apply to FAFSA as a dependent of your parents or as an independent. If you’re a first-time college student and will graduate from high school in 2022 and/or are under 24 years old, you’ll most likely need to file as a dependent, meaning you’ll need your parents’ financial information to apply.

Section 3 of the FAFSA will help you determine if you’re an independent or dependent student. You’ll need to provide some more information about yourself, such as your marital status, if you have children or other dependents, and if you’re at risk or are currently experiencing homelessness.

Once you’ve filled out this information, FAFSA should display a message that determines whether or not you’re considered a dependent and therefore need parental financial information to determine expected family contribution (which will soon be replaced with the student aid index).

(Note that the rest of these steps assume you’re filing as a dependent. While the process of filing as an independent will be similar, you won’t be asked to provide information about your parents.)

8. Section 4: Parental Information

If you need parental information for FAFSA, you’ll include that in this section. Information you’ll need includes (but is not limited to):

•   Parental marital status

•   Date of parent’s marriage

•   Parent social security number

•   Parent name

•   Parent date of birth

•   Parent email address

•   Parent’s spousal information for all of the above

•   Household size

9. Section 5: Parent Financials

Next, you’ll need to provide some financial information about your parents. You’ll be asked for information such as (but not limited to):

•   Last year taxes were filed

•   Tax return type

•   Filing status

•   IRS Data Retrieval Tool (otherwise, need to fill in tax information manually)

•   Combat pay

•   Grant and scholarship aid

•   Education credits

•   Untaxed IRA distributions

•   IRA deductions and payments

•   Tax exempt interest income

•   Child support payments

•   Need-based employment programs

•   Net worth

10. Section 6: Student financials

Now it’s time to provide some financial information about yourself. You’ll be asked for information such as (but not limited to):

•   Last year taxes were filed

•   Tax return type

•   Filing status

•   IRS Data Retrieval Tool (otherwise, need to fill in tax information manually)

•   Combat pay

•   Grant and scholarship aid

•   Education credits

•   Untaxed IRA distributions

•   IRA deductions and payments

•   Tax exempt interest income

•   Child support payments

•   Need-based employment programs

•   Net worth

11. Check for errors

Once you’ve reached the end of the application, you should receive a FAFSA summary. Before hitting submit, you may want to ensure that all the information you included is accurate. Reviewing this information closely may help avoid filing a FAFSA correction later.

12. Agreement of Terms

The FAFSA requires you to accept or reject its agreement of terms. If your parent(s) also provided information because you filed as a dependent, they will also need to accept these terms in order for you to submit the application. Both you and your parent(s) will e-sign using your FSA ID. Once you’ve accepted the terms, your FAFSA will be complete.

Sample FAFSA Form for 2021/2022

Do you need some extra help? FAFSA’s Financial Aid Tool Kit is rich with resources and information. Some documents include step-by-step instructions on how to complete the FAFSA on the website and mobile app, lists of tips for filling out the FAFSA, question-and-answer documents, and more. You can also view a sample FAFSA form or a presentation on how to fill out FAFSA using the mobile app.

This student aid report may also be useful if you need to see another FAFSA sample form.

Recommended: How much FAFSA Money Can I Expect?

What’s Different About the 2021/2022 FAFSA

As previously discussed, the FAFSA Simplification Act passed last December resulted in a few changes to FAFSA. However, most of these changes won’t go into effect for the 2021-2022 school year. For FAFSA 2021-2022, major changes include the following:

•   Automatic-Zero EFC: FAFSA will give all applicants with an income of $27,000 or less an EFC of zero, meaning FAFSA does not expect families to help pay for the applicant’s college. This amount increased $1,000 from last year, which set the cut-off at $26,000, so more students should be able to receive a EFC of zero.

•   Schedule 1 Questions: When populating tax information from the IRS Data Retrieval Tool, the tool will automatically answer whether or not the applicant filed for a Schedule 1.

Additional changes are already scheduled for the 2022/2023 FAFSA form, such as drug convictions no longer negatively affecting one’s ability to get financial aid. Additionally, registration status for Selective Service for eligible males will also no longer be considered for financial aid. You can review the latest changes to the FAFSA on the official FAFSA website.

A Few Extra Tips

Completing the FAFSA can be an overwhelming process. For those filing for the first time, you may want to check out this 2021-2022 FAFSA guide and some FAFSA tips to make the process even easier. If you need some more help on how to fill out FAFSA 2021/2022, some tips from StudentAid.Gov include:

1.    Completing the form: It can be tempting to skip the FAFSA altogether, especially if you’re from a middle- or upper-class family and you believe you won’t be eligible for aid. However, falling for this assumption could mean leaving aid on the table.

2.    Paying attention to deadlines: As stated earlier, FAFSA 2021/2022 opens Oct. 1 and closes June 30, 2022. However, the schools you’re applying to may require you to fill out the FAFSA before June 30, so it’s best to ask each school’s financial aid office about what their FAFSA deadlines are to avoid losing out on aid.

3.    Using the IRS Data Retrieval Tool: This tool auto-fills your latest tax information from the IRS database. When you fill out FAFSA, you’ll have the option to either fill out your tax data manually or use the tool. Using the tool could help you avoid making costly mistakes while also saving you time.

4.    Filling out every section: Not sure how to fill out a section? FAFSA offers helpful tips throughout each section of the FAFSA form to make filling out the FAFSA easier. Additionally, not filling out a section of FAFSA could result in your form not being submitted or you receiving less financial aid.

5.    Double-checking the form: Before you submit, you may want to go back and double-check your answers to make sure everything is filled out and is accurate.

Recommended: Navigating Your Financial Aid Package

The Takeaway

Filling out the FAFSA is a great first step to pay for your dream school. This is one of the best ways of getting scholarships and grants you won’t have to pay back or government-backed loans to help you pay for college-related costs. By learning how to properly fill out the FAFSA (and then actually doing so!), you can increase your odds of getting a bigger financial aid package.

However, if your financial aid package doesn’t cover all your college expenses, you may want to consider private student loans. It’s important to note that private student loans don’t offer the same protections as federal student loans, like income-driven repayment plans or deferment options. For this reason, private student loans are generally considered only after other sources of funding have been considered.

SoFi’s Private Student Loans are available for undergraduate and graduate students, as well as parents. In just a few minutes, you can apply online for student loans and be well on your way to financing your education.

Find out more about SoFi’s Private Student Loan options.

Header photo credit: iStock/Vladimir Sukhachev

FAFSA photos credit: FAFSA’s Financial Aid Tool Kit


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Using In-School Deferment as a Student

Undergraduate and graduate students in school at least half-time can put off making federal student loan payments, and possibly private student loan payments, with in-school deferment. The catch? Interest usually accrues.

Loans are a fact of life for many students. In fact, a majority of them — about 70% — graduate with student loan debt.

While some students choose to start paying off their loans while they’re still in college, many take advantage of in-school deferment.

What Is In-School Deferment?

In-school deferment allows an undergraduate or graduate student, or parent borrower, to postpone making payments on:

•   Direct Loans, which include PLUS loans for graduate and professional students, or parents of dependent undergrads; subsidized and unsubsidized loans; and consolidation loans.

•   Perkins Loans

•   Federal Family Education Loan (FFEL) Program loans.

Parents with PLUS loans may qualify for deferment if their student is enrolled at least half-time at an eligible college or career school.

What about private student loans? Many lenders allow students to defer payments while they’re in school and for six months after graduation. Sallie Mae lets you defer payments for 48 months as long as you are enrolled at least half-time.

But each private lender has its own rules.

Recommended: How Does Student Loan Deferment in Grad School Work?

How In-School Deferment Works

Federal student loan borrowers in school at least half-time are to be automatically placed into in-school deferment. You should receive a notice from your loan servicer.

If your loans don’t go into automatic in-school deferment or you don’t receive a notice, get in touch with the financial aid office at your school. You may need to fill out an In-School Deferment Request .

If you have private student loans, it’s a good idea to reach out to your loan servicer to request in-school deferment. If you’re seeking a new private student loan, you can review the lender’s deferment rules.

Most federal student loans also have a six-month grace period after a student graduates, drops below half-time enrollment, or leaves school before payments must begin. This applies to graduate students with PLUS loans as well.

Parent borrowers who took out a PLUS loan can request a six-month deferment after their student graduates, leaves school, or drops below half-time enrollment.

Requirements for In-School Deferment

Students with federal student loans must be enrolled at least half-time in an eligible school, defined by the Federal Student Aid office as one that has been approved by the Department of Education to participate in federal student aid programs, even if the school does not participate in those programs.

That includes most accredited American colleges and universities and some institutions outside the United States.

In-school deferment is primarily for students with existing loans or those who are returning to school after time away.

The definition of “half-time” can be tricky. Make sure you understand the definition your school uses, as not all schools define half-time status the same way. It’s usually based on a certain number of hours and/or credits.

Do I Need to Pay Interest During In-School Deferment?

For federal student loans and many private student loans, no.

If you have a federal Direct Unsubsidized Loan, interest will accrue during the deferment and be added to the principal loan balance.

If you have a Direct Subsidized Loan or a Perkins Loan, the government pays the interest while you’re in school and during grace periods. That’s also true of the subsidized portion of a Direct Consolidation Loan.

Interest will almost always accrue on deferred private student loans.

Although postponement of payments takes the pressure off, the interest that you’re responsible for that accrues on any loan will be capitalized, or added to your balance, after deferments and grace periods. You’ll then be charged interest on the increased principal balance. Capitalization of the unpaid interest may also increase your monthly payment, depending on your repayment plan.

If you’re able to pay the interest before it capitalizes, that can help keep your total loan cost down.

Alternatives to In-School Deferment

There are different types of deferment aside from in-school deferment.

•   Economic Hardship Deferment. You may receive an economic hardship deferment for up to three years if you receive a means-tested benefit, such as welfare, you are serving in the Peace Corps, or you work full time but your earnings are below 150% of the poverty guideline for your state and family size.

•   Graduate Fellowship Deferment. If you are in an approved graduate fellowship program, you could be eligible for this deferment.

•   Military Service and Post-Active Duty Student Deferment. You could qualify for this deferment if you are on active duty military service in connection with a military operation, war, or a national emergency, or you have completed active duty service and any applicable grace period. The deferment will end once you are enrolled in school at least half-time, or 13 months after completion of active duty service and any grace period, whichever comes first.

•   Rehabilitation Training Deferment. This deferment is for students who are in an approved program that offers drug or alcohol, vocational, or mental health rehabilitation.

•   Unemployment Deferment. You can receive this deferment for up to three years if you receive unemployment benefits or you’re unable to find full-time employment.

For most deferments, you’ll need to provide your student loan servicer with documentation to show that you’re eligible.

Then there’s federal student loan forbearance, which temporarily suspends or reduces your principal monthly payments, but interest always continues to accrue.

Some private student loan lenders offer forbearance as well.

If your federal student loan type does not charge interest during deferment, that’s probably the way to go. If you’ve reached the maximum time for a deferment or your situation doesn’t fit the eligibility criteria, applying for forbearance is an option.

If your ability to afford your federal student loan payments is unlikely to change any time soon, you may want to consider an income-based repayment plan or student loan refinancing.

The goal of refinancing with a private lender is to change your rate or term. If you qualify, all loans can be refinanced into one new private loan. Playing with the numbers can be helpful.

Just know that if you refinance federal student loans, they will no longer be eligible for federal deferment or forbearance, loan forgiveness programs, or income-driven repayment.

Recommended: Student Loan Refinancing Calculator

The Takeaway

What is in-school deferment? It allows undergraduates and graduate students to buy time before student loan payments begin, but interest usually accrues and is added to the balance.

If trying to lower your student loan rates is something that’s of interest, look into refinancing with SoFi.

Students are eligible to refinance a parent’s PLUS loan along with their own student loans.

There are absolutely no fees.

It’s easy to check your rate.


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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 THE END OF JANUARY 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.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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What Can You Use Student Loans For?

To attend college these days, many students take out student loans. Otherwise, they wouldn’t be able to afford the hefty price tag of tuition and other expenses.

According to U.S. News & World Report, among the college graduates from the class of 2020 who took out student loans, the average amount borrowed was $29,927. In 2010, that number was $24,937 — a difference of about $5,000.

Student loans are meant to be used to pay for your education and related expenses so that you can earn a college degree. Even if you have access to student loan money, it doesn’t mean you should use it on general living expenses. By learning the answer to, “What can you use a student loan for?” you will make better use of your money and ensure you’re in a more stable financial situation post-graduation.

Recommended: I Didn’t Get Enough Financial Aid: Now What?

5 Things You Can Use Your Student Loans to Pay For

Here are five things you can spend your student loan funds on.

1. Your Tuition and Fees

Of course, the first thing your student loans are intended to cover is your college tuition and fees. The average college tuition and fees for a private institution in 2021-2022 is $38,185, while the average for a public, out-of-state school is $22,698 and $10,338 for a public, in-state institution.

2. Books and Supplies

Beyond tuition and fees, student loans can be used to purchase your textbooks and supplies, such as a laptop, notebooks and pens, and a backpack. Keep in mind that you may be able to save money by purchasing used textbooks online or at your campus bookstore. Hard copy textbooks cost, on average, between $80 and $150; you may be able to find used ones for a fraction of the price. Some students may find that renting textbooks may also be a cost-saving option.

Recommended: How to Pay for College Textbooks

3. Housing Costs

Your student loans can be used to pay for your housing costs, whether you live in a dormitory or off-campus. If you do live off-campus, you can also put your loans towards paying for related expenses like your utilities bill. Compare the costs of on-campus vs. off-campus housing, and consider getting a roommate to help you cover the costs of living off-campus.

4. Transportation

If you have a car on campus or you need to take public transportation to get to school, work, or your internships, then you can use your student loans to pay for those costs. Even if you have a car, you may want to consider leaving it at home when you go away to school, because gas, maintenance, and a parking pass could end up costing much more than using public transportation and your school’s shuttle, which should be free.

5. Food

What else can you use student loans for? Food would qualify as a valid expense, whether you’re cooking meals at home or you’ve signed up for a meal plan. This doesn’t mean you should eat out at fancy restaurants all the time just because the money is there. Instead, you could save by cooking at home, splitting food costs with a roommate, and asking if local establishments have discounts for college students.

Recommended: How to Get Out of Student Loan Debt: 6 Options

5 Things Your Student Loans Should Not Cover

Now that you know what student loans can be used for, you’re likely wondering what they should not be used for as well. Here are five expenses that cannot be covered with funds from your student loans.

1. Entertainment

While you love to do things like go to the movies and concerts and bowling, you should not use your student loans to pay for your entertainment. Your campus likely offers plenty of free and low-cost entertainment like sports games and movie nights, so pursue those opportunities instead.

2. A Vacation

College is draining, and you deserve a vacation from the stress every once in a while. However, if you can’t afford to go on spring break or another type of trip, then you should put it off at this time. It’s never a good idea to use your student loans to cover these expenses.

3. Gym Membership

You may have belonged to a gym at home before you went to college, and you still want to keep up your membership there. You can, as long as you don’t use your student loans to cover it. Many colleges and universities have a gym or fitness center on campus that is available to students and included in the cost of tuition.

4. A New Car

Even if you need a new car, student loans cannot be used to buy a new set of wheels. Consider taking public transportation instead of buying a modest used car when you save up enough money.

5. Extra Food Costs

While you and your roommates may love pizza, it’s not a good idea to use your student loan money to cover that cost. You also shouldn’t take your family out to eat or dine out too much with that borrowed money. Stick to eating at home or in the dining hall, and only going out to eat every once in a while with your own money.

Student Loan Spending Rules

The federal code that applies to the misuse of student loan money is clear. Any person who “knowingly and willfully” misapplied funds could face a fine or imprisonment.

Your student loan refund — what’s left after your scholarships, grants, and loans are applied toward tuition, campus housing, fees, and other direct charges — isn’t money that’s meant to be spent willy-nilly. It’s meant for education-related expenses.

The amount of financial aid a student receives is based largely on each academic institution’s calculated “cost of attendance,” which may include factors like your financial need and your Expected Family Contribution (EFC). Your cost of attendance minus your EFC generally helps determine how much need-based aid you’re eligible for. Eligibility for non-need-based financial aid is determined by subtracting all of the aid you’ve already received from your cost of attendance.

Starting for the 2024-2025 school year, the EFC will be replaced with the Student Aid Index (SAI). The SAI will work similarly to the EFC though there will be some important changes such as adjustments in Pell Grant eligibility.

Additionally, when you took out a student loan, you probably signed a promissory note that outlined what you’re supposed to be spending your loan money on. Those restrictions may vary depending on what kind of loan you received — federal or private, subsidized or unsubsidized. If the restrictions weren’t clear, it’s not a bad idea to ask your lender, “What can I use my student loan for?”

If you’re interested in adjusting loan terms or securing a new interest rate, you could consider refinancing your student loans with SoFi. Refinancing can allow qualifying borrowers to secure a lower interest rate or preferable terms, which could potentially save them money over the long run. Refinancing federal loans eliminates them from all federal borrower benefits and protections, inducing deferment options and the ability to pursue public service loan forgiveness, so it’s not the right choice for all borrowers.

The Takeaway

Student loans can be used to pay for qualifying educational expenses like tuition and fees, room and board, and supplies like books, pens, a laptop, and a backpack. Expenses like entertainment, vacations, cars, and fancy dinners cannot generally be paid for using student loans.

If you have student loans and are interested in securing a new — potentially lower — interest rate, consider refinancing.

There are no fees to refinance a student loan with SoFi and potential borrowers can find out if they pre-qualify, and at what rates, in just a few minutes.

Learn more about student loan refinancing with SoFi.


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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 THE END OF JANUARY 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.

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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.

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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Using Income Share Agreements to Pay for School

Many students end up taking out loans to finance the cost of college. As of the first quarter of 2021, Americans collectively held $1.57 trillion in student debt, up $29 billion from the previous quarter. And a significant share of borrowers were struggling with their debt burdens: Just under 6% of total student debt was 90 days or more past due or in default.

Students looking for alternatives to student loans can apply for grants and scholarships, take on work-study jobs or other part-time work, or find ways to save on expenses.

Recently, another alternative has appeared on the table for students at certain institutions: income share agreements. An income share agreement is a type of college financing in which repayment is a fixed percentage of the borrower’s future income over a specified period of time.

As this financing option grows in popularity, here are some key things to know about how these agreements operate and to help you decide whether they’re the right choice for you.

How Income Share Agreements Work

Unlike student loans, an income share agreement, also known as an income sharing agreement or ISA, doesn’t involve a contract with the government or a private lender. Rather, it’s a contract between the student and their college or university.

In exchange for receiving educational funds from the school, the student promises to pay a share of his or her future earnings to the institution for a fixed amount of time after graduation.

ISAs don’t typically charge interest, and the amount students pay usually fluctuates according to their income. Students don’t necessarily have to pay back the entire amount they borrow, as long as they make the agreed-upon payments over a set period. Though, they also may end up paying more than the amount they received.

Income share agreements only appeared on the scene in the last few years, but they are quickly expanding. Since 2016, ISA programs have launched at places like Purdue University in Indiana, Clarkson University in New York, and Lackawanna College in Pennsylvania. Each school decides on its own terms and eligibility guidelines for the programs. The school itself or outside investors may provide funds for ISAs.

Purdue University was one of the first schools to create a modern ISA program. Sophomores, juniors, and seniors who meet certain criteria, including full-time enrollment and satisfactory academic progress, are eligible to apply.

Students may have a six-month grace period after graduation to start making payments, similar to the six-month grace period for student loans, and the repayment term at Purdue is typically 10 years. For some schools, however, the repayment term ranges from two to 10 years.

The exact amount students can expect to pay depends on the amount they took out and their income. The university estimates that a junior who graduates in 2023 with a marketing major will have a starting salary of $51,000 and will see their income grow an average of 4.7% a year.

If that student borrowed $10,000 in ISA funds, he or she would be required to pay 3.39% of his or her income for a little over eight years. The total amount that student would pay back is $17,971. The repayment cap for the 2021-2022 school year is $23,100.

Again, every ISA is different and may have different requirements, so be sure to check with your college or university for all the details.

The Advantages of Income Share Agreements

ISAs aren’t for everyone, but they can be beneficial for some students. For example, students who don’t qualify for other forms of financial aid, such as undocumented immigrants, may have few other options for funding school.

For students who have already maxed out their federal loans, ISAs can be a more affordable option than Parent PLUS loans or private student loans, both of which sometimes come with relatively high interest rates and fees.

Compared to student loans, many ISAs also protect students by preventing monthly payments from becoming unaffordable. Since the amount paid is always tied to income, students should never end up owing more than a set percentage for a fixed period of time. However, a student’s field of study may impact this. Students who are high earners after college may end up paying more to repay an ISA than they would have under other financing options.

If a student has trouble finding a well-paying job, or finding one at all, payments typically shrink accordingly. For example, Purdue sets a minimum income amount below which students don’t pay anything.

In Purdue’s case, the student won’t owe anything else once the repayment period is over, compared to student loans that can multiply exponentially over time due to accrued interest.

Purdue and several other universities also set the amount and length of repayment based on a student’s major, meaning monthly payments can be more tailored to graduates’ fields and salaries than student loans are. For fortunate students who see their income rise beyond expectations, many schools ensure the student won’t pay beyond a certain cap.

Potential Pitfalls of Income Share Agreements

ISAs come with some risks and drawbacks, as well. Firstly, since the repayment amount is based on income, a student who earns a lot after graduation might end up paying more than they would have with some student loans. This is because if a student earns a high income after graduating, they’d pay more to the fund. Second, the terms of repayment can vary widely, and some programs require graduates to give up a huge chunk of their paychecks.

For example, Lambda School , an online program that trains students to be software engineers, requires alums who earn at least $50,000 to pay 17% of their income for two years (up to $30,000). This can be a burden for recent graduates, especially compared to other options like income-driven repayment, which determines the percentage of income going towards student loans based on discretionary income.

Currently, there is very little regulation of ISAs, so students should read ISA terms carefully to understand what they’re signing up for.

No matter what, income share agreements are still funding that needs to be repaid, often at a higher amount than the principal.

So you’re still paying more overall for your education compared to finding sources of income like scholarships, a part-time job, gifts from family, or reducing expenses through lifestyle changes or going to a less expensive school.

How Do Income Share Agreements Impact You?

Many schools’ ISA programs are designed to fill in gaps in funding when students do not receive enough from other sources, such as financial aid, federal or private student loans, scholarships or savings. Thus, it’s important to understand how an ISA will impact both your long-term finances and other methods to pay for college.

ISAs do not impact need-based aid like grants or scholarships. Students with loans, however, could have a more complicated repayment plan with multiple payments due each month.

With ISAs, there is less clarity as to how much you’ll end up repaying from up to 10 years of income. As your income changes, your payment will remain the same percentage unless it falls below the minimum income threshold ($1,666.67 at Purdue) or reaches a repayment cap.

Whereas students may pay more than the loan principal to reduce interest, ISAs often require reaching a repayment cap of roughly double the borrowed amount to be paid off early.

Depending on your future income and career path, an ISA could cut into potential savings and investments or serve as a safety net for a less stable occupation.

Who Should Consider An ISA?

As previously mentioned, income share agreements are an option for students who have maxed out on federal loans and scholarships. There are other circumstances when an ISA may or may not be worth considering.

Colleges may require a minimum GPA to be eligible for an ISA. For instance, Robert Morris University requires incoming students to have a 3.0 high school GPA and maintain a 2.75 GPA during their studies for continued funding eligibility. Taking stock of how an ISA aligns with your academic performance before accepting funding could reduce stress later on.

Since ISA programs structure repayment as a percentage of income, graduates who secure high-paying jobs can end up paying a significant sum compared to the borrowed amount. An ISA term could be more favorable to students planning to enter sectors with more gradual salary growth, such as civil service.

Repayment plans at income sharing agreement colleges are not uniform. Students at schools with lower payment caps and early repayment options may find ISAs more advantageous.

Considering Private Loans

Students should generally exhaust all their federal options for grants and loans before considering other types of debt. But for some students looking to fill gaps in their educational funding, private student loans may make more sense for their needs than ISAs.

Recommended: Examining the Different Types of Student Loans

In particular, students who expect to have high salaries after graduation may end up paying less based on interest for a private student loan than they would for an ISA. Some private loans can also allow you to reduce what you owe overall by repaying your debt ahead of schedule.

SoFi doesn’t charge any fees, including origination fees or late fees. Nor are there prepayment penalties for paying off your loan early. You can also qualify for a 0.25% reduction on your interest rate when you sign up for automated payments.

The Takeaway

As mentioned, an income share agreement is an alternate financing option for college. An ISA is generally used to fill in gaps in college funding. Generally, it’s an agreement between the borrower and the school that states the borrower will repay the funds based on their future salary for a set amount of time.

One alternative to an ISA could be private student loans. Keep in mind that private loans are generally only considered as an option after all other sources of federal aid, including federal student loans, have been exhausted.

If you’ve exhausted your federal loan options and need help paying for school, consider a SoFi private student loan.


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. SoFi Lending Corp. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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

What Is a Federal Direct Subsidized Loan?

Federal Direct Subsidized Loans are available to students who demonstrate financial need. The federal government subsidizes this type of loan by paying the interest that accrues while the student is enrolled at least half-time and during qualifying periods of deferment, such as the grace period.

It’s one of three federal student loans available to student borrowers. The others include Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans. Read on for more information about the benefits of Direct Subsidized loans and details about other types of student loans available to eligible students.

What Are the Benefits of a Federal Direct Subsidized Loan?

Like any other student loan, you will be responsible for paying back your Federal Direct Subsidized Loan after you finish school, but unlike many other student loans, you won’t be responsible for paying interest while you are in school or during your grace period. The government subsidizes this type of loan by paying the interest on your behalf.

Since the government is paying the interest, it is not capitalized on the loan when you graduate. When interest is capitalized, it means it is added to the principal value of the loan. This becomes the new principal value and interest will accrue based on this new balance. Since there is no interest to capitalize, the amount you originally borrowed and the amount you’ll have to repay after your grace period ends will be the same.

Recommended: Understanding Capitalized Interest on Student Loans

Interest on a Direct Subsidized Loan won’t start accruing until the grace period is over. This might sound like a minor detail, but not having to pay interest while you are in school can drastically cut down the overall cost of your loan.

Other benefits of a Federal Direct Subsidized Loan? Like other federal student loans, you are not obligated to make payments during school.

How Do You Apply for a Federal Direct Subsidized Loan?

In order to apply for a Federal Direct Subsidized Loan, you will need to complete the Free Application for Federal Student Aid, more commonly known as FAFSA®. The FAFSA is available for free online, and contains questions about you and your family’s financial circumstances.

The information you submit through the FAFSA is transmitted to your school, and is used to determine what types of aid and how much for which you may be eligible. The FAFSA must be completed annually.

How Is Your Eligibility for a Federal Direct Subsidized Loan Determined?

After the FAFSA has been reviewed, you will receive a Student Aid Report , which will explain your eligibility for the various types of federal financial aid. What type of aid and how much aid you are eligible for depends on many different circumstances, including the amount the federal government expects you and your family to contribute to your educational costs, your current enrollment status in school, and the cost of attending your particular college.

The financial aid staff at your school is responsible for determining exactly how much and what type of federal loans you are eligible for.

Because Federal Direct Subsidized Loans are a need-based form of federal financial aid, you must meet certain eligibility requirements to qualify. These requirements are largely based on your expected family contribution, or how much the federal government expects that you and your family can put towards your educational expenses.

There are also limits on the amount of subsidized loans you can borrow each year, regardless of your financial need. For the 2021-2022 school year, the limit on subsidized loans was $3,500 for first-year undergraduates, $4,500 for second-year undergraduates, and $5,500 for third-year undergraduates and beyond.

Graduate and professional students are not eligible for Direct Subsidized Loans.

Paying Back a Direct Subsidized Student Loan

Like other types of student loans, you will need to start paying back your Federal Direct Subsidized Loan if you leave school or after graduation. After graduation, borrowers with Federal Direct Subsidized Loans are eligible for a six-month grace period before repayment is required.

Some people with Direct Student Loans may potentially qualify for Public Service Loan Forgiveness (PSLF). PSLF is available to qualifying college graduates who work in certain fields like government, the nonprofit sector, or healthcare, and allows some federal student loans to be forgiven after 10 years of qualifying payments.

Actually getting approved for PSLF can be extremely challenging due to stringent requirements. In October 2021, the the Department of Education announced plans to overhaul the program in order to improve upon the program’s accessibility.

Beyond Subsidized Loans: Other Options Available to Student Borrowers

Since borrower eligibility for Direct Subsidized Loans is based on borrower need, and there are annual borrowing limits, students may be interested in learning about other loan options available to them. There are three other types of federal loans and some borrowers may consider private student loans.

The three types of federal loans available outside of Direct Subsidized Loans are:

•   Direct Unsubsidized Loans. These loans are available to undergraduate and graduate students. Unlike Direct Subsidized Loans, borrowers are responsible for paying the interest on these loans while they are enrolled in school and during their grace period. Eligibility is not based on financial need.

•   Direct PLUS Loans. PLUS Loans are options for graduate and professional students, or parents of students who are interested in borrowing a loan to help their child pay for college. Eligibility for this type of loan is not based on need, but the application process does require a credit check.

•   Direct Consolidation Loan. This federal loan isn’t awarded to borrowers as a part of their financial aid package. Instead, a Direct Consolidation Loan allows borrowers with multiple federal loans to combine (or consolidate) them into a single loan. The loan’s new interest rate is the weighted average, rounded up to the nearest one eighth of a percent, of the interest rates on the existing loans.

Private student loans are offered by private lenders. They are not required to offer the same borrower benefits or protections — think of things like PSFL or income-driven repayment plans — as federal student loans. Because of this, private loans are generally considered after borrowers have reviewed all of their other financing options.

Recommended: A Guide to Private Student Loans

To apply for private student loans, potential borrowers will need to fill out an application directly with the lender of their choice. The loan’s terms and interest rates will be influenced by factors including the borrowers financial situation and credit history, among others.

The Takeaway

Borrowers with Federal Direct Subsidized Loans are not responsible for the interest that accrues while they are enrolled in school at least half-time or during the grace period or other qualifying periods of deferment. The interest is subsidized by the U.S. government. To qualify for this type of federal student loan, borrowers must be qualifying undergraduate students who demonstrate financial need.

Other options for students looking to pay for college may include Direct Unsubsidized or PLUS Loans, scholarships and grants, or work-study. After reviewing those options, borrowers still looking for resources to pay for school may consider private student loans as an option.

SoFi offers private student loans for undergraduate and graduate students or their parents and there are no fees — that means there are no late fees, no application fees, or origination fees.

Interested in learning more about using a private student loan to pay for college? See what SoFi has to offer.


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.

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.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

How to Talk to Your Children About Student Loans: 6 Key Points

Many parents lecture — er, talk to — their teenagers about being responsible. Don’t text and drive. Do try to spend that summer job money wisely. As children approach college, talking about student loans might be a smart idea.

For one, the topic is pretty complicated.

And second, even if you plan to help repay any student loans, most qualified education loans are taken out in the student’s name, and there’s usually no escape: Even bankruptcy rarely erases student loan debt.

Maybe your student-athlete or scholar is counting on a full ride. While confidence is a wonderful thing, full rides are exceedingly rare.

Here are six student loan concepts you can discuss with your aspiring college student.

1. Here’s What We Think We Can Contribute

It might be uncomfortable to talk frankly about your family finances, but they almost always determine the amount and types of financial aid your child may qualify for.

It can be important for parents to discuss what they’re able to contribute in order to help their young adults wrap their heads around the numbers, too.

2. Let’s Forge Ahead With the FAFSA

The first step to hunt for financial aid is to complete the FAFSA®, the Free Application for Federal Student Aid. It takes most people less than an hour. Students helping their parents fill it out will get a look at the expected family contribution: the family’s taxed and untaxed income, assets, and benefits.

Based on financial need, a college’s cost of attendance, and FAFSA information, schools put together a financial aid package that may be composed of scholarships and grants, federal student loans, and/or work-study.

Awards based on merit (scholarships) or need (grants) are free money. When they don’t cover the full cost of college, that’s where student loans can come in.

If your income is high, should you bother with the FAFSA? Sure, because there’s no income cutoff for federal student aid. And even if your student is not eligible for federal aid, most colleges and states use FAFSA information to award nonfederal aid.

About 400 colleges and scholarship programs use the CSS Profile, a financial aid application in addition to the FAFSA. It determines eligibility for institutional scholarships and grants.

3. Interest Rates: Fixed and Not

Your soon-to-be college student may not know that there are two types of interest rates: fixed and variable.

Fixed interest rates stay the same for the life of the loan. Variable rates go up or down based on market fluctuations.

You can explain that all federal student loans borrowed after July 2006 have fixed interest rates, which are set each year, and that private student loan interest rates may be variable or fixed.

4. Federal vs Private Student Loans

Around now your young person is restless. But press on.

Anyone taking out student loans should learn that there are two main types: federal and private. All federal student loans are funded by the federal government. Private student loans are funded by some banks, credit unions, and online lenders.

If your child is going to borrow money for college, it’s generally advised to start with federal student loans. Since federal student loans are issued by the government, they have benefits, including low fixed interest rates, forbearance and deferment eligibility, and income-based repayment options.

Private student loans have terms and conditions set by private lenders, and don’t offer the generous repayment options or loan forgiveness programs of federal loans, but some private lenders do offer specific deferment options.

Private student loans can be used to fill gaps in need, up to the cost of attendance, which includes tuition, books and supplies, room and board, transportation, and personal expenses. A student applicant often will need a cosigner.

5. Another Wrinkle: Subsidized vs Unsubsidized

Financial need will determine whether your undergraduate is eligible for federal Direct Subsidized Loans. Your child’s school determines the amount you can borrow, which can’t exceed your need.

The government pays the interest on Direct Subsidized Loans while your child is in college, during the grace period (the first six months after graduation or when dropping below half-time enrollment), and in deferment (postponing repayment).

With federal Direct Unsubsidized Loans, interest begins accruing when the funds are disbursed and continues during grace periods, and the borrower is responsible for paying it. Direct Unsubsidized Loans are available to both undergraduate and graduate students, and there is no requirement of financial need.

Borrowers are not required to pay the interest while in school, during grace periods, or during deferment (although they can choose to), but any accrued interest will be added to the principal balance when repayment begins.

There are annual and aggregate limits for subsidized and unsubsidized loans. Most dependent freshmen, for example, can borrow no more than $5,500.

6. Soothing Words: Scholarships and Grants

It’s important to not overlook the nonloan elements of the financial aid package. They can (hooray) reduce the amount your student needs to borrow.

Scholarships and grants are essentially free money.

While some schools automatically consider your student for scholarships based on merit or other qualifications, many scholarships and grants require applications.

You may want to assign a research project to your college-bound young adult to look into all of the scholarship options they may qualify for.

The Takeaway

Debt isn’t the most thrilling parent-child topic, but college students who will need to borrow should know the ins and outs of student loans: interest rates, federal vs. private, subsidized vs. unsubsidized, and repayment options.

If federal aid doesn’t cover all the bases of college, your student can consider a private student loan with SoFi.

SoFi Private Student Loans come with competitive rates, flexible repayment options, and no fees. A student can apply entirely online, with or without a cosigner.

See your interest rate in three minutes. No strings attached.


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.

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

What Are College Tuition Payment Plans?

According to the 2021 Sallie Mae survey “How America Pays for College,” nearly 80% of students and their families eliminated a college based on cost when determining which school to attend.

If the cost of college tuition is one of the determining factors in your decision process, it could be worth looking into tuition payment plans. College tuition payment plans are offered by colleges and allow tuition to be paid over an extended period of time. Typically, it is not difficult to qualify for a school’s tuition payment plan, but there may be a fee in order to enroll.

These plans are offered by some colleges and could help make tuition payments more manageable for students and parents.

What Is a College Tuition Payment Plan?

Instead of paying for college tuition at the beginning of each year, semester, or quarter, college tuition payment plans — also known as tuition installment plans or deferred payment plans — allow students and their families to spread out the cost of tuition over a period of time.

Depending on the school, the plan may allow payments to be made over the course of the semester or over the full year.

While you’ll generally have to start making payments right away, programs frequently offer the option to spread payments into monthly installments. Some schools also offer programs that break the payment into a few equal payments throughout the semester.

How Do Payment Plans Work?

Some colleges run their own tuition payment plans. Others use an outside service to administer the plan.

Typically these payment plans only cover the direct costs charged by and paid to the college, such as tuition and fees. Sometimes the cost of housing and meal plans will also be included under a tuition fee payment plan. The cost of things like textbooks and school supplies are not usually included in these payment plans.

Many tuition payment plans require an enrollment fee, which may fall around $50 or $100, although it may be lower. These plans don’t usually charge interest, which can potentially make them less expensive than taking out a student loan, as long as you are able to make the monthly payments.

What Types of Colleges Offer Payment Plans?

Many schools offer some sort of tuition payment plan. Qualifying for the plan isn’t generally very difficult. However, some schools do have specific enrollment periods. Check with the school you plan to attend to determine when you need to enroll and what is required to do so.

What if My School Doesn’t Offer a Payment Plan?

For many students and their parents, paying for school upfront isn’t possible. Sometimes even with a payment plan, the burden of tuition is still too high for students and their families.

Consider some of the following options when planning to pay for college tuition. While these ideas might not be enough to help you cover the full cost of tuition on their own, a combination of a few could do the trick.

Federal Aid

Federal aid for college encompasses grants, scholarships, student loans, and work-study. To apply, students must fill out the Free Application for Federal Student Aid (FAFSA® ) each year.

The schools you apply to will use this information to determine how much aid you receive. You’ll typically receive an award letter detailing what types of federal aid you’ve qualified for and the amounts.

Federal Student Loans

Federal student loans can be either subsidized or unsubsidized. Subsidized loans are awarded based on need. The Department of Education covers the interest that accrues on these loans while you are in school at least part-time, during the grace period after leaving school, and during periods of deferment or forbearance.

Unsubsidized federal loans are awarded independent of need. Borrowers are responsible for paying the interest that accrues on these loans while they are in school and during periods of deferment, like the grace period.

Payments are not required on either unsubsidized or subsidized loans while you are actively enrolled more than part-time in school.

There are also PLUS loans available to parents who are interested in borrowing a loan to help their child pay for college.

Work-Study

The federal work-study program provides jobs for undergraduate and graduate students who demonstrate financial need. The amount of work-study you receive will depend on factors like when you applied, your level of determined financial need, and the amount of funding available at your school.

The money earned for work-study won’t count against you when you fill out the FAFSA, so it shouldn’t jeopardize future financial aid awards. Each time you fill out the FAFSA, it’s worth indicating that you’re still interested in receiving work-study as part of your financial aid award (that is, if you are still interested).

And it’s important to remember that your financial aid award may change from year to year, depending on you and your family’s circumstances.

Scholarships and Grants

Scholarships and grants don’t typically have to be repaid, which makes them one of the best options for students trying to pay for school. Some scholarships and grants are awarded by schools based on the information you provided in the FAFSA, but there are scholarships and grants available that aren’t based on financial need.

Taking some time to comb through online databases that catalog available scholarships, like FastWeb or Scholarships.com , could prove helpful. Each scholarship will have different application requirements.

Some might require an essay or additional supplementary materials, but the effort could be worth it if you’re able to fund a portion of your tuition costs.

Private Student Loans

Sometimes federal aid, scholarships, and your savings aren’t enough to cover the full cost of tuition. In those cases, private student loans could be an option. Unlike federal student loans, which are offered by the government, private student loans are offered by banks, credit unions, or other private lenders.

The private student loan application process will vary slightly based on lender policies, but will almost always require a credit check.

Lenders will review your credit score and financial history as they determine how much money they are willing to lend to you.

In some cases, students might need the help of a cosigner to take out a private student loan. This could be the case if they have little to no credit history.

Some parents may also be interested in taking out a loan to help their child pay for their education.

The Takeaway

Tuition payment plans, which extend the payment for college tuition over a fixed period of time, can be helpful for parents and students as they navigate how they’ll pay for the cost of education. Spreading tuition payments over the semester or year can help make them more manageable.

Private student loans could be worth considering after you’ve exhausted your federal aid options, and if things like tuition payment plans aren’t financially feasible. If you decide a private student loan is a good option for you, consider SoFi as your lender.

SoFi offers student loans for undergraduate students and their parents. If you qualify to borrow a private student loan with SoFi, there are no fees. The application process can be completed entirely online. You can also choose one of four flexible repayment plans for undergraduate student loans.

Want to learn more about the private student loans offered by SoFi? See your rates and find out if you pre-qualify right now.


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.
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

Utah 529 Plan for College Savings

You don’t even need to mention it to the IRS on your federal taxes.
Contribution options include online payments, checks, money orders, income tax refunds, payroll, bank transfers and rollover funds from other accounts.
Want to move the needle as soon as you launch your college savings investment plan? Give your Utah Educational Savings Plan a boost from this introductory offer from the Upromise Mastercard, backed by Barclays Bank, FDIC insured.

What Is a 529 Savings Plan?

Get the rundown on Utah’s 529 plan for college savings, find out how rewards programs like Upromise can help you grow funds even faster.

While you can’t skirt payroll taxes to contribute to them, the money generated from a 529 plan is generally tax-free if used for qualified expenses.
Privacy Policy
These plans typically generate money for college through mutual funds, a shared portfolio of investments, but they can use individual funds too. Unlike retirement accounts, you can’t make pre-tax contributions to them.

Taxed deferred

You can claim a 529 plan tax deduction on your income taxes, a tax credit that enables you to contribute even more. The State of Utah offers a 5% tax credit of up to ,070 for single filers, ,140 for married couples in 2021.

Tax deductions 

Here’s a rundown of some of the top benefits of 529 plans and the ways they can grow your college savings:

No federal taxes

Need to step on the gas to grow your savings faster? Enabling the Mastercard’s roundup feature will make it easier to corral and nurture those extra dollars and cents, by rounding up charges for each purchase you make with the card.

Account holder control

You must be at least 18 years old to open a Utah 529 plan.

Accessible

Link your 529 account with Upromise to get rewarded for savings. You’ll get .29 just for joining the program and if you link your account.

Flexible

0,000 total per beneficiary ― but you can contribute to someone else’s fund.

Ground Rules on Utah 529 Plan Withdrawals, Beneficiaries and More

The beneficiary has no control over when or how much money is withdrawn from the account, or any say on investment options. The account holder has to request a withdrawal for qualified expenses or pay a penalty for a non-qualifying disbursement. So no, your student can’t blow your savings on digital currency for Fortnite or Roblox.
Conventional 529 plans let you choose the investment vehicle you feel will serve your needs best, but prepaid plans leave the investing to the state.

Who can benefit:

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Account holder requirements:

529 plans are tax-advantaged investment accounts used to grow money for education expenses. They come in two forms: the widely used education savings plan and the dwindling prepaid tuition plan, which is only accepted at a handful of Utah colleges.

Who can contribute:

Knowing what it takes to start and maintain a 529 college savings plan is one thing. Making the most of it is another. But there are services that can help you maximize your investments and hit your goals. Upromise is a rewards program that offers tools and advice to help you hit your savings goals, maximize your plan’s benefits and find additional ways to save along the way.

Ways to contribute:

As flexible as 529 plans are, there are still rules regulating them.

Age-based limits:

Neither you nor your beneficiary has to live in Utah to qualify for a 529 plan in the state. Yes, you can start a Utah educational savings plan and use it for qualified expenses in another state. However, your account will still be subject to Utah’s rules.

Annual contribution caps:

Anyone with a Social Security number or tax identification number can be a beneficiary.

Lifetime contribution caps:

Anyone can contribute: family, friends, acquaintances — though only the account holder can claim the tax deduction.

Qualified expenses:

529 plans may impact need-based financial aid. If one of the beneficiary’s parents is the account holder, needs-based financial aid could be decreased by up to 5.64%. If you’re both the beneficiary and account holder, that deduction could climb up to 20%.

Non-qualified withdrawals:

For non-qualified expenses, money generated from 529 investments is subject to state income tax and a 10% penalty.

More Frequently Asked Questions about 529 College Savings Plans 

Upromise also offers a Mastercard, an optional debit card you can use to earn cashback on purchases, such as groceries and household items, and apply those funds to your Utah 529. It’s a force multiplier for saving for college.

How Do 529 College Savings Plans and Prepaid Tuition Compare?

You don’t have to be an experienced investor to generate money from your 529 plan. But you’ll likely have general options for how aggressively or conservatively your account targets growth. The closer to college a student is, the more you’ll likely want to ease off the gas and target safer investment options.
,000 per beneficiary ― you can contribute more, but you’ll be hit with a gift tax.

How will a 529 Plan Impact Financial Aid?

Still got a few “what abouts” lingering in your mind? As simple as it is to set up and maintain a 529 college savings plan, you’ll probably want to make sure you’re maximizing this long-term investment in higher education. Here are some more frequently asked questions:

What happens to unused money in a 529 plan?

Both are technically 529 plans. But while conventional 529 plans are becoming more popular, prepaid tuition plans are dwindling. Prepaid tuition plans are more rigid. They’re only accepted at participating schools, down to just eight institutions in Utah, and any money generated from them is only used to lock in the current rate of tuition.

  • Roll over the money into another beneficiary’s account, including K-12 tuition.
  • If the beneficiary decides not to go to college, other forms of training, such as vocational school or apprenticeships may qualify.
  • Pay taxes on it and take the 10% penalty to use the funds on something other than education. You might break even or still come out ahead.

How to Start a 529 Plan

Source: thepennyhoarder.com
Ready to stop worrying about money?
Plans can also generate money through 529 rewards programs that help grow savings accounts through cashback programs.
If there’s a theme here, it’s that 529 plans are flexible. You have plenty of options for unused money in a college savings plan:
Eligible expenses include tuition, books, fees, supplies, computer equipment, certain software, education loan repayment and room and board when enrolled in enough credit hours to be considered a part-time student. Other higher education expenses may qualify.
529 plans are tax-advantaged investment accounts that allow you to invest and grow your money to use on qualified education expenses. And the state of Utah happens to offer some of the best 529 college savings plans in the country — and it’s not just for Utah residents. <!–

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Beyond the requirement for the account holder, there are no age-based limits on Utah’s 529 plan. The student doesn’t have to use the funds in the Utah 529 plan by a certain age or before a certain amount of time has passed.

What Is a Merit Scholarship & How to Get One

There are many avenues to fund higher education that one could take. Grants offer money to help college students cover the cost of their education, usually based on financial need.

Money received by grants does not typically need to be repaid. Student loans, on the other hand, refer to a lump sum of money that is loaned out for the purpose of covering educational costs upfront. Student loans require repayment on a specific schedule and with added interest.

In addition to grants and student loans, another possible way to fund your college education is to receive a merit-based scholarship. Merit scholarships are generally awarded based on some type of merit such as academic performance or achievement and usually do not need to be repaid. Unlike grants, merit scholarships are typically awarded independent of financial need.

What is a Merit Scholarship?

A merit based scholarship is awarded to an individual on the basis of academic excellence, or other non-academic criteria such as talent, and/or certain achievements. As mentioned, while some scholarships may review the financial needs of the student, it’s not typically the primary focus of the application.

Merit scholarships for college exist to acknowledge things like academic, athletic, or artistic promise and success.

They could also apply to specialty and niche interests, such as a specific degree program. The money could either come from the academic institution itself or an outside individual or organization.

Getting a Merit Scholarship

So what are merit based scholarships able to do for the total cost of your college education? These scholarships could help cover a portion of (and in certain cases, the full amount of) tuition, room, and board, therefore helping decrease the overall cost of college. Like grants, the money from scholarships does not need to be repaid.

Recommended: A Guide to Unclaimed Scholarships and Grants

Here are a few common types of merit scholarships:

Colleges and Universities

Many colleges and universities have merit aid awards that are offered to students. Programs may vary from school to school. Some schools may consider all students for a merit award without any further applications. In some cases there may be an additional application required. Select merit aid awards may be designed to cover the full cost of tuition, while others will only cover a portion.

Academic Merit Scholarships

Academic merit scholarships award money to students who demonstrate significant academic achievement in high school. Often, academic merit scholarships may consider a student’s GPA, standardized test scores, class rank or other factors.

Depending on the school, you may not need to submit or do anything extra to be awarded a merit-based scholarship. Instead, the school may decide based on your application alone. Note that the exact criteria considered can vary based on the school.

Athletic Merit Scholarships

NCAA Division I and II schools may offer athletic scholarships to select student athletes. If you’re interested in an athletic scholarship keep in mind that getting recruited can be a time intensive process. Depending on the sport you play you may need a highlight reel or video that shows off your skills. Coaches may also review your stats.

Most schools will also want to see your academic records and SAT or ACT scores as well. You might also consider reaching out to coaches at the schools you are interested in attending.

Merit Scholarship Options from Member Organizations

Member organizations are special interest groups, typically requiring some sort of membership fee. Some examples include the National Association of Flavors and Food-Ingredient Systems (NAFFS), Daughters of the American Revolution (DAR), and The Society of Women Engineers (SWE).

Oftentimes, these organizations provide scholarships to students. In some cases, they are awarded to members of the organization. One example of this is the Boy Scouts of America. In order to qualify for their Eagle Scout World Explorer, applicants must be an Eagle Scout.

Other times, awards are available to students who are pursuing a specific course of study. For example, the NAFFS offers an annual scholarship to “outstanding food science students .” While the DAR Richard and Elizabeth Dean Scholarship is awarded to students who are pursuing an undergraduate degree in American Studies. Scholarships from the SWE are available to applicants who are studying at an accredited university and pursuing a career path in engineering, engineering technology, or computer science.

Private Companies

Another source of merit scholarships is private companies. Companies like Coca-Cola, Burger King, Google, and more have annual scholarships. Like many other scholarship opportunities the application requirements and eligibility criteria will vary based on the company and/or scholarship. Here are a few examples:

Coca-Cola Scholars Program Scholarship

This program awards 150 scholarships annually worth $20,000 each . This scholarship is available to graduating high school seniors who plan to enroll in an accredited U.S. college or university.

Burger King Scholars Program

The Burger King Scholars program offers scholarships to high school seniors who have a GPA of at least 2.5 on a 4.0 scale, demonstrate community involvement, and plan to enroll in an accredited college in the U.S. Since it was established in 2005, the program has awarded over $50 million to 43,000 students.

Generation Google Scholarship

The Generation Google Scholarship program is targeted for students pursuing degrees in computer science. For the 2022-2023 school year, recipients will get a $10,000 scholarship. This scholarship is open to students enrolled in an accredited Bachelors, Masters or PhD program who are studying computer science or computer engineering, or another “closely related technical field.”

National Merit Scholarship Corporation

The National Merit Scholarship Corporation (NMSC), has run the National Merit Scholarship Program since 1955. This award is open to high school students who meet the NMSC’s eligibility requirements, which are published online here . Students interested in pursuing the National Merit Scholarship program must also take the PSAT/NMSQT®, generally during their junior year. This is the qualifying test to apply for the scholarship program.

How to Apply

The process for applying to a merit scholarship can vary quite dramatically from scholarship to scholarship. Some merit scholarships, such as those offered by colleges and universities, don’t require students to fill out any additional paperwork beyond their application to the school.

Applying for merit aid from a source other than your school can be more time consuming and will likely vary depending on the organization offering the award. In addition to an application detailing basic personal information, students may be required to write an essay or personal statement, gather letters of recommendation, or go through an interview process.

If you’re interested in applying for a private merit scholarship, check in with the organization directly so you can be sure that you understand exactly what the application requirements are.

What Can Merit Scholarships Pay For?

Frequently, if the merit scholarship is offered by the school, the award will go directly to pay your tuition bills. If there is any money left over after tuition is paid for, it can be used to pay for other educational expenses including room and board, books, or other fees. Each school will have their own procedures for how merit aid is awarded to students, so confirm any questions directly with the financial aid office.

Merit Scholarships and Income Taxes

Generally speaking, merit scholarships are not taxed by the IRS. According to the IRS, scholarships and grants are considered tax-free so long as the following conditions are met:

•   The student is pursuing a degree at an educational institution; and

•   The award money is used to pay for tuition and fees or other expenses related requirements at the educational institution, such as, fees, books, and supplies.

There are some situations in which a merit scholarship may be taxed. If a grant or scholarship meets the following criteria, it may be taxable, according to the IRS:

•   The scholarship is used to pay for incidental expenses such as room and board, travel, or optional equipment.

•   The scholarship is awarded as payment for teaching, research, or other services. This excludes money received for services required as a part of the:

◦   National Health Service Corps Scholarship Program

◦   Armed Forces Health Professions Scholarship and Financial Assistance Program

◦   or a comprehensive student work-learning-service program at a work-college , as defined in section 448(e) of the Higher Education Act of 1965.

If you have any questions about whether or not a scholarship you’ve received is considered taxable income, consider consulting with a tax professional who can provide advice specific to your personal circumstances.

Finding Merit Scholarships

Check in with your college or university to find out if there are any school-specific awards available and determine how to file an application (if an additional application is required). Online resources and databases abound to help you identify merit based scholarships across the United States. For students who are pursuing graduate degrees, there are also some scholarships and grants for graduate students.

It could be a good idea to make a running list or spreadsheet of all of the merit based scholarships that you are interested in, so you can keep the specific due dates and application requirements organized. This could potentially help relieve some stress as you go through the application process.

Consider Starting Early

Many merit-based scholarships look for demonstrated excellence over the course of an applicant’s entire four years of high school. Therefore, it could be a good idea to start thinking about what types of merit scholarships you’re interested in applying for as early as possible.

Maintaining Your Scholarship

It is important to note that some merit based scholarships could require the scholarship recipient to maintain a certain grade point average (GPA) and/or require specific campus or community involvement to continue receiving consistent scholarship funding.

If you do decide to apply for a merit based scholarship, it’s a good idea to be prepared to not only do the hard work to secure the scholarship but also maintain it once you get to campus.

Other Ways to Help Finance College Tuition

If you do not meet the requirements for any merit scholarships for college, there are still many financing options available to you. Often the first step for students looking to secure aid is by filling out the Free Application for Federal Student Aid (FAFSA® ). Students must fill this out in order to receive any federal aid, including federal grants and scholarships, work-study, and federal student loans.

The federal work-study program sets students up with part-time jobs where they can earn money to put towards their educational costs.

Recommended: Am I Eligible for Work-Study?

New federal student loans boast consistent fixed interest rates, expectations for repayment, income-driven repayment plans, and possible forgiveness programs. Depending on your level of need you may qualify for either subsidized or unsubsidized student loans. With a subsidized loan (for undergrads only), the federal government pays for any accruing interest on your loans while you’re in school; with an unsubsidized loan, you have to pay for the interest yourself.

If federal aid and merit based scholarships aren’t enough to cover the cost of a college education, private student loans could be an option to consider. These loans are offered by banks and private institutions. Students and their co-signers (if applicable) apply for private student loans as if they were applying to other types of loans, such as auto and home loans.

Since they are not beholden to the same criteria as federal loan terms, private student lenders are able to determine their own unique term lengths, interest rates, and repayment plans; thus, private loans could fill in any gaps between the cost of attendance and the amount of federal aid and scholarships they receive. However, because they don’t offer the same borrower protections as federal student loans, private student loans are generally considered only after all other sources of funding have been exhausted.

The Takeaway

Merit scholarships are awarded to students based on some sort of merit, such as academic or athletic. This money does not typically need to be repaid by student recipients. Some sources for merit scholarships include your college or university, member organizations, private companies, or the National Merit Scholarship Corporation.

If merit awards and federal aid aren’t enough to pay for college, private student loans may be an option to consider. If you think that private student loans could be a good option for you, you could consider SoFi’s private student loans. With no fees, flexible repayment plans, and a convenient online application, financing your education has never been easier. Keep in mind that, as mentioned, private student loans are usually considered as a last resort option because they don’t always have the borrower protections (like deferment) that federal loans do.

Ready to make a plan to finance college? Learn more about the options SoFi offers for private student loans.


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