Dear Penny: Is Using Retirement Money So My Daughter Can Graduate a Mistake?

Dear Penny,
A big advantage of Parent PLUS loans is that you can qualify for something called income-contingent repayment. Basically, your payment is capped at 20% of your disposable income. You’re planning to retire soon, so I’m assuming your income will drop soon as well. That means you could qualify for an extremely low payment once your daughter graduates.
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She is a good kid with some special problems that she overcomes daily. I want her to have this degree and a chance in life. She worked very hard to overcome all of the physical and mental challenges in her life, BUT expenses are starting to affect my retirement. Any advice?
Sometimes I get antsy when parents talk about spending retirement money on their child’s education. But we’re talking about one year of college, not four. I think you’d deeply regret not giving your daughter the financial support she needs to make it through this final year.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].
Contact the financial aid office for your daughter’s school if you haven’t already done so. The Free Application for Federal Student Aid, or FAFSA, bases financial aid on income from two years earlier. For example, aid for the 2022-23 school year will be based on 2020 income. But some schools offer a process called professional judgment where administrators can adjust FAFSA information based on major life changes, like a parent’s retirement, on a case-by-case basis.
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Your daughter has no doubt overcome her challenges thanks to her own grit, but also because of your love and support as a parent. You’re making a sacrifice to pay for her last year of school because you believe in her. Once she graduates, paying off any debt you’ve incurred will be another challenge you’ll need to conquer together.
-J.
Keep in mind, a Parent PLUS loan is only an option if your daughter is considered a dependent student. For example, if she’s 24 or older or she has dependent children of her own, unfortunately, you wouldn’t be eligible.
Ready to stop worrying about money?
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Dear J.,
With private student loans — whether you take them out in your name or co-sign for your daughter — you’re at the mercy of your lender if you’re struggling with payments. So I’d vote in favor of a Parent PLUS loan, even if you find a private loan with a lower interest rate.
If you can’t get a Parent PLUS loan, I’d suggest splitting taking half from your retirement funds and a private loan for the other half. Neither is an ideal option, but sometimes life forces us to choose between less-than-perfect options.
What makes me nervous about using retirement money is that virtually everyone’s investments have taken a hit in recent months. You want to limit your withdrawals as much as possible right now so that your money can recover. But at least since you’re 67, you won’t pay an early withdrawal penalty.
Now let’s address your daughter’s role. I don’t know if she currently has a job. If she is able to work some to help defray costs without jeopardizing her studies, that should be on the table.
My daughter is in her last year of college. I don’t have any more money to pay for it. So for her last year, should I take from retirement monies or get a loan? 
If financial aid can’t make up the shortfall, a Parent PLUS loan is a good solution. A Parent PLUS loan is a federal student loan that you, as the parent, are responsible for repaying.
Source: thepennyhoarder.com

But I want her to focus on her studies so that she can actually complete her final year of coursework in a year. Stretching out the timeline further could pose a greater risk to your retirement. So I wouldn’t ask your daughter to get a job if she’s not already working or work more hours if she has a job.

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By taking half from your retirement and half as a loan, you can minimize the damage to your nest egg while taking less debt into retirement. If you’re able to work just a bit longer to pay some of these expenses in cash, even better.

What Is IRS Tax Form 1098 (Mortgage Interest Statement)?

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Additional Resources

In an effort to help make filing taxes easier this year, we are breaking down the various IRS tax forms to help you know if you need them, and how to use them.

There’s nothing like a love letter from your mortgage lender with an IRS tax form to make you swoon with joy.

As tax forms go, the 1098 ranks among the simplest as you prepare your tax return. But there are some things you need to know about Form 1098 and how to use it in your tax return.

What Is IRS Tax Form 1098, Mortgage Interest Statement?

The IRS Form 1098 informs you how much interest you paid on your mortgage loan for the last tax year. 

Mortgage lenders send you this document in case you want to itemize your deductions on your tax return. They also send a copy to the Internal Revenue Service for their records, so don’t get any ideas about taking liberties with your interest deduction. 

Far fewer taxpayers itemize their deductions since the standard deduction jumped in the Tax Cuts and Jobs Act of 2017. That makes Form 1098 less relevant to the average American than it once was, though it does contain information you may need.

However, the form remains relevant to real estate investors, who deduct mortgage interest on Schedule E of their tax return. Mortgage interest is an expense for investment properties and comes off their taxable profit. Deducting it from your investment property profit doesn’t require you to itemize your deductions. 


Who Should File Form 1098?

Property owners don’t file Form 1098 as part of their federal tax return. They simply list the amount of mortgage interest in the appropriate place on their return: Schedule A for homeowners, Schedule E for investment property owners.

Mortgage lenders need to file Form 1098 with the IRS if the borrower paid more than $600 in a given year and send you a copy — which you can frame if you so choose. They typically send the form in February with the total mortgage interest paid in the previous year.


How to File IRS Form 1098

While you don’t need to file Form 1098 as a borrower, it helps to be able to read it. 

The most important information lies in Box 1: the amount of mortgage interest paid in the previous year. However, the form contains other useful information, including:

  • Box 2: Outstanding mortgage principal (your remaining loan balance)
  • Box 3: Mortgage origination date (your loan start date)
  • Box 4: Refund of overpaid interest (if applicable)
  • Box 5: Mortgage insurance premiums (if you paid private mortgage insurance for a conforming loan or mortgage insurance premium for a Federal Housing Administration loan, it appears here)
  • Box 6: Points paid on the purchase of the principal residence (you may be able to deduct these as well)
  • Boxes 7-11: Identifying information about your loan, such as the property address

You’ll also find identifying information about yourself, such as your name and Social Security number.


Other 1098 Forms

While the mortgage interest statement is the most common type of 1098 form, it’s not the only brat in the pack. You may also come across the following 1098 forms.

Form 1098-C, Contributions of Motor Vehicles, Boats

If you donated a vehicle — including boats or airplanes — to a charitable organization last year, you’ll receive a 1098-C from the charity. 

Charities often give these vehicles to individuals in need or sell them at below-market rates and use the profit to fund programs. Alternatively, the charity might auction the car to raise money for their cause.

Form 1098-C confirms you weren’t part of that transaction. However, if you donated a beater worth less than $600, you may not receive one of these forms. Read the instructions for Form 1098-C for more information.

Form 1098-E, Student Loan Interest Statement

You may feel like you’ll be paying off your student loans for the rest of your life, but at least you get a tax break. Maybe. 

Each year, you’ll receive a 1098-E detailing how much interest you paid to each loan servicer if it exceeded $600. You can deduct the interest from your taxable income on your 1040 without itemizing your deductions as long as you meet the income requirement.

You can deduct up to $2,500 in student loan interest for loans used to pay for qualified expenses while you were in school. However, the deduction does phase out if your modified adjusted gross income (MAGI) falls between $70,000 and $85,000 (between $140,000 and $170,000 if married filing a joint return). You cannot take a student loan interest deduction if your MAGI exceeds $85,000 or more ($170,000 or more if you file a joint return). 

If you paid less than $600 in student loan interest last year, the servicer may not send you a 1098-E, but you can still deduct this interest as long as you have a record of how much you paid. If you don’t know, ask your servicer and record it in your tax file.

As a bonus, if your parents or someone else pays student loans in your name for you, the IRS considers the money a gift, and you can still deduct the interest on your own taxes. However, if the loan is in someone else’s name, that person is entitled to take the interest deduction as long as he or she is the one paying on it.

Form 1098-T, Tuition Statement

If you or one of your dependents is currently in school, the school will send an IRS Form 1098-T at the end of the year detailing all fees you paid for qualified tuition and other related expenses. Calculate all education-related tax deductions and credits, such as the tuition and fees deduction, the lifetime learning credit, or the American opportunity tax credit.

The amounts on the form encompass all money you paid to the school, even if you paid in advance — the payment appears on the tax form for the year in which you actually paid it. 

For example, if you pay your spring semester tuition in December of the previous year, it will show up on the prior year’s 1098-T. These amounts include any money used from loans to pay for tuition and education expenses and list financial aid like college scholarships and grants separately.

Some expenses, such as college textbooks and school supplies, are not generally reported on the 1098-T, but you can still claim them for higher education tax credits or deductions so long as they’re classified as qualified expenses by the IRS.


Form 1098 FAQs

If you still have burning questions about 1098 tax forms, these answers to frequently asked questions can help clear them up.

How Do I Get a 1098 Form?

Your mortgage lender sends you a Form 1098, Mortgage Interest Statement. If you haven’t received it by late February, blow off some steam by yelling at your lender. (Just kidding. Be nice. They literally still own part of your house. But thinking about yelling at them should make you feel better.)

Form 1098-C comes from the charity you donated a vehicle to, while Form 1098-E comes from your student loan servicer. Form 1098-T comes from your college or university. 

Do I Need to File Form 1098 With My Tax Return?

No, you don’t. You need only include the information in the appropriate field on your tax return.

When in doubt, ask your accountant or tax advisor. Alternatively, you can use an online tax preparation service, which will ask you for the amount you paid and fill it into the right field for you. 

What Happens if I Don’t File a 1098 Form?

The IRS doesn’t require borrowers to file a 1098 form at all. But if you ignore them, you might miss out on valuable income tax deductions and make an involuntary donation to Uncle Sam. 

If you are a lender, charity, student loan servicer, or university, you are required by law to both send a 1098 form to the payer and file it with the IRS. Failure to do so will result in your immediate execution — no, not really, but the IRS may penalize you, audit you, or otherwise make your life unpleasant. 


Final Word

With a higher standard deduction these days, most Americans don’t have to stress over documenting and itemizing every single deduction anymore. It makes filing your tax return that much simpler.

However, homeowners who itemize their personal deductions do still want to include their mortgage interest among them. And the mortgage interest deduction offers another way for real estate investors to lower their taxes while leveraging other people’s money to build their portfolio of properties. Get tax advice from a qualified tax professional if you have any questions about these tax benefits.

Whether you deduct mortgage interest on your tax return or not, keep your 1098 forms in your tax records for at least three years after filing. You never know when Uncle Sam will pay you a nasty visit with an audit, and every deduction could help if he does. 

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GME is so 2021. Fine art is forever. And its 5-year returns are a heck of a lot better than this week’s meme stock. Invest in something real. Invest with Masterworks.

G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

Source: moneycrashers.com

How to Get Teacher Loan Forgiveness

Private school teachers can also qualify for the Perkins Loan Teacher Cancellation.
You meet the additional requirements, depending on whether you’re new to the profession and what grade level you teach.
The takeaway: You’d better enjoy teaching, because you’re going to have to do it for a while if you want to get your student loans wiped out.

Similar to the Teacher Loan Forgiveness program, Public Service Loan Forgiveness has quite a few hoops to jump through. But the good news is that the public service program does not restrict teachers to a specific school or subject matter.
The maximum ,500 award is only awarded to “highly qualified” teachers in special education or secondary mathematics or science. You can receive up to ,000 for other subject areas.
The standard repayment term for federal student loans is 10 years. If you have difficulty making payments, you have four main options within an income driven repayment plan (IDRP) for lowering them that take your income and expenses into account:

Teacher Student Loan Forgiveness Programs

This loan forgiveness program should be an obvious, easy choice, with the word “teacher” in the title. But there are some rigid requirements.

1. Teacher Loan Forgiveness (TLF)

The Perkins Loan Program ended on Sept. 30, 2017, so if you’re a recent graduate, this forgiveness may not be of much help. But if you have outstanding federal Perkins loans, you can still qualify for cancellation.

Which Loans Are Eligible?

You’ve attained your bachelor’s degree. Submit a completed Teacher Loan Forgiveness Program application. The head of the school(s) where you completed your service will have to complete the certification section, and you’ll need to submit separate applications for each loan servicer.

Pro Tip
The program was created in 2007 by former president George W. Bush to help public service workers, like teachers, get out of student loan debt. But the guidelines were so strict and confusing, few people actually qualified for forgiveness.

Contact your college’s financial aid or alumni office to find out about its forgiveness program options. For state and local programs, check out this directory from the American Federation of Teachers.

Who’s Eligible for Teacher Loan Forgiveness?

To qualify, you must either teach at a low-income school or teach one of the following subjects:
You have not had certification or licensure requirements waived on an emergency, temporary or provisional basis.
As a teacher, your employer matters, but the options are much more plentiful than the restrictive Teacher Loan Forgiveness program. Qualifying employers include federal, state, local or tribal government organizations and not-for-profit organizations that are tax-exempt.

How Much Can You Get?

You don’t have to teach all five years at the same school, but you’ll need verification from every school you taught at to reach the five-year minimum. You apply for teacher loan forgiveness after you’ve completed the teaching requirement.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

  1. Don’t know which loans you have? Log onto www.studentloans.gov: In the loan information list’s left-hand column, it will identify the type of loan. Or you can call the Department of Education and ask.
  2. Start your AmeriCorps application here.
  3. After completing your AmeriCorps term of service, you are eligible to receive the Segal AmeriCorps Education Award, which can be used to repay qualified federal student loans that includes Direct, Perkins Loans, Federal Consolidated Loans and others listed here.
  4. They say that teaching is a calling. It’s just not typically a calling to money.

If you’re thinking about stacking the Teacher Loan Forgiveness with other forgiveness programs, you’ll be waiting a while. That’s because the forgiveness programs count your service sequentially, not simultaneously.

How to Apply

To apply, contact the school where you obtained the Perkins Loan to learn its specific rules.
And while there are a number of programs specifically designed to help teachers pay off student loans, a word of warning to anyone looking for a quick and easy fix. All of the teacher loan forgiveness programs require you to stick to a strict repayment schedule during a qualifying period when you must remain in the teaching profession.

2. Public Service Loan Forgiveness

We cover each of these repayment plans in more detail in this article, but know that these plans aren’t actually forgiveness programs. They’re repayment programs with a forgiveness option at the end. You’ll need to resubmit your income and family size every year to determine eligibility — and the forgiven portion is subject to federal taxes.
Although the Perkins Loan Teacher Cancellation is specifically designed for teachers, it’s also specifically for Perkins loans.
This award is subject to federal tax in the year each payment is made, making it taxable income.
Even with federally held student loan forbearance extended until Sept. 1, 2022, you shouldn’t ignore your student loan debt. In fact, this could be an opportune time to explore your possibilities before the freeze ends on interest and payments.

Which Loans Are Eligible?

  • Payments on all Direct loans enrolled in Pay As You Earn Repayment Plan (PAYE) and Income-Based Repayment Plan (IBR).
  • Payments made on all Direct loans that were not in PAYE and IBR are temporarily eligible to count toward forgiveness.
  • Perkins and Federal Family Education Loans (also known as FFEL) can qualify if they are consolidated, but previous payments may count though a limited PSLF waiver.

Who’s Eligible for Public Service Loan Forgiveness?

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To qualify for Teacher Loan Forgiveness, you need to have one of the following loans:

How to Apply

You don’t need to be a math teacher to realize that the ,000-plus average amount of student loans to get a bachelor’s degree would be tough to pay off on a teacher’s starting salary of ,163.

3. Perkins Loan Teacher Cancellation

If you are employed as a full-time teacher at a low-income school (you can find the list of eligible schools here) for five complete and consecutive academic years, you’re eligible for the program if at least one of those years was after the 1997-98 school year.
Let’s take a look at the different options for student loan forgiveness. They vary based on the types of loans you have, the amount that’s eligible for forgiveness, the school where you work and even the subject you teach.
Although ,000 to ,500 can put a dent in a debt, if your loans reach into the upper five digits (or six digits) — or you don’t meet the requirements of the Teacher Loan Forgiveness Program — you do have other options.
AmeriCorps programs place teachers in high-need urban and rural areas across the U.S. The positions are limited-term contracts but come with a full salary and other benefits.

  • Mathematics
  • Science
  • Foreign Languages
  • Special Education
  • Subject area that is facing a shortage of qualified teachers in your state

School librarians, guidance counselors, and other administrative staff are not considered teachers for the purposes of this loan forgiveness program. 

How to Apply

The highly qualified requirements are as follows:

4. AmeriCorps

That means you can use both the teacher loan forgiveness and Public Service Loan Forgiveness to wipe out federal loans, for instance, but not for the same period of teaching service. So after working five years to qualify for the teacher loan forgiveness, you’ll need to tack on another 120 monthly payments to qualify for Public Service Loan Forgiveness.
Considering a recent study found that 55% of teachers say they plan to leave the profession earlier than they originally planned — and teaching in low-income districts can be extra challenging — you might be better off applying for just the Public Service Loan Forgiveness program if you’re looking to have a large amount of debt forgiven.
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But if you owe a smaller amount, help from the Teacher Loan Forgiveness program could help put a dent in your debt.

How to Apply

The availability of teacher loan forgiveness programs at the state and local level depends on where you live. If you’re struggling with student debt, you might be able to find a sympathetic ear at your alma mater or state agency.

5. State- and School- Forgiveness Programs

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You can use your award to repay defaulted federal student loans, as long as it qualifies.

How to Apply

That’s 15 years total — so if you graduate from college at 22, you’ll need to commit to teaching until you’re at least 37 years old. And there’s no guarantee you’ll receive forgiveness.

6. Income Driven Repayment Plans

This one isn’t specific to teachers, but it’s certainly applicable here.
If you are eligible, up to 100% of your loan may be canceled in increments for years of teaching service.

  • Income-Based Repayment Plan (IBR)
  • Income-Contingent Repayment Plan (ICR)
  • Pay as You Earn (PAYE)
  • Revised Pay as You Earn (RPAYE)

In 2021, the Department of Education announced an overhaul of the PSLF program, allowing previously non-qualifying payments to be counted toward forgiveness, and in some cases wiping out student loan balances.

An overview of a teacher teaching elementary school students.
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Can You Stack Forgiveness Programs? Sort of.

If you’re employed by a government or non-profit, you’re eligible to qualify for loan forgiveness after 120 payments — that’s 10 years for you non-math teachers. You’ll need verification for each year of qualification.
You must have a full-time job in the public sector, and you’ll need 120 qualifying, non-consecutive loan payments (that’s 10 years worth).
You’ve received full state certification as a teacher.
Almost every state has at least one type of student loan forgiveness program that’s designed for those in public service fields.
Ready to stop worrying about money?
If you’re in default on a loan, you are not eligible for forgiveness unless you have made satisfactory repayment arrangements with the holder of the defaulted loan. <!–

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Login to the Federal Student Aid site and use the Public Service Loan Forgiveness tool to determine whether you, your loan and your employer qualify, as well as to fill out the form.

Guide to Grad PLUS Loans

Grad PLUS loans are federal student loans for graduate and professional students. Although Grad PLUS loans have higher interest rates and fees than some other types of federal student loans, they also have a major benefit — virtually no borrowing limits. You can borrow up to the full cost of attendance of your school, minus any other financial aid you’ve already received.

Read on for more on how Grad PLUS loans work, including their eligibility requirements, interest rates and repayment options.

What Are Grad PLUS Loans?

If you’re planning to attend a graduate or professional program, a Grad PLUS loan could help cover costs. Issued by the Department of Education, Grad PLUS loans are student loans designed for graduate and professional students.

PLUS loans are not the only federal loans available to you as a graduate student — you can also borrow Direct unsubsidized loans. Direct unsubsidized loans have lower interest rates and fees than PLUS loans, but they come with borrowing limits.

If you’ve hit your limit and need additional funding, a Grad PLUS loan could cover the gap. As mentioned above, you can borrow up to the full cost of attendance of your program, minus any other financial aid you’ve already gotten. This flexibility can be helpful for students who are attending pricey programs.

Recommended: How Do Student Loans Work? Guide to Student Loans

What Can Grad PLUS Loans Be Used for?

Grad PLUS loans can be used for tuition, fees and other education-related expenses. These expenses include,

•   Housing

•   Food

•   Textbooks

•   Computers and other supplies

•   Study abroad expenses

•   Transportation

•   Childcare costs

A Grad PLUS loan will first be disbursed to your financial aid office, which will apply the funds toward tuition, fees, room and board, and any other school charges. The financial aid office will then send any remaining funds to you.

Recommended: What Can You Use Student Loans For?

Who Is Eligible for Grad PLUS Loans?

To be eligible for a Grad PLUS loan, you must be a graduate or professional student enrolled at least half-time at an eligible school. What’s more, your program must lead to a graduate or professional degree or certificate.

You’ll also need to meet the eligibility requirements for federal financial aid (more on this below), as well as submit the Free Application for Federal Student Aid (FAFSA®).

Typical Grad PLUS Loan Requirements

Besides being enrolled in an eligible graduate or professional program, you need to meet a few other requirements to take out a Grad PLUS loan:

Meet the Requirements for Federal Student Aid

Since Grad PLUS loans are part of the federal student aid program, you must be eligible for federal aid to borrow one. Here are some of the criteria you need to meet:

•   Be a U.S. citizen or eligible noncitizen

•   Have a valid Social Security number (with some exceptions)

•   Have a high school diploma, General Educational Development (GED) certificate or other recognized equivalent

•   Maintain satisfactory academic progress while in school

•   Not already be in default on a federal student loan or owe money on a federal grant

If you’re a non-U.S. citizen or have an intellectual disability or criminal conviction, additional requirements might apply.

Submit the FAFSA

You’ll need to submit the FAFSA before you can borrow a Grad PLUS loan. After applying to grad school, you can submit this form, free of charge, on the Federal Student Aid website, with the myStudentAid mobile app or via the mail. Since the FAFSA only applies to a single academic year, you’ll need to submit it every year you’re in school and want to receive financial aid.

Complete the Grad PLUS Loan Application

Along with submitting the FAFSA, you’ll also need to fill out a separate application for the Grad PLUS loan. You can find and submit this application on the Federal Student Aid website, though some schools have separate processes. Your financial aid office can advise you on the steps you need to take.

If your application is approved, you’ll need to agree to the terms of the loan by signing a Master Promissory Note. If you haven’t borrowed a Grad PLUS loan before, you’ll also be required to complete student loan entrance counseling.

Not Have Adverse Credit History (or Apply With an Endorser)

While you don’t need outstanding credit to qualify for a Grad PLUS loan, you can’t have adverse credit. According to the Department of Education, you have adverse credit if one of the following applies to you:

•   You have accounts with a total balance greater than $2,085 that are 90 or more days delinquent

•   You’ve experienced a default, bankruptcy, repossession, foreclosure, wage garnishment or tax lien in the past five years

•   You’ve had a charge-off or write-off of a federal student loan in the past five years

If you have adverse credit, you have two options:

•   Appeal the decision due to extenuating circumstances. For example, you could provide documentation showing that you paid off a delinquent debt on your credit report.

•   Apply with an endorser who does not have adverse credit. Your endorser will be responsible for repaying the loan if you fall behind on payments.

Grad PLUS Loans Interest Rates

Grad PLUS loans come with fixed interest rates that will remain the same over the life of your loan. They also have a disbursement fee, which is a percentage of your loan amount that gets deducted from your loan.

Congress sets rates and fees on federal student loans periodically. These are the current Grad PLUS loan interest rates and fees:

Interest Rate (for loans disbursed on or after July 1, 2021 and before July 1, 2022) Disbursement Fee (for loans disbursed on or after Oct. 1, 2021, and before Oct. 1, 2022)
6.28% 4.228%

Repaying Your Grad PLUS Loans

Grad PLUS loans are eligible for a variety of federal repayment plans:

•   Standard repayment plan, which involves fixed monthly payments over 10 years.

•   Income-driven repayment, specifically Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment or Income-Contingent Repayment. These plans adjust your monthly student loan payments to a percentage of your discretionary income while extending your loan terms to 20 or 25 years. If you’ve made on-time payments but still have a balance at the end of your term, it may be forgiven. The amount forgiven may be considered taxable income by the IRS.

•   Extended repayment, which extends your repayment term to 25 years and lets you pay a fixed or graduated amount.

•   Graduated repayment, which lowers your student loan payments in the beginning and increases them every two years. You’ll pay off your loan over 10 years, and your final payments won’t be more than three times greater than your initial payments.

Grad PLUS loans are also eligible for certain federal forgiveness programs, such as Public Service Loan Forgiveness.

Other Options to Pay for Grad School

Grad PLUS loans aren’t the only way to pay for graduate school. Here are some alternative options:

Direct Unsubsidized Loans

You can borrow up to $20,500 per year in Direct Unsubsidized loans as a graduate student with an aggregate loan limit of $138,500, including any loans you borrowed as an undergraduate.

Here are the interest rate and disbursement fee for graduate students:

Interest Rate (for loans disbursed on or after July 1, 2021 and before July 1, 2022) Disbursement Fee (for loans disbursed on or after Oct. 1, 2020, and before Oct. 1, 2022)
5.28% 1.057%

Grants and Scholarships

Besides student loans, you can also pursue grants and scholarships for graduate school. You can find grants and scholarships from a variety of sources, including the Department of Education, your state, your school or a private organization. By earning grants and scholarships, you might not need to borrow as much in student loans.

Private Student Loans

You can also explore your options for private graduate student loans from banks, online lenders or credit unions. Some lenders offer interest rates that start lower than Graduate PLUS loan interest rates and don’t charge an origination fee.

Although private student loans aren’t eligible for federal repayment plans or programs, some lenders offer flexible repayment options or deferment if you need to pause payments. But, because private student loans aren’t required to offer the same borrower benefits as federal student loans, they are generally borrowed as a last resort option after all other sources of financing have been exhausted.

The Takeaway

If you’re looking for ways to pay for graduate school, a Grad PLUS loan could help. You can use this flexible loan to cover your school’s cost of attendance, as well as choose from a variety of federal repayment plans when it comes time to pay it back.

A Grad PLUS loan, however, might not be your most affordable borrowing option. Depending on your credit and other factors, it may be possible to find a private student loan with an even lower interest rate than a Grad PLUS loan.

SoFi offers private student loans with competitive rates, no fees and flexible repayment terms. Learn more about SoFi’s no-fee private student loans.

FAQ

What kind of loan is Grad PLUS?

The Grad PLUS loan is a federal graduate student loan issued by the Department of Education. It is designed specifically for graduate and professional students.

Is there a max on Grad PLUS loans?

There is virtually no limit on the amount you can borrow with a Grad PLUS loan. You can borrow up to your school’s cost of attendance, minus any other financial aid you’ve already received.

Can Grad PLUS loans be used for living expenses?

Yes, you can use Grad PLUS loans to cover your living expenses while at school. You must use your loan on education-related expenses, which can include housing, food, supplies, transportation and other costs related to attending school.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. 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.

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

The Best Student Loans of May 2022

College costs are overwhelming for a lot of families. So students turn to student loans to cover them. Most students, following expert recommendations, start with federal student loans, but those aren’t always enough to cover costs.

When federal student loans don’t cut it, you can turn to private student loan lenders to fill in the gap.

Unlike federal student loans, private student loans offer a variety of options for interest rates, loan amounts and terms that could make picking one daunting. So we’ve pulled together a list of some of the best student loans available to make it easier for you to compare and vet your options.

Federal student loans have been in the news a lot lately as the U.S. Education Department has

Keep reading below the table for more details on every lender, plus all the information you need to find the college funding plan that’s right for you and your family.

Interest rates accurate as of late April 2022 and subject to change. Variable rates listed are margins added to a base rate such as LIBOR or SOFR, which could add around 0.30% to 1%.

Best Student Loans at a Glance

Lender Variable APR with Autopay Fixed APR with Autopay Loans for
Credible 0.94% – 11.98% 3.02% – 14.08% Undergrad and grad, refinancing
Earnest Starting at 0.94% Starting at 2.99% Undergrad and grad
College Ave 0.94% – 11.98% 3.24% – 12.99% Undergrad, grad and career training, refinancing
Sallie Mae 1.13% – 11.23% 3.50% – 12.60% Undergrad, grad and career training
SoFi 1.05% – 11.78% 3.47% –11.16% Undergrad and grad, refinancing
Ascent .47% – 11.31% 4.36% – 12.75% Undergrad, grad, career training and bootcamp
LendKey Starting at 1.57% Starting at 3.99% Undergrad and grad, refinancing
Citizens Bank n/a 3.48% – 10.78% Undergrad and grad, refinancing
PNC Bank Starting at 1.09% Starting at 2.99% Undergrad, grad and career training, refinancing
Purefy 1.74% – 7.24% 2.43% – 7.94% Refinancing
Sparrow 0.99% – 11.98% 2.99% – 12.99% Undergrad, grad and career training, refinancing
Student Loan Authority n/a 2.99% – 4.61% Undergrad, grad and career training, refinancing
Chicago Student Loans n/a 7.53% – 8.85% Undergrad (juniors and seniors)
Funding U n/a 7.49% – 12.99% Undergrad
Discover 1.79% – 11.09% 3.99% – 11.59% Undergrad, grad and career training, refinancing
Splash Financial 1.74 – 8.27% 1.99% – 8.27% Undergrad, grad and career training, refinancing

Credible

Best for Comparing Loan Rates

4.5 out of 5 Overall

Key Features

  • Compares rates from top lenders
  • See multiple offers without hard credit check
  • Variable APR as low as 0.94%

Through Credible’s loan marketplace, you can fill out an application to see pre-qualified rates for multiple lenders in one place. Select options that work for you, like deferred or interest-only payments while you’re in school, fixed or variable rates, and loan terms that fit your plan. Once you choose a loan offer, you can finish your application and sign your loan agreement with the lender directly.

Credible

Variable APR

0.94% – 11.98%

Fixed APR

3.02% – 14.08%

Loans for

Undergrad and grad, refinancing

Earnest

Best for Flexible Repayment Options

5 out of 5 Overall

Key Features

  • 9-month grace period
  • Skip one payment/year
  • Pay monthly or every two weeks

Earnest offers an easy-to-use, modern platform to find loans for undergrad, grad school and professional degrees with a nine-month grace period before beginning repayment after school. Loans come with an option to defer one payment every 12 months with no extra fees or interest. Apply online, and get an offer within 72 hours.

Earnest

Variable APR

Starting at 0.94%

Fixed APR

Starting at 2.99%

Loans for

Undergrad and grad, refinancing

College Ave

Best for Affordable In-School Repayment

3.5 out of 5 Overall

Key Features

  • Variable APR as low as 0.94%
  • Parent and cosigned loans available
  • 4 repayment options

College Ave is a mainstay in student loans and refinancing. Apply for loans to cover undergrad, grad and professional degrees, and career training programs. The online application is quick and easy, and borrowers tout the company’s customer service, so you’ll be on top of your loan from application to repayment. Choose how you repay while you’re in school to save money and fit your budget.

College Ave

Variable APR

0.94% – 11.98%

Fixed APR

3.24% – 12.99%

Loans for

Undergrad, grad and career training, refinancing

Sallie Mae

Best for College Financial Planning

2 out of 5 Overall

Key Features

  • Faster applications for returning borrower
  • Scholarships available
  • Credit cards and banking options

Sallie Mae is a private lender and platform for financial products for students. The business no longer originates or services federal loans, as it’s most known for. Apply for private student loans, credit cards and savings accounts designed for students. With Multi-Year Advantage, returning borrowers have fast applications and high approval rates to make it easier to get your money each year.

Sallie Mae

Variable APR

1.13% – 11.23%

Fixed APR

3.50% – 12.60%

Loans for

Undergrad, grad and career training

SoFI

Best for SoFi Banking Clients

4 out of 5 Overall

Key Features

  • No fees
  • Unemployment protection
  • Earn rewards to repay loans faster Summary

SoFi is well known for student loan refinancing, and it offers other types of loans including in-school student loans with no hidden fees. As a SoFi member, you get access to perks, including subscriptions to products like Grammarly, Evernote and Coursera, to support your education. With unemployment protection, you get forbearance on loans for up to three-month increments if you lose your job.

SoFi

Variable APR

1.05% – 11.78%

Fixed APR

3.47% –11.16%

Loans for

Undergrad and grad, refinancing

Ascent

Best for Graduated Repayment

4 out of 5 Overall

Key Features

  • Graduated repayment available
  • Hardship repayment options
  • Bootcamp loans available

Ascent offers student loans and scholarships for your full academic career. Apply online with no application fees to see your prequalified rates without a hard credit check. Use loans to pay for everything from a traditional undergrad or grad program to career training and even career-boosting bootcamps.

Ascent

Variable APR

1.47% – 11.31%

Fixed APR

4.36% – 12.75%

Loans for

Undergrad, grad, career training and bootcamp

LendKey

Best for Loan Reconnaissance

4 out of 5 Overall

Key Features

  • Work with community banks and CUs
  • Student loans and refinancing options
  • Rates as low as 1.57%

LendKey is a student loan servicer and a platform for finding the best student loan and refinancing options from partner community banks and credit unions. LendKey’s platform streamlines the process, so you get the benefit of working with a community-oriented institution without the headache of multiple application processes.

LendKey

Variable APR

Starting at 1.57%

Fixed APR

Starting at 3.99%

Loans for

Undergrad and grad, refinancing

Citizens Bank

Best for Citizens Bank Customers

3 out of 5 Overall

Key Features

  • Loyalty discounts
  • Cosigner release option
  • Multi-Year Approval

Citizens Bank is an established financial institution with more than 40 years of experience providing student loans and other financial services. With multi year approval, you can get approved for new loans year after year with a faster application and no hard credit check. Citizens Bank customers can get an interest rate discount up to 0.25 percentage points.

Citizens Banks

Variable APR

n/a

Fixed APR

3.48% – 10.78%

Loans for

Undergrad and grad, refinancing

PNC

Best for Undergraduate Loans

2.5 out of 5 Overall

Key Features

  • Established traditional bank
  • Cosigner release option
  • Student loans and refinancing options

PNC Bank is one of the largest banks in the United States, with nearly 200 years of experience in financial services. Student loans and refinancing are among its vast services. The PNC Solution Loan is designed specifically for undergraduates, to bridge the gap when federal student loans don’t cover all your expenses. It also offers graduate and professional loans.

PNC Bank

Variable APR

Starting at 1.09%

Fixed APR

Starting at 2.99%

Loans for

Undergrad, grad and career training, refinancing

Purefy

Best for Refinancing Student Loans

3 out of 5 Overall

Key Features

  • Student and parent loan refinancing
  • Compare multiple lenders
  • No hard credit check

Purefy is for anyone out of school, repaying student loans and looking for ways to save money. Use the platform to compare student loan refinancing options from multiple lenders side-by-side. The platform is free to use, and you can see prequalified rates in minutes. You can refinance private or federal loans through its partner lenders.

Purefy

Variable APR

1.74% – 7.24%

Fixed APR

2.43% – 7.94%

Loans for

Refinancing

Sparrow

Best for Easy Student Loan Repayment

4 out of 5 Overall

Key Features

  • Compare offers from multiple lenders
  • App to automate loan repayment
  • Manage private and federal loans

Sparrow is a platform for student loans, refinancing and repayment in one place. You can fill out a single application to see prequalified offers from multiple partner lenders for private loans or refinancing. Then use the app to manage and automate repayment of your private and federal student loans in one place.

Sparrow

Variable APR

0.99% – 11.98%

Fixed APR

2.99% – 12.99%

Loans for

Undergrad, grad and career training, refinancing

Rhode Island Student Loan Authority

Best for Income-Driven Repayment

5 out of 5 Overall

Key Features

  • Income-based repayment available
  • Fixed interest rates
  • Less-than-halftime students eligible

RISLA is a nonprofit organization offering student loans and refinancing for borrowers all over the U.S. Its loans have more borrower protections than most private student loans: You have income-driven repayment options, a fixed interest rate and two repayment terms to choose from (10 or 15 years). Limited loan forgiveness is even available for students who complete internships.

Rhode Island Student Loan Authority

Variable APR

n/a

Fixed APR

2.99% – 4.61%

Loans for

Undergrad, grad and career training, refinancing

Chicago Student Loans

Best for Equitable Lending

4.5 out of 5 Overall

Key Features

  • Merit-based approval and interest rates
  • No cosigner needed
  • Income-based repayment options

Chicago Student Loans by A.M. Money works with limited schools around the Midwest, but if your school is eligible, this is a great option for equitable lending. Approval and interest rates are determined based on your academic achievement, not your credit or income. And income-based repayment plans are available if you can’t afford your monthly payment.

Chicago Student Loans

Variable APR

n/a

Fix APR

7.53% – 8.85%

Loans for

Undergrad (juniors and seniors)

Funding U

Best for Merit-Based Lending

5 out of 5 Overall

Key Features

  • Approval by GPA and non-credit factors
  • No cosigner needed
  • More than 1,000 eligible schools

Funding U makes undergraduate loans based on a student’s GPA, not their family’s credit history. It uses a credit check to set interest rates, but also factors in your GPA and year in school — the rate goes down as you progress nearer to graduation! Funding U works with more than 1,460 nonprofit colleges and universities.

Funding U

Variable APR

n/a

Fixed APR

7.49% – 12.99%

Loans for

Undergrad

Discover

Best for Rewards for Good Grades

3.5 out of 5 Overall

Key Features

  • No origination or late fees
  • Cash reward for good grades
  • Variable APR as low as 1.79%

In addition to its full suite of financial services, Discover offers student loans for undergrads, grad students and professional degrees with no origination or late fees. You’ll get rewarded for good grades: Get a 1% cash reward for each new loan if you have a GPA of at least 3.0 for the term(s) the loan covers.

Discover

Variable APR

1.79% – 11.09%

Fixed APR

3.99% – 11.59%

Loans for

Undergrad, grad and career training, refinancing

Splash Financial

Best for Refinancing Undergrad and Med School Loans

4.5 out of 5 Overall

Key Features

  • Compare offers from multiple lenders
  • No origination fees or prepayment penalties
  • Exclusive interest rates from partner lenders

Splash Financial lets you compare in-school student loans and student loan refinancing (and personal loans) from multiple lenders with a simple and quick online application. In addition to its search function, Splash partners with its lenders to offer exclusive interest rates — with fixed rates as low as 1.99% — to help you get the best deal possible.

Splash Financial

Variable APR

1.74 – 8.27%

Fixed APR

1.99% – 8.27%

Loans for

Undergrad, grad and career training, refinancing

Types of Student Loans

The first thing you need to know before applying for any student loans is the difference between federal and private student loans. These two types of loans are treated differently and offer significantly different options for repayment and forgiveness down the line, so know what you’re signing up for before you borrow.

Federal Student Loans

Federal student loans are backed by the U.S. government and make up the vast majority of student loans borrowed every year in the country.

Application: You apply for federal loans along with other types of federal student aid for college through the Free Application for Federal Student Aid, a form you fill out every year to demonstrate your family’s financial situation. The U.S. Department of Education (ED) approves basic undergraduate loans and grants based on financial need, not creditworthiness, so students can apply for federal financial aid without a cosigner.

Types of loans: The government makes four types of student loans: Direct Subsidized, Direct Unsubsidized, Direct PLUS for parents or graduate students, and Federal Perkins Loans for students with exceptional financial need. It also awards grants and work study awards based on financial need. PLUS loans are granted based on creditworthiness, but might still be easier to get than some private loans.

Interest rates: Federal student loan interest rates are standard and not based on a borrower’s credit history. Congress sets them each year for loans disbursed that year, and you keep that rate for the life of your loan. For example, the interest rate for 2021 was 3.73% for Direct undergraduate loans, 5.28% for graduate student loans and 6.28% for PLUS loans.

Repayment plans: The required repayment for federal student loans starts six months after leaving school (or going less than half time), and the standard repayment plan splits monthly payments evenly over 10 years. Subsidized loans don’t accrue interest while you’re in school, while unsubsidized loans do.

Federal student loans are originated and serviced by private institutions, but they’re backed by a guarantee from the federal government, so ED sets repayment terms. You can opt into a graduated payment plan or income-driven repayment, both which would extend your time to repay and could give you a more affordable monthly payment (as little as $0).

Only federal loans are eligible for forgiveness under programs like Public Service Loan Forgiveness and for national forbearance periods like we’ve seen during the pandemic. The pause on loan payback has been extended six times since the start of the pandemic.

Refinancing options: Even though you receive one lump payment (if you get a refund) each semester, you might have multiple student loans to your name. You can combine them with a Direct Consolidation Loan, a student loan consolidation option creates one balance and one monthly payment, and sets the interest rate at the average of all the loans. This isn’t a money-saving step, but could make repayment simpler.

You can also refinance federal student loans using a private refinancing option, which could save you money if you have strong credit and can keep up with payments. This would pay off your federal loan balances and replace them with a private loan. It removes the repayment and forgiveness options that come with federal loans.

Private Student Loans

Private student loans are consumer loans made by private banks, credit unions and financial institutions. They’re treated differently from other types of private loans, but don’t come with as much flexibility as federal loans.

Application: You apply for private student loans directly with the lender or servicer providing the loan. Lenders approve loans based on creditworthiness, just like other credit products, so you have to have a strong credit history or apply with a creditworthy cosigner to be approved. Most (but not all) lenders include an option to release the cosigner after a few years of steady payments.

Types of loans: Private student loan lenders typically offer student loans for undergraduate students, graduate students and professional degrees. Some also offer loans for career training or alternative education like bootcamps. The loans all offer the same basic terms, but interest rates and loan amounts usually vary based on the degree covered.

Interest rates: Private student loan interest rates are set based on creditworthiness and can range from less than 1% to 12% or more depending on the prime rate. Fixed rates are set when you take out a loan and stay the same for the life of the loan, while variable interest rates fluctuate up and down when the Fed adjusts the prime rate.

Repayment plans: Private lenders don’t offer the same amount of protection in repayment as the federal government, but they usually offer a variety of repayment options so you can choose a plan that helps you save money without being overwhelmed by payments. You usually get to choose whether to pay off interest and/or principal while in school, or defer all payments until six months or more after school.

Many private lenders offer forbearance options of a few months at a time, so you can pause payments due to financial hardship without defaulting on your loan. They don’t, however, offer income-driven repayment, so your monthly payment is unaffected by your ability to pay it.

Private student loans aren’t eligible for forgiveness under federal plans, but you might be able to discharge them in bankruptcy under limited circumstances.

Refinancing options: If your financial situation improves, you can apply to refinance your student loans with the same or a different private lender. This pays off your existing loans and replaces them with a new loan with better terms, like a lower interest rate or lower monthly payments.

Should You Take out a Federal or Private Student Loan?

Nearly every expert will tell you to use private student loans as your last resort to pay for school. First exhaust free funding, like grants, scholarships and work study. Then take on federal student loans. Then, if your costs aren’t covered, take out private student loans to fill the gap.

That’s because private loans are the riskiest of all those options.

Federal student loans may be subsidized to save on interest, and they come with flexible repayment plans that offer relief when your income is low. And they’re eligible for forgiveness for student loan borrowers who qualify. Most private loans don’t have those options.

However, private student loans could come with significantly lower interest rates than federal student loans if you have good credit. Federal loans come with standard rates between 3% and 7% and don’t reward good credit (or punish bad credit).

After exhausting free funding, the most ideal route is to borrow a subsidized federal loan — which won’t accrue interest while you’re in school — then consider refinancing once the repayment period starts, you’ve built a strong credit history and feel confident in your ability to make monthly payments for the term of the new loan.

Even most private student loan lenders encourage borrowers to look into federal funding before taking out a private loan while you’re in school. They’re generally designed to fill gaps for students who aren’t eligible for enough in federal student loans to cover their costs to attend college.

Student Loan Costs to Consider

When you evaluate private student loan offers, you’ll probably focus on the interest rate, because that has a significant impact on the long-term cost of the loan. But there are other costs to consider.

Before accepting any loan offer or signing the agreement, make sure you know how much you’ll pay (if anything) in these common costs:

  • APR: Annual percentage rate is commonly called the interest rate (though they’re a little different). It’s usually the most prominently advertised feature of student loans. Student loan interest rates tend to fall between 3% and 11% and can be fixed or variable — the latter means they’ll change with the prime rate. A higher credit score can get you a lower interest rate and vice versa.
  • Origination fee: Some lenders charge a fee to receive your loan, though that’s less common with student loans than other types of loans. Origination fees are usually around 2% or 3% of the loan amount. They come out of the amount disbursed to the school, so you likely won’t notice them unless you’re very particular about math.
  • Late fee: Most loan agreements come with a fee for late payments, usually a percentage of the payment due. Many student loan lenders are doing away with late fees and building in options for flexible repayment, so shop around to compare your options!

What Is a Cosigner?

A cosigner is someone who shares the responsibility of a loan with the borrower. If you — the borrower — can’t qualify for a loan on your own because of bad credit or no credit, you could apply with a cosigner with good credit to qualify.

You receive the funds, but you both bear responsibility for repaying the loan, and repayment or default impacts both credit scores.

Cosigners are common for private student loans, because many people entering college are young and have almost no credit history. You can cosign with a parent, guardian or other creditworthy person, who basically guarantees the loan in case you don’t repay.

Student loans often come with an option for cosigner release, so the cosigner doesn’t have to stay tied to the loan for years after the student’s left school and gone off on their own. Cosigners can usually be released after around 12 to 36 months of on-time payments, with proof of the borrower’s income.

Who Can Take out a Private Student Loan?

Any student can usually apply for a student loan from a private lender, but creditworthiness determines whether you’ll be approved.

Lenders generally have basic requirements for student loans, as well, including:

  • You must be enrolled at least half-time in a degree-granting institution.
  • You must be the age of majority in your state (usually 18 or 19).
  • You must be a U.S. citizen or resident.

Some lenders make exceptions for these, though. For example, Ascent offers a Bootcamp Loan, which wouldn’t come with the enrollment requirement. Some lenders also make loans for international students who aren’t U.S. residents.

How to Get a Private Student Loan

Follow these steps to apply for a private student loan.

  • Weigh your options. Before turning to private loans, fill out a FAFSA to see your options for federal financial aid. This doesn’t commit you to taking out a federal loan, and it has no affect on your credit score; it just gives you all the information you need to make a decision. If federal aid won’t cover your costs, look into private loans.
  • Find a cosigner. If you don’t have strong credit, get a cosigner on board before you apply. Use a site like Credit Sesame or Credit Karma to check your credit score and history for free to see where you stand.
  • Get pre-qualified. Lenders let you fill out a little information about yourself — usually all online — and run a soft credit check to give you an idea of the interest rate and loan terms you could qualify for. That lets you compare offers before submitting to a hard credit inquiry that impacts your score. Marketplaces like Credible and LendKey let you see and compare several pre-qualified offers with one application.
  • Choose a lender. Choose the loan offer that looks like the best fit for you, and finish your application with the lender. You can usually do this part all online, too. The lender will run a hard credit check and might need more information from you, like proof of income. You could get a decision as soon as the same day or after a few days, depending on the lender’s process.
  • Accept your loan. Once approved, you can review and sign your loan agreement — remember to note any fees! — and accept your funds. Lenders send student loan funds directly to your school to pay for tuition and fees, and the school will send you a refund for any extra amount.

Frequently Asked Questions (FAQs) About Student Loans

We’ve rounded up the answers to some of the most common questions about where to get the best private student loans.

What Type of Loan is the Best Value to Students?

Which student loan options are best for you depends on your family’s financial situation. Private student loans can be an optimal option financially, because of potentially low interest rates and short repayment terms. But they’re only available to students with good credit or creditworthy cosigners. Federal student loans are available based on financial need and come with a host of repayment and forgiveness options that could protect low-income borrowers in the long run.

What Type of Student Loan Has the Lowest Interest Rate?

Private student loans can have interest rates as low as 1% but might be as high as 12% or more, depending on your credit. Federal loan rates are set by Congress for all borrowers and fall around 3% to 5% for undergraduate loans. If you (or your cosigner) have good credit, a private student loan could get you the lowest interest rate.

What is the Biggest Student Loan You Can Get?

The size of your student loan depends on what kind of loan you take out. For private student loans, it’s determined by your credit and the term of the loan you want. Some private lenders set caps on student loan amounts, and some will lend up to your full cost of attendance. For federal loans, your loan amount is determined based on your cost of attendance and expected family contribution. If you demonstrate financial need, your federal loan might go beyond tuition, and you could receive a refund to help cover living expenses. Undergrads can borrow a max of between $5,500 and $12,500 each academic year, and grad students can borrow up to $20,500. 

Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine.

Source: thepennyhoarder.com

Similarities and Differences Between Financial Aid vs Student Loans

Figuring out how to pay for school can be stressful, so it’s important to compare financial aid vs student loans so that you can reduce your financial burden as much as possible and find out what’s right for you.

When college financial aid isn’t enough, people use federal or private student loans to help cover costs. Private student loans can also close gaps between what you qualify for and how much you need. We’ll compare student loans vs financial aid and explore some features that can help you determine what makes the most sense for your financial situation.

What Is Financial Aid?

Financial aid is funding that is available to students to help make college or career school more affordable. College financial aid comes in several forms and helps students pay for higher education expenses, including tuition and fees, room and board, books and supplies and transportation.

Here are several types of financial aid available to students:

•   Scholarships: A scholarship is a form of financial aid that’s awarded to students to help pay for school. Scholarships are typically awarded based on academic or athletic achievement, community involvement, job experience, field of study, financial need and more.

•   Grants: A grant is a form of financial aid that doesn’t have to be repaid and is generally based on financial need.

•   Federal work-study programs: The federal work-study program offers funds for part-time employment to help eligible college students in financial need.

•   Federal student loans: Student loans are borrowed money from the federal government or private lenders to help pay for college.

Financial aid can come from federal, state, school, and private sources. Federal Student Aid, a part of the U.S. Department of Education, is the largest provider of student financial aid in the U.S. Federal aid is distributed to 13 million students each year, totaling $120 billion.

Recommended: Am I Eligible for Work-Study?

What Are Student Loans?

A student loan is money borrowed from the government or a private lender to help pay for school with the expectation that you will pay it back. Like most other types of loans, the amount borrowed will accrue interest over time. Student loans can be used on school-related expenses including tuition, room and board, and other school supplies.

Loans are different from grants or scholarships and it’s essential that you understand the differences between financial aid vs student loans. If you receive a grant or a scholarship, you typically don’t have to pay that money back. Student loans are also different from work-study programs, where students in financial need to work part-time jobs to earn money to help pay for school.

It’s common for college students to take out student loans to finance their education, but you should first compare federal vs private student loans. Federal student loans offer some borrower benefits that make them preferable to private student loans.

Federal Student Loans

Federal student loans are loans that are backed by the U.S. government. Terms and conditions of the loan are set by the federal government and include several benefits, such as fixed interest rates and income-driven repayment plans. To qualify, students must fill out the Free Application for Federal Student Aid (FAFSA®) every year that they want to receive federal student loans. The FAFSA also allows students to apply for federal aid including scholarships, grants, and work-study. Colleges may also use the information provided on the FAFSA to determine school-specific aid awards.

There are four types of federal student loans available:

•  Direct Subsidized Loans are student loans for undergrads in financial need to help pay for expenses related to higher education. The government covers the accruing interest on this type of loan while the borrower is enrolled in school at least half-time and during the loan’s six month grace period after graduation.

•  Direct Unsubsidized Loans are made to eligible undergraduate, graduate and professional students. Eligibility is not based on financial need. Borrowers are responsible for all accrued interest on this type of loan.

•  Direct PLUS Loans are made to graduate or professional students, known as the Grad PLUS loan, or parents of dependent undergraduate students, known as the Parent PLUS loan. These loans are meant to help pay for education expenses not covered by other financial aid.

•  Direct Consolidation Loans allow students to combine all eligible federal student loans into a single loan.

Private Student Loans

Private student loans can also be used to help pay for college. Private student loans are offered by banks, credit unions, and online lenders. Understanding how private student loans work is essential before borrowing. While federal student loans are generally the first option potential student borrowers pursue, private student loans may be an option to consider for borrowers who are trying to pay for college without financial aid. Unlike federal student loans, which have terms and interest rates set by the federal government, private lenders set their own and conditions that vary from lender to lender.

Private student loans are also credit-based. The lender will review an applicant’s credit history, income and debt, and whether they’re enrolled in a qualified educational program. Applicants who may lack credit history, or have a less than glowing credit score may consider applying with a cosigner to improve their chances of approval.

Unlike federal student loans, interest rates can be fixed or variable. A fixed interest rate stays the same for the life of the loan but a variable interest rate may change. The interest rate a borrower qualifies for will also depend on the lender as well as the borrower’s creditworthiness.

Not all private student loans are the same. Because of this, it’s important that you understand the annual percentage rates (APRs) and repayment terms before taking on the loan.

Financial Aid vs Student Loans Compared

When comparing financial aid vs student loans, you need to be aware of the similarities and differences between financial aid vs student loans. Here are some key comparisons.

Similarities Differences
They can both be used to help fund education-related expenses. Financial aid doesn’t typically need to be repaid. Student loans must be repaid within a given loan term, plus interest.
FAFSA® must be filled out for financial aid and federal student loans. Financial aid and student loans may be paid out differently.
Financial aid and student loans have certain eligibility requirements. Some financial aid, like scholarships, may be awarded based on merit. Federal student loans can be both need and non-need based. Lending criteria on private student loans is determined by the lender.

Similarities

Financial aid and student loans are both used to help fund education-related expenses, like tuition, room and board, books and classroom supplies, and transportation. Financial aid and student loans backed by the federal government also require students to fill out FAFSA® for each year that they want to receive federal student loans or federal financial aid. Financial aid and student loans also have some sort of eligibility requirements, whether that be based on financial need, merit or creditworthiness.

Differences

The biggest difference between financial aid vs student loans is whether or not you need to pay back the money you are given to help pay for college. Financial aid is either money that doesn’t need to be paid back, known as gift aid, or earned through a federal work-study program.

Student loans must be repaid within a given loan term. Not only are students expected to pay back student loans, but there’s typically interest that accrues over the life of the loan.

There may also be differences in how financial aid and student loans are paid out to the student. Private student loans are usually paid in one lump sum at the start of each school year or semester; however, you may not receive the full amount of a scholarship award upfront. Government grants and loans are generally split into at least two disbursements and If you have a work-study job, you’ll be paid at least once a month.

Some private student loans may also come with greater flexibility and offer more money than financial aid.

Recommended: Gift Aid vs Self Help Aid For College

Pros and Cons of Financial Aid

Pros of Financial Aid

•  Money received through financial aid does not typically have to be repaid.

•  Potential to decrease future debt by minimizing the amount you have to borrow.

•  Opens up new opportunities for many students to attend a better school than they could without financial assistance.

•  Allows students to focus on their education instead of worrying about paying tuition.

Cons of Financial Aid

•  Most financial aid does not cover all school-related costs.

•  Scholarships, grants, and work-study programs can be highly competitive.

•  You may have to maintain certain standards to meet eligibility requirements during each semester.

•  There’s less flexibility on how you can spend funds.

Pros and Cons of Student Loans

Pros of Student Loans

•  Student loans offer financial support for those who would otherwise be unable to attend college.

•  You don’t need any credit history for federal student loans and you can use a creditworthy cosigner for private student loans.

•  Student loans can be used for things beyond tuition, room and board, and books.

•  Paying off student loans may help you build credit.

Cons of Student Loans

•  You start off with debt after graduating from college.

•  Student loans can be expensive.

•  Defaulting on student loans can negatively impact your credit score.

•  If you borrowed a private student loan, the interest rate may be variable.

Private Student Loans from SoFi

Financial aid and student loans financially support students by relieving some of the financial burden that’s often associated with higher education. When financial aid isn’t enough, students may seek private student loans to help cover their college costs. Although private student loans don’t come with as many perks as federal student loans, and are generally borrowers only as a last resort option as a result, they can help fill in the gaps between what you qualify for and how much you need.

Private student loans from SoFi can help serve as a supplement to federal aid. SoFi student loans offer plenty of benefits, such as no origination fees, no application fees, no late fees, and no insufficient fund fees. You can find out if you pre-qualify within minutes.

Learn more about private student loan options available with SoFi.

FAQ

Does FAFSA loan or grant money?

FAFSA is an application that you fill out in order to determine your eligibility for receiving a federal loan or federal student aid such as grants and scholarships. While a federal student loan is borrowed money that must be repaid after graduation, funds received through grants, scholarships, and work-study programs do not need to be repaid.

Can you get financial aid and student loans at the same time?

Yes. If you apply for financial aid at your school, you may be offered loans as part of your school’s financial aid offer to help cover the remaining costs.

Do scholarships count as financial aid?

Yes, scholarships are a type of financial aid that is considered gift aid and typically do not have to be repaid.


Photo credit: iStock/Altayb

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. 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

What is a Pell Grant – And How Do You Apply?

Students unable to finish studies due to the closing of their school or who received the Borrower Defense Loan Discharge may also be eligible.
Robert Bruce is a senior writer for The Penny Hoarder. 
As of the 2021-22 school year, the minimum Pell Grant award a student can receive is 0 per year (July 1 to June 30) and the maximum is ,495. Your EFC number will determine where you fall in that range.

What Is a Pell Grant?

The takeaway: Always fill out a FAFSA! You never know what you could be eligible for.
Students with a parent who died in the line of duty – as a military veteran or public service officer – may also be eligible if they are under 24 and enrolled at least part-time in a college or career school.
To qualify for a Pell Grant, you need to have a minimum GPA (2.0)  and demonstrate exceptional financial need.
A Pell Grant is a form of federal student financial aid that, unlike a loan, doesn’t need to be repaid. The U.S. Department of Education awards federal Pell Grants to low-income students who qualify. The grants cover tuition, room and board, and other educational fees and expenses.

Who Is Eligible for a Pell Grant?

College students who struggle to afford tuition and other expenses have an avenue to help pay for their education that doesn’t involve federal loans: the federal Pell Grant.

  • Demonstrate “exceptional financial need” on the FAFSA application.
  • Be a U.S. citizen or eligible non-citizen.
  • Have yet to receive a bachelor’s, graduate, or professional degree.
  • Maintain a minimum GPA of 2.0. Note: Individual institutions may have different GPA requirements.

Pell Grant funds are available at 6,000 educational institutions in the country. To be eligible, you must:
Source: thepennyhoarder.com
The numbers say that more than 2 million students would have been eligible for the Pell Grant in the 2015-2016 school year, but they didn’t fill out a FAFSA. Further, 1.2 million would’ve qualified for the maximum Pell Grant amount.
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The Pell Grant is a need-based program that, unlike federal student loans, never has to be repaid. With total student loan debt in the U.S. reaching nearly .75 trillion in 2022 affecting more than 43 million borrowers, this federal grant is an attractive alternative for students who qualify.

How Much Money Can I Receive From a Pell Grant?

Is the Pell Grant the same as the FAFSA?
A federal Pell Grants is just that – a grant. It’s not a loan so you don’t need to pay it back – with a few caveats.  If you withdraw from courses, change your enrollment status, or fail to meet GPA requirements after having received your award, you may have to pay it back. That could also have tax implications, so it’s not a good idea all around.  Federal student aid administrators also factor in your school’s cost of attendance and your enrollment status.
How many times can I receive a Pell Grant?
If you fit in those categories, here’s what you need to know.

Incarcerated individuals may be eligible for aid through the Second Chance Pell experiment – created in 2015 by the Obama administration to provide “education opportunities for thousands of justice-involved individuals who have previously been unable to access federal need-based financial aid.” The program expanded in the 2022-23 school year to include 200 colleges and universities now offering their prison education programs with support from the Pell Grant program.

How Do I Apply for a Pell Grant?

Individual grant amounts depend on a student’s Expected Family Contribution (EFC), an index number that determines eligibility for federal student aid. The number originates from the financial information provided when you complete the FAFSA.
Graduate students aren’t eligible for the Pell Grant, though some students working on a post-baccalaureate teacher certification may qualify.
You can also apply for the “year-round Pell Grant” if you attend summer school. In this situation, you would be eligible for the same award amount you received in the fall and spring. So if your annual award amount is ,000, and you’ll receive ,000 in the fall, ,000 in the spring – then you would be eligible for an additional ,000 if you attend summer school.

Other FAQs About Pell Grants

The application process is simple enough. To apply for a Pell Grant, students must fill out the Free Application for Federal Student Aid form (FAFSA). From there, financial aid administrators will determine whether the student is eligible and, if so, set the Pell Grant award amount.
Also, you’ll need to reapply for the grant using the FAFSA every academic year, meaning your Pell Grant aid can change annually based on your current financial situation.
Created in 1972, it is named after U.S. Sen. Claiborne Pell of Rhode Island and is the largest education grant program offered by the federal government.
Grant recipients risk losing eligibility if they withdraw from courses, change enrollment status, or fail to meet their college or university’s GPA requirements.
Like other federal student aid options, to apply for a Pell Grant students need to fill out the Free Application for Federal Student Aid (FAFSA) form.
Colleges and universities disburse the award funds into the student’s account balance and are reimbursed by the federal government. The timing of the disbursement varies by institution – some may make monthly payments while others might distribute all of the funds before classes begin.

Do you have to pay back a Pell Grant? <!–

–>


No. The FAFSA is simply a form you fill out when applying for federal student aid programs – everything from federal student loans, work-study and grants, including the Pell Grant. 

7 Financial Aid Secrets You Should Know

As a student (or parent) it can be easy to focus solely on the college application process, and completely forget about financial aid. You spend so much time studying for the SATs (or ACTs) and tweaking your college essay so it perfectly represents you, that after you’ve been accepted and the reality of tuition payments set in, you might feel momentary panic.

It’s no secret that college tuition is expensive. Students and parents save for years to pay for higher education, but sometimes that’s just not enough. According to a Sallie Mae® study, “How America Pays for College 2021 ,” parent income and savings covered 45% of college costs while student income and savings covered 8% of the costs.

Many of us rely on financial aid to bridge the payment gap. Financial aid may come from multiple sources, including scholarships, grants, work-study, federal student loans, and private student loans.

Scholarships and grants are extremely useful forms of financial aid, since students are not typically required to pay back the money they receive. An online survey of students and parents found 72% of college families in 2021 relied on scholarships and grants to cover a portion of college expenses, according to Sallie Mae’s study.

Scholarships, grants, and savings often aren’t enough to cover the cost of attending college. Sallie Mae says 47% of college families borrowed money to help pay for college in 2021. Some families used home equity loans and credit cards, but federal student loans represented the most frequently used source of borrowed money followed by private student loans.

To top it all off, the financial aid application process can be confusing. Between federal aid and other scholarships, it can be difficult to keep everything straight.

Most often, the first step in applying for financial aid is filling out the Free Application for Federal Student Aid (FAFSA®). You can begin filling out the FAFSA on October 1 for the following academic year. The federal FAFSA deadline for the 2022–23 academic year is June 30, 2023, while colleges and states may have their own FAFSA deadlines.

Some schools use an additional form to determine scholarship aid — the College Scholarship Service Profile .

Taking the effort to apply for financial aid early can have a positive impact on your tuition bill. Below we highlight seven financial aid secrets you should know.

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1. Decision Day vs Summer Melt

May 1 is usually decision day, the deadline when prospective college students must decide which college they plan to attend in the fall. But even after this deadline, students can change their minds. This phenomenon is known to industry professionals as “summer melt,” and sometimes it’s triggered by FAFSA verification setbacks.

Students who receive insufficient need-based financial aid, for example, might be compelled to reconsider their college enrollment decisions. Summer melt can give you an opportunity to select a more affordable school for you if you’ve encountered a FAFSA verification roadblock.

Summer melt is a common problem that causes schools to lose students during the summer. Because of this, schools may have a bit of secret wiggle room in their acceptance policy to admit new students over the summer for the fall semester.

2. Writing a Letter

You might be able to take advantage of summer melt with this secret: write a letter. After you get your financial aid offer, you could write a letter to your school’s financial aid office to open the lines of communication.

Let them know how excited you are to attend school in the fall. That’s where you could include a thoughtfully worded inquiry for any additional aid that you might qualify for as a result of summer melt.

When students decide to switch schools or not attend at the last minute, it means that they also won’t be using their financial aid award — which could now be available to other students.

3. Calling the Financial Aid Office

Another way to potentially take advantage of summer melt is to call your school’s financial aid office. Instead of calling immediately after you receive your financial aid award, think about calling in June or July. This allows financial aid offices time to account for students who have declined their financial aid packages.

An appropriately timed call to the financial aid office at your school could mean additional financial aid is allocated to your package — no guarantees, of course, but it never hurts to ask.

4. Submitting Paperwork and Applications On Time

Every school’s financial aid office has to follow a budget. Some financial aid is offered on a first-come, first-served basis, so it helps to submit forms, like the FAFSA, and other applications, on time or even ahead of schedule.

You may be out of luck if you apply for assistance after your university’s financial aid office has met their budget for the year. Some states have early winter deadlines for awarding scholarships and grants. Tennessee residents, for example, must complete their FAFSA by February 1 to be considered for a state-funded Tennessee Student Assistance Award grant.

You can check the deadlines for financial aid in your state through the U.S. Department of Education’s Federal Student Aid website .

Repay your way. Find the monthly student loan
payment and rate that fits your budget.

5. Being Prepared

Have the basics ready to go before you sit down to fill out the FAFSA. If you have all of the information you need before you begin filling out the FAFSA, you’ll likely have an easier time filling out the information.

Usually, each parent and the student will need to create a username and password, which is called the Federal Student Aid ID (FSA ID). You’ll also need:

•   Social Security numbers (for you and your parents)

•   Bank statements and records of untaxed income (possibly)

•   You and your parents’ tax returns (aid awards are based on income from two years ago)

•   Any W2 forms

•   Net worth calculations of your investments (for students and parents)

6. Being Wary of Services that Charge You for Help

If you need assistance filling out the FAFSA, avoid any services that charge you. The first F of FAFSA stands for “Free,” so there is no need to pay for a service to fill the form out for you.

If you need assistance filling out the FAFSA, there are plentiful online resources through the U.S. Department of Education .

7. Filing the FAFSA Every Year

For every year you are a student and want to receive federal aid, you’ll have to file the FAFSA. Get in the habit of filing it every fall, so you’re closer to the top of the financial aid pile.

The Takeaway

Scholarships and grants can be super-helpful additions to a federal financial aid package. The money can reduce your tuition bill and doesn’t usually need to be repaid. Work-study can also be beneficial in helping college students make ends meet.

If you need additional help financing your college experience, SoFi offers private student loans with an entirely digital application process and no fees whatsoever. Potential borrowers can choose between a variable or fixed interest rate and have the option to add a cosigner to the loan.

Learn more about SoFi’s flexible repayment plans and application process for private student loans.


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.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. 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.

SOSL18228

Source: sofi.com