Red Canoe Credit Union Builds Bridges with Gen Z through Sparrow
LONGVIEW, WA – January 11, 2024 – Red Canoe Credit Union, a forward-thinking financial institution committed to member success, announces a groundbreaking partnership with Sparrow, a leading fintech championing the credit union movement. This collaboration marks a pivotal step in Red Canoe’s mission to empower Gen Z and propel their financial future.
We understand that Gen Z craves financial clarity and personalized solutions. By partnering with Sparrow, we harness cutting-edge technology to deliver precisely that. Through their innovative student loan marketplace platform, we provide Gen Z members with the options to clearly and transparently fund their higher education goals, without the anxiety and stress usually associated with the process.
Amy Davis, Chief Marketing Officer of Red Canoe Credit Union
Revolutionizing Engagement through Targeted Solutions
Streamlined access to diverse lenders and competitive rates: Gen Z members can compare and choose from a wide range of student loan options, ensuring they secure the best fit for their needs.
Personalized financial guidance: Sparrow’s platform leverages data-driven insights to deliver tailored recommendations and resources, empowering Gen Z members to make informed financial decisions.
Maximized transparency: Members can understand what the cost of borrowing might be without adversely affecting their credit score.
We are thrilled to partner with Red Canoe Credit Union in their dedication to building brighter financial futures for Gen Z. Our platform equips Red Canoe with the tools and expertise to attract, engage, and empower this influential demographic. Together, we pave the way for a more inclusive and accessible financial landscape for all.
Harrison Hochman, Chief Executive Officer of Sparrow
Sparrow is expanding their reach beyond college and universities direct and reaching out to credit unions to establish strategic partnerships. Red Canoe proves to be a good partner in the Pacific Northwest with their current growth in serving a younger demographic and mission to help members financially thrive.
About Red Canoe Credit Union
Red Canoe Credit Union is a $1.1 billion community financial institution proudly serving over 60,000 members. Red Canoe Credit Union is a vibrant financial institution dedicated to member success and community prosperity. Learn more at https://www.redcanoecu.com/. Deposits insured by the NCUA, an agency of the US government.
Sparrow
Sparrow, one of the fastest growing student lending platforms in the U.S., offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare real student loan rates through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
It is no secret that the cost of education has increased dramatically over the last several decades. At the current rate, the cost of college doubles every nine years. The rapid increase in the cost of education has forced generations of Americans to rely on student loans to afford a degree. Unsurprisingly, almost 70% of students in the Class of 2019 took out student loans.
Since borrowing affects most students in the US, it is important to know how the student lending industry operates. In this article, we’ll break down everything you need to know about student loans.
What is a Student Loan?
A student loan is money borrowed from the government or a private lender, designated for educational purposes. Typically, these loans cover the cost of tuition, books, supplies, and room-and-board.
While it is best to avoid debt, many financial professionals classify student loans as “good debt.” That’s because a college education is seen as an investment in yourself that helps increase your lifetime earning potential. In other words, the career earnings unlocked by a college degree are worth more than the loan. On average, college graduates earn more money and have better job security across their professional careers than those with only a high school diploma.
Federal student loans are provided by the U.S. Department of Education, while private student loans and student loan refinancing are supported by banks, credit unions, non-profits, and other private lenders.
Of the three types of debt, federal loans usually have the lowest interest rates and most flexible repayment options. With that said, the particular loan that is best for you depends on your financial need, year in school, and credit history.
Federal Student Loans
After you’ve exhausted grants, work-study, and scholarships, you should turn to federal student loans to pay for college.
To apply for federal student loans, you must fill out the Free Application for Federal Student Aid (FAFSA). The FAFSA is the go-to form that determines your eligibility for federal financial aid.
To receive federal support, you must be a U.S. citizen, have a valid social security number, have earned a high school diploma, and be enrolled at an eligible college or university.
The FAFSA is available starting Oct. 1 the year before a you plans to enroll. For example, if you are enrolling for the 2022-23 school year, the FAFSA will be available on Oct. 1, 2021.
The FAFSA is accepted, reviewed, and distributed on a rolling basis. You should complete the FAFSA form as early as possible. The earlier you apply, the better your chances are for receiving financial aid awards.
Benefits of Federal Student Loans
Federal student loans come with many benefits and protections that are not typically offered with private student loans. Designed to reduce the burden of repayment, these advantages include:
Federal student loans typically have lower interest rates than private loans. Rates for new federal loans are also fixed, meaning they’ll stay constant during the entire loan term.
2. No credit check
Unlike private student loans, most federal loans do not require you to have credit history. The only type of federal loan that requires a credit check is Direct PLUS, which is available to graduate students and parents. This makes federal student loans the best option if you have a limited credit history.
3. No cosigner requirement
Federal student loans do not require cosigners. This means you do not need to rely on a relative for financial help, making the process much easier for those legally and financially independent.
There is one exception: if you are a graduate student or parent applying for a Direct PLUS loan and have a poor credit history, you may not be eligible without an “endorser,” which is similar to a cosigner.
4. Forbearance and deferment options
Federal student loans offer forbearance and deferment options if you face economic hardship. Forbearance and deferment allow you to postpone your student loan payments for up to three years.
5. Income-driven repayment
Federal student loans offer a repayment plan that is based on your income. With income-driven repayment, you pay a percentage of your income each month — or $0 if you have no income.
6. Loan forgiveness
The Public Service Loan Forgiveness program allows you to have loans forgiven after at least 10 years of public service and 120 qualifying monthly payments.
Loan forgiveness is also available after you have made qualifying monthly payments in an income-driven repayment plan for 20 to 25 years.
We’ll break down what you need to know about each of the loans below.
Direct Subsidized Loans
Who can get Direct Subsidized loans?
In order to qualify for Direct Subsidized loans, you must be an eligible undergraduate student who demonstrates financial need.
How much can you borrow?
Your school determines the amount you can borrow. The amount you borrow may not exceed your financial need.
If you are an undergraduate student, the maximum amount you can borrow with a Direct Subsidized loan ranges from $5,500 to $12,500 per year depending on your year in school and your dependency status (whether you are a dependent or independent student). The maximum amount you can borrow per year increases every year you are in school.
What’s the interest rate on Direct Subsidized loans?
The interest rate for Direct Subsidized loans is 3.73% for 2021-22.
Is there an origination fee?
When you take out a Direct Subsidized loan, you will be charged an origination fee — a fee meant to offset a lender’s cost for issuing a loan. The origination fee is deducted from the loan disbursement before you or the school receives the funds. Currently, the origination fee on Direct Subsidized loans is 1.057%, but it changes each year on October 1st.
So for example, if you borrow $12,500 in Direct Subsidized loan, 1.057% (or $132) will go to the federal government, while the remaining $12,368 will go to your school (and then you).
Who will pay the interest?
The U.S. Department of Education pays the interest on a Direct Subsidized loan:
while you’re in school at least half-time,
for the first six months after you leave school (referred to as a grace period), and
during a period of deferment (a postponement of loan payments).
Thoughts from the Sparrow Nest
The low interest rate and generous grace period make Direct Subsidized loans the preferred option if you need to borrow money for school. But remember, Direct Subsidized loans are only available to undergraduates who can demonstrate financial need, and the amount of money you can borrow with Direct Subsidized loans is capped at $12,500. This means that, even if you do qualify for Direct Subsidized loans, you might need to look elsewhere to fund the gap in your education financing.
Direct Unsubsidized Loans
Who can get Direct Unsubsidized loans?
Direct Unsubsidized loans are based on merit, not financial need. They are made eligible to undergraduate, graduate, as well as professional students.
How much can you borrow?
Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.
The maximum amount you can borrow each academic year in Direct Unsubsidized loans ranges from $5,500 to $12,500 for undergraduates, depending on your year in school and your dependency status. Direct Unsubsidized loans have an annual limit of $20,500 for graduate or professional students.
What’s the interest rate on Direct Unsubsidized loans?
The interest rate for Direct Unsubsidized loans is 5.28% for 2021-22.
Is there an origination fee?
Similar to Subsidized loans, when you take out a Direct Unsubsidized loan, you will be charged an origination fee — a fee meant to offset a lender’s cost for issuing a loan. The origination fee is deducted from the loan disbursement before you or the school receives the funds. Currently, the origination fee on Direct Unsubsidized loans is 1.057%, but it changes each year on October 1st.
So for example, if you borrow $20,000 in Direct Unsubsidized loan, 1.057% (or $211) will go to the federal government, while the remaining $19,789 will go to your school (and then you).
Who will pay the interest?
When you take out a Direct Unsubsidized loan, you have a 6 month grace period. Unlike with Direct Subsidized loans, however, you are responsible for all interest charges on unsubsidized loans, from the moment you take out the loan until the day you pay it off.
Thoughts from the Sparrow Nest
Direct Unsubsidized loans are a great choice for undergraduate who have exhausted their Direct Subsidized loans. They’re also the preferred option for graduate and professional degree students who need federal funding. That is because of the relatively low interest rate and higher borrowing limits.
With that said, if you meet the financial need requirements to qualify for subsidized loans, you’ll pay less over time than you would with unsubsidized loans. Unlike with Direct Subsidized loans, you are responsible for all interest charges on Unsubsidized loans, from the moment you take out the loan until the day you pay it off.
Direct Subsidized Loans vs Direct Unsubsidized Loans
Subsidized
Unsubsidized
Qualification
Need-based
Merit-based
Annual borrowing limit
$5,500 – $12,500, depending on your year in school and dependency status
$5,500 – $12,500, depending on your year in school and dependency status
Interest while in school
Government pays interest while you’re in school
Interest accrues while you’re in school that you must eventually pay
Eligible borrowers
Undergraduates only
Undergraduate and graduate or professional degree students
Direct PLUS Loans
What are the different types of Direct PLUS loans?
There are two types of Direct PLUS loans: Grad PLUS loans and Parent PLUS loans.
Grad PLUS loans allow graduate and professional students to borrow money to pay for their own education. You can use Grad PLUS loans to cover any costs not already covered by other financial aid or grants, up to the full cost of attendance.
Parent PLUS loans allow parents of dependent students to borrow money to cover any costs not already covered by the student’s financial aid package, up to the full cost of attendance. The program does not set a cumulative limit to how much parents may borrow. Parent PLUS loans are the financial responsibility of the parents, not the student.
Who can get Direct PLUS loans?
While most federal student loans are need or merit-based, Direct PLUS loans are based on a credit check. If you have a poor credit history, you will have a harder time qualifying and might require an “endorser” (essentially a cosigner, who pledges to pay back the loan if the primary borrower cannot). Even if you have an adverse credit history, you may still be able to receive a PLUS loan if you meet additional requirements.
How much can you borrow?
The maximum PLUS loan amount you can receive is the cost of attendance (determined by the school) minus any other financial aid received.
What’s the interest rate on Direct PLUS loans?
The interest rate for Direct PLUS loans is 6.28% for 2021-22.
Is there an origination fee?
Similar to Subsidized and Unsubsidized loans, when you take out a Direct PLUS Loan, you will be charged an origination fee — a fee meant to offset a lender’s cost for issuing a loan. The origination fee is deducted from the loan disbursement before you or the school receives the funds. Currently, the origination fee on Direct PLUS Loans is 4.228%, but it changes each year on October 1st.
So for example, if you borrow $12,500 in Direct PLUS Loan, 4.228% (or $528) will go to the federal government, while the remaining $11,971 will go to your school (and then you).
Who will pay the interest?
Direct PLUS loans are not subsidized, which means that interest accrues while you are enrolled in school. Direct PLUS loans also do not have a “grace period,” which means you must start repaying PLUS loans as soon as you or the school receives the loan funds.
Thoughts from the Sparrow Nest
Direct PLUS loans can be a good option for parents and grad students, alike.
If you’re a parent, you should take out PLUS loans if you need the safety net or want the benefits these loans offer, such as income-driven repayment plans and Public Service Loan Forgiveness.
If you’re a student, you should take out PLUS loans to pay for grad school only after you have maxed out the borrowing limit on lower-interest unsubsidized loans.
Federal Student Loan Interest Rates
Loan Type
Borrower Type
Interest Rate
Origination Fee
Direct Subsidized Loans & Direct Unsubsidized Loans
Undergraduates
3.73%
1.057%
Direct Unsubsidized Loans
Graduate or Professional Students
5.28%
1.057%
Direct PLUS Loans
Parents and Graduate or Professional Students
6.28%
4.228%
Note: The interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS loans first disbursed on or after July 1, 2021 and before July 1, 2022. Rates and fees are subject to change.
Federal Student Loan Repayment Plans
Federal student loans offer several repayment options depending on the loan type. These options include:
Check out the information below for a complete breakdown of the different repayment options for federal student loans.
Standard Payment
The standard payment plan is available to all borrowers and is great if you want to pay off your debt in the shortest period of time. With a standard student loan payment option, you would make equal monthly payments for 10 years. You’ll pay less interest and pay off your loans faster than you would on other plans.
Eligible Borrowers
All borrowers are eligible for this plan.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
All PLUS loans
All Consolidation Loans (Direct or FFELP)
Pros of Standard Repayment:
Shorter repayment period compares to other options
Less interest over time
Cons of Standard Repayment:
You may have higher monthly payments compared to the other options
Your monthly payment would remain the same even if your income dropped
Graduated Repayment
The graduated repayment plan allow you to start your payments off at a lower amount and gradually increase to the full payment over a 10-year period. This plan is ideal if you plan to start your career at a lower income level or do not plan to dive into full-time work immediately after graduation.
Eligible Borrowers
All borrowers are eligible for this plan.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
All PLUS loans
All Consolidation Loans (Direct or FFELP)
Pros of Graduated Repayment:
The 10 year repayment period allows you to pay off your loans faster compared to other plans
Your payments might align better with the entry-level wages many new graduates take on
Cons of Graduated Repayment:
You would pay slightly more over time in comparison to the standard repayment plan since more interest would accrue while you’re making smaller payments
You could be in a tough spot if your income does not grow over time as you expect
Extended Repayment
The extended repayment plan is available to all borrowers except those with Federal Direct Loans or Federal Family Education Loans (FFEL) that owe less than $30,000. This option allows for either a fixed or graduated payment, leading to full repayment by the end of a 25 year period.
This option is ideal if you have a hefty total loan amount and need a smaller monthly payment.
Eligible Borrowers
If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
All PLUS loans
All Consolidation Loans (Direct or FFELP)
Pros of Extended Repayment:
Lower monthly payments relative to other plans
You have the option to choose either fixed or graduated payments
Cons of Extended Repayment:
There is no option for loan forgiveness as with the income-driven repayment options
The longer repayment period would cause you to pay more interest over time in comparison to the other plans
Income-Driven Repayment
Income-driven repayment plans use your income to set a monthly payment. This amount is typically 10-20% of your income and can be as low as $0 if you’re unemployed. With these plans, your loan term is extended, usually to around 12-25 years. When this term is up, the remaining balance you owe will sometimes be forgiven. However, you would be required to pay taxes on the forgiven amount, so you are not totally off the hook.
There are 5 different income-driven repayment options offered for federal student loans. Each of the income-driven repayment options has its own specific requirements in order to qualify, but they’re all ideal for people whose monthly income is too low to pay the standard monthly payment.
The PAYE plan makes your monthly payment 10% of your discretionary income. The payments are reevaluated every year and updated if your income changes for any reason or if your family size changes. If you have not repaid your loan in full after 20 years, the remaining balance will be forgiven.
Eligible Borrowers:
If you are a new borrower from either on or after October 1, 2007 and received a Direct Loan disbursement on or after October 1, 2011
Eligible Loans
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidated Loans not including PLUS loans made to parents
2. Revised Pay As You Earn Repayment Plan (REPAYE)
The REPAYE plan makes your monthly payments 10% of your discretionary income and is recalculated every year in the same way the PAYE plan is. For undergraduate loans, your remaining balance will be forgiven after 20 years, and for graduate loans, 25 years.
Eligible Borrowers:
Any Direct Loan borrowers with an eligible loan type
Eligible Loans:
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidated Loans not including PLUS loans made to parents
3. Income-Based Repayment Plan (IBR)
An IBR plan sets monthly payments at either 10 or 15 percent of your discretionary income, neither amounting to more than what you would pay under the 10-year standard repayment plan. Payments are reevaluated every year based on changes in income and family size. Depending on when you received your first loan, your remaining balance will be forgiven after either 20 or 25 years. It is important to note that you may have to pay taxes on this forgiven amount.
Eligible Borrowers:
Those with high debt relative to their income
Eligible Loans:
Direct Subsidized and Unsubsidized
Subsidized and Unsubsidized Stafford Loans
All PLUS loans for students
Consolidation Loans not including PLUS loans made to parents
4. Income-Contingent Repayment Plan (ICR)
The ICR plan sets monthly payments at whichever is lesser: 20% of discretionary income OR the monthly payment you’d have on a plan with a fixed payment over 12 years, adjusted to your income. Payments are reevaluated and updated based on changes in your income and family size. Outstanding balances are forgiven after 25 years.
Eligible Borrowers:
Any Direct Loan borrower with an eligible loan type
Eligible Loans:
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidation Loans
5. Income-Sensitive Repayment (ISR)
The ISR plan sets monthly payments based on your annual income with the caveat that the loan is paid in full within 15 years.
Eligible Borrowers:
Only for FFELP Program loans
Eligible Loans:
Subsidized and Unsubsidized Stafford Loans
FFELP PLUS Loans
FFELP Consolidation Loans
Pros and Cons of Income-Driven Repayment
Pros
Cons
1.) Your monthly payments would likely be more affordable
2.) Your monthly payments would decrease if your income decreased, so you would not be locked into paying a certain amount each month even if you fall into economic hardship
1.) You may pay more in interest with a longer repayment period
2.) The total amount you pay could be more than the standard repayment plan depending on the plan you choose
3.) You must meet certain requirements in order to qualify
Private Student Loans
Private student loans can help you pay for college after you’ve exhausted scholarships, grants, and federal loans.
Private loans are made by private lenders such banks, credit unions, non-profits, and online lenders, and have terms and conditions that are set by the lender. Private student loans typically have higher interest rates and less flexible repayment options compared to federal student loans.
Who Can Get a Private Student Loan?
To qualify for a private student loan, you’ll need to attend an eligible school, as well as meet any age, education, or citizenship requirements. You’ll also need to meet a lender’s criteria for credit and income, or apply with a cosigner who does.
While most private student loans are credit-based, there are a handful of private student loans that are future-income-based. These are great for students who cannot meet the credit requirements and do not have access to a qualified cosigner.
How Much Can You Borrow?
Private student loans have a higher borrowing limit compared to federal loans. Private lenders allow you to borrow up to your school’s cost of attendance. With that said, it is wise to only borrow what you need — and what you can afford to repay.
How are Interest Rates Determined?
The interest rate on your private student loan depends on a few main factors:
Most private student loans are credit-based. That means the lender looks at your history of borrowing money and paying it back on time. They want to know how creditworthy, or how responsible you are with credit, before approving your student loan application.
In general, a higher credit score leads to a lower interest rate. The reverse is also true — a lower credit score leads to a higher interest rate.
Type of interest rate (fixed vs variable)
Most private lenders allow you to choose between a fixed and variable interest rate.
A fixed interest rate stays the same for the life of the loan. This means you’ll have a predictable student loan payment each month.
A variable interest rate fluctuates throughout the life of the loan depending on economic conditions. Variable interest rates often start out lower than fixed rates but can change, so your monthly student loan payments may vary considerably from month to month.
In general, fixed student loan interest rates are a better option than variable rates. That is because fixed rates always stay the same, so you will know exactly how much you need to pay each month. If you’re unsure which rate to choose, go with fixed; it is the safer option and allows you to budget accordingly. If you’re comfortable taking a risk to potentially save on interest, consider a variable rate.
Loan term
Loan term, also called loan duration, is the length of time you’ll have to pay off your loan. Private student loan terms usually range between 5-20 years, with plenty of options in between. Keep in mind that the longer your loan term, the more time interest accrues — this leads to higher total cost.
A simple way to think about is:
The shorter the loan term, the higher the monthly payments. If you’re making high monthly payments, the faster the loan will be paid off and the lower the total cost, since interest has less time to accrue.
On the other hand, the longer the loan term, the lower the monthly payments.If you’re making low monthly payments, the slower the loan will be paid off and the higher the total cost, since interest has more time to accrue.
What is a Cosigner?
If you cannot qualify for a student loan on your own, most private lenders will encourage you to apply with a cosigner. A cosigner is a person – such as a parent, close family member, or friend – who pledges to pay back the loan if you do not. This can be a benefit both to you and your lender since many many college-bound high school students have not had time to build up their own credit. However, it is risky to be the cosigner because if the student is unable to pay the loan back, the cosigner is responsible to pay on their behalf.
Private Student Loan Repayment Plans
While repayment options depend on the lender, most private lenders offer some variation of the repayment plans below.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it is not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance will not grow while you’re in school.
You will not make any progress paying down your loan balance while you’re a student. But at least you will not owe more than you borrowed when it is time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance will not grow as quickly.
Deferred Repayment
Do not make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You will not have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Are there any discounts or fees on private student loans?
Auto-pay discount
Many lenders allow you to get an interest rate reduction by signing up for automatic payments. The autopay discount generally starts at 0.25% but can go up to 2%, depending on the lender.
Origination fee
An origination fee is a you must pay to offset a lender’s cost for issuing a loan. Private loans rarely have an origination fee, but all federal loans do (although at different rates: 1.057% for federal subsidized and unsubsidized and 4.228% for Federal PLUS).
Prepayment penalty
A prepayment penalty is a fee you would have to pay if you want to repay your loans early. It is not allowed on any student loans, federal or private.
Application fee
There is generally no cost to apply for private student loans.
Student Loan Refinance
What is Student Loan Refinancing?
Student loan refinancing is when a lender pays off your existing loans and gives you a new one with a lower interest rate or repayment plan. In the long run, this saves you money since you’ll be paying less interest.
Refinancing could look like this [note: this is a very basic example]:
Loan 1: $10,000 at 7.5% interest rate
Loan 2: 13,000 at 8.25% interest rate
~insert magical refinancing here~
New Loan: $23,000 at 5.25% interest rate
Notice that the new loan is for the same amount of total debt, however, the interest rate is lower. This would save you money in the long run since less interest would accrue.
Example of Refinancing Student Debt
To contextualize this information, let’s look at an example. Let’s say you took out a student loan of $36,405 at an interest rate of 4.66% during undergrad and you plan on paying it off over the next 10 years at a monthly rate of around $380. By the time you finish paying it off, you will have actually paid $45,614.52–the original $36,405 plus $9,208.42 in interest. On the other hand, if you refinance for an interest rate of 2.59% over the same ten-year period, you can reduce your monthly payments to $344.69, and pay only $4,956.52 in interest, saving $4,251.50 over the lifetime of the loan.
What Do I Need to Refinance?
Generally, you need a strong credit score (mid-high 600s), a stable income, or a qualified cosigner to refinance.
Should I Refinance My Loans?
You should refinance your loans if it will save money. Generally, a lower interest rate and shorter repayment plan will lead to extra savings.
When You Should Refinance
If the savings will be significant. If you can qualify for a better interest rate, it is a good idea to refinance. You do not need to have a perfect credit history. As long as you can get that lower interest rate, you’re likely going to save some coin.
If you have student loans with high variable interest rates. Variable interest rates do just as they’re called – they vary. It is challenging to predict what payments will be with a variable interest rate as it is always changing. Whether your variable interest rate is currently high or low, it may be a good idea to refinance if you can secure a lower fixed rate.
If the economy supports low interest rates. Interest rates are impacted by economic factors. If the rate environment is good, rates may be lower, and it may be a good idea to take advantage of that.
If your finances have improved. If your financial situation has improved since you first took out your loans, you may qualify for a better interest rate on a new loan.
When You Should Not Refinance
If you’re planning to pursue student loan forgiveness. If you are pursuing a program such as Public Service Loan Forgiveness, you should not refinance your student debt as it would make you ineligible for the program.
If you have Federal Loans and may experience a drop in income. When you refinance federal student loans, you lose the option to participate in federal repayment programs such as income-driven repayment and federal loan relief options.
If you’ve declared bankruptcy recently. It is significantly more difficult to refinance student debt if you have declared bankruptcy. While not impossible to refinance under these conditions, many lenders will require around 4-10 years to have passed since the bankruptcy filing before lending.
If you’ve had to default on student debt. Defaulting on a student loan is a red flag to lenders as it tells them that you may not be able to make consistent loan payments.
How Many Times Can I Refinance?
You are allowed to refinance as many times as you like, free of cost.
Final Thoughts from the Sparrow Nest
Our goal is to bring simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. We hope this guide helps.
Around 43 million Americans owe a grand total of $1.7 trillion on their student loans and unfortunately, this number is projected to increase to roughly $2 trillion by 2022.
We all know $1.7 trillion is a massive number, and it’s important to recognize it as what it truly is: a crisis. The weight of student debt permeates every aspect of our lives.
This shouldn’t scare anyone away from their dream of pursuing a college education, but it is crucial to evaluate the vast impact of the crisis in which we’re living.
Here’s What You Need to Know About How the Student Debt Crisis Affects You:
Student loan debt impacts more than just the individuals desperately praying for their payments to disappear.
While there are various ways student loan debt impacts the economy, we’ll focus on three ways that impact the college student and recent graduate demographic most:
Shifting the Economic Power Away from Students and Recent Graduates
Since the 1980s, the cost of a college education has increased rapidly. A degree that cost roughly $53,000 in 1989 now costs around $104,000. The worst part? Wages haven’t increased at the same rate. This makes it harder and harder for college graduates to pay back their student loans.
As a result of this, students are increasingly disempowered when it comes to investing in a college education. Students hardly benefit from a rise in the cost of education, and rather, lenders, investors, and universities do. This leaves students in a tricky position, often forced to choose between taking out loans for a stronger education or opting for a lower-cost option that feels like less of a fit.
Lowering the Rates of Homeownership
Between 1970 and 2017, the rate of homeownership for Americans aged 20-34 has dropped nearly 10%. While there are various contributors to the drop in homeownership, the student debt crisis is a central factor.
To put it simply, holding an abundance of student debt prevents people from purchasing real estate. Knowing that you have upcoming loan payments can prevent you from being able to save for a down payment on a new home, or from getting into another monthly payment with rent.
While this isn’t as applicable to current college students, it is a large concern for almost everyone’s long-term goals (while it was nice during COVID, few people plan to live at the ‘rents’ place forever). Whether you plan to sell your first home and make a profit or leverage the equity for other expenses, homeownership is a sound financial decision. Not only does it mark a step in fully embracing one’s independence and freedom as an adult, but it helps support the long-term goals of both the individual property owner and the surrounding community.
Shifting Timelines of Typical Life Milestones
Regardless of any internet memes you see poking fun at the differences in generations, there are stark differences between today’s college students and those in our parents’ generation. Due to the increase in student loan debt, current borrowers are (practically) forced to delay traditional life milestones such as purchasing their first car or home, getting married, having children, and even retirement.
Roughly 21% of young millennials are waiting longer to get married and another 21% are delaying having kids due to their student debt. What may be most concerning is that roughly 40% of younger millennials are putting off saving for retirement. While perhaps not a pressing issue at a young age, this does raise concerns for the ability to retire down the line and could impact future generations as they prepare to support the generations before them.
Inequality Impact
There is substantial evidence highlighting the various disparities in the amount of student debt accumulated across racial and ethnic groups.
According to EducationData.org, “Black and African American college graduates owe an average of $25,000 more in student loan debt than White college graduates.” While this figure is important to understand, we must consider how this impacts the milestones we previously discussed.
The impact of student debt goes well beyond the payments and impacts how people engage in the world around them. This is crucial to understanding how deep the inequalities created by student loan debt truly go when left unchecked.
Hanson, M. (2021, June 9). Student Loan Debt by Race [2021]: Analysis of Statistics. EducationData.
Mental Health Impact
If you are a current student or recent graduate, you may be one of the individuals already feeling the mental health impact of student loan debt.
Psychologists have studied the relationship between student loan debt and mental health and have concluded that “student debt has been linked to depression, anxiety, and even thoughts of suicide.” This oftentimes comes from the feeling of being stuck or stagnant in one phase of life, or circumstance, due to one’s student loan debt.
While this doesn’t mean that everyone with student loan debt will experience mental health issues, it is becoming increasingly prevalent. In a survey of college counseling directors, 95 percent said that significant psychological problems are a major, increasing concern for their students
Currently, 1 in 4 young adults between the ages of 18-24 have a diagnosable mental illness. However, we can expect this number to worsen should the student debt crisis continue growing at its current rate.
What Can We Do About the Debt Crisis?
It may feel like we just dropped an absolute bomb on you, and in some ways, we probably have. The student debt crisis is serious, and we do need to think critically about how we can repair such a broken system. With that said, there are positive things happening to fix it.
Politicians are Recognizing the Crisis
More and more politicians are coming forward and recognizing the vast impact of the student debt crisis and sharing their plans to address it.
Acts are Being Proposed
Acts such as Elizabeth Warren’s Student Loan Fairness Act have been proposed to alter and improve the interest rates tied to federal loans.
Schools are Stepping Up
Many universities have announced plans to provide free or low-cost education to low-income students. For example, the University of Michigan created their High Achieving Involved Leader Scholarship to provide a 4-year education free of tuition and fees to qualified low-income students.
Big Tech is Getting Involved
Major tech companies, including Google, Amazon, Microsoft, and IBM, have started offering their own certification programs for a fraction of the cost of a traditional college degree. Their goal is to create standardized skillsets and equip students with the essential skills they need to get a job in high-paying, high-growth career fields. Best of all, the programs do not require a degree or any prior experience to be eligible.
Sparrow is Here to Help
If federal student loans don’t cover your education costs, a private student loan could help. We want to help you find the loan that fits your needs best, saving you both time and money. With Sparrow, you can compare personalized offers from multiple lenders to find the right student loan for you.
WARREN, OHIO – 7 17 Credit Union is proud to announce the appointment of Harrison Hochman to its Board of Directors. A dynamic and accomplished entrepreneur, Hochman brings a wealth of experience in financial technology and a passion for innovation that aligns seamlessly with the credit union’s mission of empowering members through financial access, education, and integrity.
Hochman is co-founder and CEO of Sparrow, a groundbreaking fintech platform he helped launch from his parents’ backyard at just 20 years old. Sparrow’s newest product—Crest—is purpose-built to help credit unions and banks deepen member wallet share by automating personalized, multi-product marketing journeys. Without requiring core integration, Crest enables institutions to intelligently promote checking, credit card, loan, and savings products—driving engagement, boosting share of wallet, and reinforcing PFI relationships. Recognized as one of Forbes’ 30 Under 30 in the Education category and named one of eleven young global leaders in STEM, environmental, and societal sustainability by the prestigious Straubel Foundation, Hochman has been widely acknowledged for his visionary leadership and dedication to making education more accessible and affordable.
I am honored to join the board of one of the largest credit unions in Ohio. 7 17’s passion for improving the lives of its members and supporting the communities it serves resonates with me and I look forward to working with the board and management to expand the credit union’s reach throughout Ohio and beyond.
Harrison Hochman, Chief Executive Officer of Sparrow
A graduate of Stanford University with both bachelor’s and master’s degrees, Hochman combines academic excellence with real-world impact.
We are thrilled to welcome Harrison to the board. His forward-thinking mindset and history of innovation in the financial industry align perfectly with our mission to deliver purposeful, people-first banking. As a locally rooted credit union, we believe strongly in the power of banking with intention — supporting our members and communities through meaningful growth and service and we know Harrison will be a tremendous asset to leading that effort.
Paul Marshall, Board Chairman of 7 17 Credit Union
His experience in fintech, commitment to sustainability, and role as a mentor to aspiring entrepreneurs make him an invaluable addition to the 7 17 Credit Union Board. Harrison’s appointment further contributes to 7 17’s investment in our member’s digital experience and enhancement to the ease of use of our mobile and online banking tools. It further underscores 7 17 Credit Union’s dedication to innovation, financial education, and a future shaped by responsible, community-focused banking.
John Demmler, President and Chief Executive Officer of 7 17 Credit Union
About 7 17 Credit Union:
7 17 Credit Union is the largest credit union in Northeast Ohio with 13 branch locations and more than 120,000 members. Established in 1957, we’re proud to help people improve their lives financially and support the communities we serve. Anyone living in Northeast Ohio is eligible to open accounts with 7 17. To learn more about 7 17, our services, and how to join, visit www.717cu.com.
About Sparrow: Sparrow partners with over 100 credit unions representing $100B+ in assets and 6 million members. Through Sparrow, credit unions accelerate hyper-targeted digital relationship-building—unlocking deeper conversations and stronger connections. The Crest platform crowdsources best-practice automated journeys from high-performing peers, placing the right message in front of the right member at the right time. The result: more multi-product relationships and smarter member engagement.
CUNA Strategic Services aligns with Sparrow to help credit unions soar into the future and develop loyal, multi-product relationships with the next generation of members
MADISON, WI – January 30, 2025 – CUNA Strategic Services is pleased to announce its new alliance with Sparrow, a trailblazer in fintech disruption. This collaboration aims to help credit unions meet the unique lending and engagement needs and aspirations of Gen Z and Millennial members.
The alliance between Sparrow and CUNA Strategic Services is a commitment to revolutionizing how credit unions connect with younger generations. In the digital age, innovation is imperative. Through Sparrow’s advanced lending technology, credit unions are equipped to seamlessly adapt to the dynamic needs of Gen Z and Millennials, ensuring a future where credit unions are the institutions of choice for younger members.
Barb Lowman, President of CUNA Strategic Services
Sparrow’s white-labeled lending marketplace not only assists younger members in solving their hardest financial challenge (such as financing their education) but also leverages marketing analytics and automations to provide tailored recommendations from the credit union that result in loyal, long-term members.
I realized while on campus that none of my friends knew what a credit union was, even as some of them took out indirect loans from actual credit unions. Our alliance with CSS is a pivotal step to help credit unions across America respond to the call of the next generation, and usher in a new chapter of engagement.
Harrison Hochman, Chief Executive Officer of Sparrow
Sparrow proudly partners with over 90 credit unions, ranging from institutions with $34 billion in assets to those with just $6 million.
Credit unions transitioning to Sparrow’s platform have seen:
70% of all users being younger non-members who state interest in becoming members after harnessing the service
Access to 260+ unique data attributes per Gen Z user, and pre-set automations to create deep, multi-product relationships with them
The ability to be the active relationship builder with a younger member, as opposed to handing them, and their data, to affiliate partners at this formative time in their lives
Sparrow enables credit unions to focus on what they do best – deeply understanding their members’ needs and adopting innovative solutions that transform their financial futures.
About CUNA Strategic Services: CUNA Strategic Services develops strategic alliance relationships to offer quality products and services to your credit union that contribute to your bottom line, add to your peace of mind, and enhance your relationships. The company is jointly owned by America’s Credit Unions and the state leagues. For more information, visit www.cunastrategicservices.com.
About Sparrow:
Sparrow empowers credit unions to provide unparalleled loan services to grow Gen Z membership. Its innovative platform shortens the lengthy search for the most competitive private loan rates from weeks to seconds. Sparrow enables credit unions to be the active relationship builder in their members’ financial journeys, all without the complexities of managing a loan portfolio. Sparrow is dedicated to helping credit unions win the loyalty of the next generation of members.
$135M Credit Union leverages Sparrow to build a bridge to the next generation of membership
NEW YORK, NY – August 13, 2024 – Central Maine Credit Union, a steadfast advocate for financial well-being, today announced a strategic partnership with Sparrow, a pioneering fintech platform dedicated to empowering credit unions in the Gen Z market. By integrating Sparrow’s cutting-edge Gen Z financing solution, Central Maine Credit Union is poised to build a strong foundation for the next generation of members.
Recognizing the critical importance of financial literacy and support for young adults, Central Maine Credit Union is committed to addressing the unique challenges faced by Gen Z.
Our partnership with Sparrow is a pivotal step in securing the future of our credit union. By offering a superior student loan experience, we are not only solving a significant financial challenge for young people but also cultivating long-term relationships built on trust and value.
Kerry Hayes, Chief Executive Officer of Central Maine Credit Union
Sparrow’s platform provides Central Maine Credit Union with a powerful tool to attract and retain Gen Z members. By offering a curated marketplace of student loan options, personalized financial guidance, and unparalleled transparency, Central Maine Credit Union is positioning itself as the financial partner of choice for young adults.
We are thrilled to partner with Central Maine Credit Union. Their dedication to their members aligns perfectly with Sparrow’s mission to help credit unions thrive in the digital age. Together, we are building a bridge to the future by empowering young people to achieve their financial goals.
Harrison Hochman, Chief Executive Officer of Sparrow
Sparrow’s white-labeled platform enables credit unions to seamlessly integrate student loan services into their existing offerings, enhancing the overall member experience. By adopting this innovative solution, Central Maine Credit Union is demonstrating its commitment to staying ahead of industry trends and meeting the evolving needs of its membership.
About Central Maine Credit Union
Central Maine Credit Union is a member-owned financial cooperative with a mission to empower financial well-being through personalized financial services and a commitment to community. With over $130 million in assets, Central Maine Credit Union serves as a trusted financial partner for over 5,000 members in Maine. Learn more at https://centralmainecu.com/.
About Sparrow
Sparrow empowers credit unions to provide unparalleled student loan services to grow Gen Z membership. Its innovative platform shortens the lengthy search for the most competitive private student loan rates from weeks to seconds. Sparrow’s vision extends beyond transactions, aiming to assist credit unions in cultivating deep, personalized relationships with their younger members. Through its white-labeled platform, Sparrow enables credit unions to be the active relationship builder in their members’ financial journeys, all without the complexities of managing a student loan portfolio. Partnering with over 60 credit unions, as well as 30 other universities, fintechs, and community financial institutions, Sparrow is dedicated to helping its partners win the loyalty of the next generation of members. Learn more at www.sparrowfi.com and follow us on LinkedIn.
Financial Plus Credit Union Embraces Innovation to Support Michigan’s Future Workforce and Education
FLINT, MI – In an exciting leap forward for educational finance, Financial Plus Credit Union (FPCU) is thrilled to announce a dynamic partnership with Sparrow, a trailblazer in financial technology aimed at transforming the way credit unions serve the evolving needs of their communities. This partnership is set to revolutionize the student loan experience for Michigan’s trade school and college students, embodying FPCU’s commitment to enriching the financial well-being of its members.
Through this partnership, FPCU is now proud to facilitate funding for over 88 trade schools, 30 community colleges, and 61 four-year universities throughout Michigan, ensuring a wide range of options for prospective students.
For Brad Bergmooser, Chief Executive Officer of Financial Plus Credit Union, it was critical that FPCU stayed true to its communities of members.
Our commitment to our communities has never been stronger. Our partnership with Sparrow shows that we are answering the call of the next generation as they pursue life-changing educational opportunities. We started by supporting factory and trade-workers, and are now deepening our commitment to them through an innovative, digital solution.
Brad Bergmooser, Chief Executive Officer of Financial Plus Credit Union
Addressing Michigan’s Educational Financing Needs with Precision and Care
FPCU’s integration with Sparrow’s platform marks a pivotal shift in how educational financing is approached. The platform will provide a private student loan marketplace designed to help students find the coverage they need for remaining educational costs after exhausting all scholarships, grants, work study, and federal loans. The partnership brings to the forefront:
Comprehensive Educational Coverage: Through the collaboration with Sparrow, members can now find the best private student loan offer for their degree in a matter of seconds, without any impact to their credit score.
Commitment to Michigan’s Workforce: By enhancing access to trade school education, FPCU is both staying true to its roots of supporting Michigan’s working-class auto workers, while at the same time fueling the future of the economy.
Innovative Community Support: This partnership is a testament to FPCU honing in on the unique needs of each generation in their communities, and adopting solutions that change the course of their members’ financial futures.
We’re thrilled to launch our partnership with FPCU; utilizing Sparrow is a great complement to their growing digital reach. The collaboration will empower FPCU to meet young consumers where they are and address their evolving needs.
Harrison Hochman, Chief Executive Officer at Sparrow
About Financial Plus Credit Union: Financial Plus Credit Union is a community-driven financial institution, with assets totaling $1.3 Bn. It was originally founded by auto-workers rooted in Genesee County, and now serves all of Michigan with over 81,000 members. FPCU takes pride in its personalized service, competitive rates, and shared ownership and member empowerment, and is committed to fostering a community that genuinely cares about its members. Learn more at www.myfpcu.com.
About Sparrow:Sparrow empowers credit unions to provide unparalleled student loan services to grow Gen Z membership. Its innovative platform shortens the lengthy search for the most competitive private student loan rates from weeks to seconds. Sparrow’s vision extends beyond transactions, aiming to assist credit unions in cultivating deep, personalized relationships with their younger members. Through its white-labeled platform, Sparrow enables credit unions to be the active relationship builder in their members’ financial journeys, all without the complexities of managing a student loan portfolio. Partnering with over 50 credit unions, as well as 30 other universities, fintechs, and community financial institutions, Sparrow is dedicated to helping its partners win the loyalty of the next generation of members. Learn more at www.sparrowfi.com and follow us on LinkedIn.
Figuring out student loans is overwhelming. People start throwing out loan lingo left and right, and all the terms start to blend together.The term “cosigner” is one popular example of this loan lingo and often becomes a point of confusion. Understanding what a student loan cosigner is and when you may want to have one is crucial in the student loan process. Let’s break it down.
What is a Cosigner?
A cosigner is someone who agrees to sign onto a loan alongside you, the borrower. By doing so, the cosigner takes legal responsibility for repaying the loan if you do not. A cosigner is often a family member or friend but can be anyone who is willing to cosign.
Private student loans, on the other hand, come from private entities and are given out based on your creditworthiness.* If the lender deems you not creditworthy enough to borrow from them, you may need a cosigner to secure the loan.
*Creditworthiness is essentially how much a lender trusts you to pay back your debts. The higher your credit score, the more creditworthy you appear to lenders.
Why Would I Need a Cosigner?
There are a variety of reasons why you may need a cosigner to get approved for a private student loan, such as:
Your credit score or income is too low
Your credit or employment history is too short
Your credit report shows a variety of other debt or a checkered history in repaying it
Your residency status requires applying with a citizen or permanent resident cosigner
From the lender’s perspective, having a creditworthy cosigner lessens the risk associated with lending to you. It assures them that there is a responsible individual able to pay the loan in full and on time.
In these instances, having someone cosign may be your only option for actually securing a loan with that specific lender. Even if you are deemed creditworthy enough to take out a loan on your own, having a creditworthy cosigner can help you qualify for and borrow loans with more attractive terms.
Is Having a Cosigner a Bad Thing?
Needing a cosigner isn’t necessarily a bad thing and is actually quite common. According to a study conducted by MeasureOne, in the 2019-2020 academic year, over 90% of undergraduate students needed a cosigner for at least one private loan they took out. Even if you don’t need a cosigner, including one on your application may have additional positive benefits.
Benefits of Having a Cosigner
If you are able to have a creditworthy cosigner on your private student loans, there are numerous benefits, such as:
The ability to secure a loan. Without a cosigner, you may not be able to secure a loan on your own.
Lower interest rates. If your cosigner has demonstrated creditworthiness, private lenders will likely give you a lower interest rate on your loans.
Less expensive over time. Lower interest rates on your loans means lower payments, which means less money spent over time.
The person cosigning can also benefit from doing so. If the primary borrower demonstrates responsibility in making their loan payments, the cosigner’s credit score can go up, too.
Can You Get a Loan Without a Cosigner?
The short answer here is yes. However, more often than not, you will need a cosigner on a private student loan, particularly if you’re an undergraduate.
You should shop around for a lender that will offer you the best interest rates and terms, but you may find that many require a cosigner for first-time, inexperienced borrowers.
If you can get a loan without a cosigner and still get the same interest rate either way, it’s best to take the loan out without the cosigner. It’s better to build your own credit over time without the cosigner being legally responsible for your debt.
What to Look For in a Cosigner
If you’re unable to get approved without a cosigner, having anyone willing to cosign will be helpful. But, if you do have a choice, here are a few things to look for in a potential cosigner:
Someone with stable income who could genuinely handle paying off your loan if you struggle to do so yourself
Someone with little to no debt themselves as it could be challenging to support your loan payments (if needed) with their own debt
Someone with a high credit score
Someone with a solid debt repayment history
Final Thoughts from the Nest
Whether you need a cosigner may be a bit out of your control. The good news is that most college students need a cosigner and ultimately benefit from having one. Understanding what they are and how to proceed if you do need one is the most important first step.
If you’re struggling to find a cosigner, don’t worry. We’ve partnered with several lenders to offer Sparrow members non-credit-based student loans that don’t require a cosigner. To see what loan options you prequalify for, fill out the Sparrow application.
The interest rate on your student loan(s) will drastically impact how much you pay over the life of the loan. Even a small increase in the interest rate could result in thousands of dollars more over your repayment term.
Finding a low interest student loan should be of utmost priority when selecting the best option for you. Here are the best student loan rates of September 2024.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EdvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 7.00% to 10.57% Variable Interest Rate: 8.12% to 11.02% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Interest rates will vary significantly based on the lender and type of loan. So, there really isn’t a specific threshold of what is considered a “good” interest rate. Generally speaking, however, an interest rate at or above 10% is considered very high, while interest rates less than 7% are on the lower end.
Across all student loans, 5.8% is the average interest rate. Use the average interest rate as a marker when determining if the interest rate offered to you is good.
Rates Are Just One Piece of the Puzzle
While the interest rate on your student loan is an incredibly important factor, it is only one piece of a much more complex puzzle. When selecting a student loan, you should also consider factors such as whether the interest rate is fixed or variable, the repayment period, and the projected monthly payment.
Fixed vs Variable Interest Rate
A fixed interest rate will remain the same throughout the life of the loan, while a variable interest rate is subject to change due to market conditions. So, if you borrowed a loan with a 5% fixed interest rate, it would remain at a 5% interest rate up until the day you pay it off. On the other hand, if you borrowed a loan with a variable interest rate starting at 5%, the rate could fluctuate up and down throughout the life of the loan.
There are pros and cons to both fixed and variable rate loans. Select the option you feel most comfortable with.
Repayment Period
Generally speaking, the longer the repayment period, the more you will pay over the life of the loan. Consider the repayment periods offered to you and how they will impact what you pay throughout repayment.
Principal Balance
$30,000
$30,000
Interest Rate
5%
5%
Repayment Period
10 years
15 years
Monthly Payment
$318
$237
Total Paid
$38,184
$42,703
With a shorter repayment period, you will have larger monthly payments. However, if you’re able to afford them, a shorter repayment period can save you quite a bit over the life of the loan.
Projected Monthly Payment
During repayment, you will be required to make at least the minimum monthly payment on your loan. As illustrated by the table above, the monthly payment will change based on the repayment period and interest rate you have.
Some private student lenders may only offer one or two repayment periods. Before agreeing to a student loan, consider the projected monthly payment amount. If the amount does not seem feasible for you given your projected monthly income after graduation, you may want to explore other student loan options.
How to Find the Best Student Loan Rate
Before agreeing to any loan, it’s important to do your research. To simplify the search process, we built Sparrow.
Rather than hopping from site to site comparing loans one by one, Sparrow allows you to compare personalized, pre-qualified student loan rates from 15+ lenders in one form. To find the best student loan rate for you, start the process with Sparrow.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Typically, it’s recommended that borrowers have a good credit score to access competitive student loan offers. But what if you have no credit at all?
Don’t fret — there are a variety of student loan options for borrowers with no credit.
Keep reading to learn how you can get student loans with no credit and to explore our top picks for lenders.
Can You Get Student Loans if You Don’t Have Credit?
It depends on the type of loan you are borrowing. For federal loans, you do not need to have credit to qualify. On the flip side, most private student loans will require you to have a strong credit history.
However, there are still private loan options for those without a credit history. Borrowers can either apply for non-credit-based loan options or have a cosigner with a strong credit history cosign their loan. That said, borrowers should consider a cosigned loan option before non-cosigned, non-credit-based loans because the interest rates can be higher for the latter.
Student Loan Options if You Have No Credit
There are plenty of loan options available for prospective borrowers without any credit.
Federal Student Loans
Experts recommend that borrowers exhaust their federal loan options before resorting to private loans. Federal loans have controlled interest rates, strong borrower benefits, and variousrepayment plans, making them the preferred option.
Generally, most federal student loans have fixed interest rates that are set by Congress. This means that the interest rate on the loan will never change, protecting your interest rate from fluctuations due to the economy.
If you opt for private student loans, look into the lenders below. Rather than searching for lenders one-by-one, we recommend comparing your no credit options with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Here are the best private student loans for no credit:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Ascent’s Non-Cosigned, Outcomes-Based loan is a great option for high school upperclassmen (including DACA recipients and international students) with limited credit/income and no cosigner. Qualifying students must have a GPA above 2.9.
Fixed interest rate: 13.09% to 15.08% Variable interest rate: 13.07% to 15.02%
Edly’s income-based repayment (IBR) loan is not like your average student loan. Students who are approved for an Edly IBR loan do not make payments during school but can make payments based on their income after graduation.
IBR loans are best for borrowers who want a loan that doesn’t require a cosigner or have a minimum credit score, in addition to flexible repayment plans and competitive repayment terms.
The APR on an IBR loan depends on your projected income, but the Edly IBR loan has a maximum 24% APR.
If you are a high-achieving undergraduate student with limited credit history and income, Funding U is the lender for you.
Funding U offers student loans without a cosigner, credit history, or income. Your eligibility as a borrower depends on your GPA and estimated future earnings.
Fixed interest rate: 7.49% to 12.99% Variable interest rate: Funding U does not offer variable interest rates.
MPOWER offers non-cosigned loans to domestic, international, and DACA undergraduate and graduate students. MPOWER is available in all 50 states and offers special discount rates for responsible borrowing.
Fixed interest rate: 13.74% (14.75% APR) Variable interest rate: MPOWER does not offer variable interest rates.
As a borrower, finding the best loan option for you is important for your future finances. As you sift through your options, be sure to compare loans across interest rates, repayment plans, and borrower protections.
Given the rising cost of college, finding affordable college financing is more important than ever. As a parent, it’s both understandable and admirable to want to support your child through the process of paying for college. It’s essential that you have the tools to pick the best college loan.
If you’re curious about your parent loan options, you’re in the right place. Here’s what you need to know to pick the best college loan for parents.
The best parent loan for you will ultimately be the one that suits your needs best. However, having a list of options that offer competitive interest rates, flexible repayment options, and strong customer service will make the search process easier.
The following are our top picks for the best private college loans for parents.
Parent Loans vs. Traditional Private Student Loans
While parent loans and traditional private student loans are similar in nature, there are some key differences you’ll want to consider before choosing one over the other.
A parent loan allows you to borrow on behalf of your child to finance their education. While you may require your child to make payments directly to you, you are legally the sole person responsible for paying back the loan.
A traditional student loan, however, is one that your child borrows on their own behalf. If you cosign the student loan, both you and your child are legally responsible for paying back the loan.
Both federal and private lenders offer parent loans. While similar in that parents can borrow both loan types on behalf of their child, they differ in several ways.
The only federal student loan parents can borrow on behalf of their child is the Parent PLUS Loan. To receive a Parent PLUS Loan, you must:
Be the biological or adoptive parent of a dependent undergraduate student who is enrolled at least half-time at an eligible school
Not have an adverse credit history
Meet the general requirements to receive federal student aid
The interest rate for Parent PLUS Loans is fixed and set by the government each year. For Parent PLUS Loans disbursed on or after July 1, 2022 and before July 1, 2023, the interest rate is 7.54%.
Like other federal student loans, Parent PLUS Loans have the opportunity to be forgiven, which is not available for private student loans. This is an important factor to consider if you plan to pursue any loan forgiveness programs.
Before borrowing a Parent PLUS Loan, you should check to see what rates you qualify for in private parent loans. You may find that some private lenders are able to offer you rates lower than the Parent PLUS Loan interest rate.
Private Parent Loans
Private parent loans are provided by private student loan lenders. Unlike federal Parent PLUS Loans, each individual private lender will offer different interest rates and terms. The eligibility criteria for private parent loans will vary, but in general, you must:
Meet income and/or credit requirements
Be borrowing on behalf of a student attending an eligible school
While it is commonly assumed that private student loans always have higher interest rates than federal student loans, that isn’t necessarily true. You should always compare both federal and private parent loan options before agreeing to one or the other.
Commonly Asked Questions About College Loans for Parents
What is the best way for parents to pay for college?
There is no single best way for parents to pay for their child’s college education. Generally speaking, however, you should begin by encouraging your child to pursue scholarship and grant opportunities. Both forms of aid do not need to be repaid.
Following that, consider what you’re able to contribute out-of-pocket. It’s important to minimize the amount you need to borrow.
After you’ve exhausted both options, consider both federal and private student loans.
Is it better to borrow a Parent PLUS Loan or a private parent loan?
One option isn’t necessarily better than the other. If you plan to pursue any loan forgiveness programs, you may prefer a Parent PLUS Loan over a private parent loan. If you are more concerned with finding a competitive interest rate, however, you may find that a private parent loan suits you better.
Do parents need good credit for student loans?
It depends on the lender. While most federal student loans do not factor your credit score into your eligibility, private student loans often do. That said, there are a variety of private student lenders that work with parent borrowers with lower credit scores.
To borrow private parent loans, see what rates you qualify for by completing the Sparrow application. In less than 3 minutes, we’ll show you which parent loans you qualify for and at what rates.
Final Thoughts from the Nest
There are a variety of parent loan options available, and while beneficial, it can make the process of picking the best option overwhelming. To simplify the process, start with Sparrow. Rather than searching endlessly for a parent loan that works for you, fill out the Sparrow application, and we’ll do the search for you. We’ll show you which parent loans you qualify for and at what rate so you can find the best option for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Some rates listed may include an Autopay Discount, which requires you to agree to make your monthly payments by an automatic monthly deduction (ACH) from a valid bank account. To verify whether the interest rates listed include an Autopay Discount, please read the individual lender disclosures.
A great way to reduce your student loan debt is to refinance. An important part of that is looking for a good lender that will offer you good terms. In fact, the best refinance companies are going to give you the best terms. But, what do you even look for? And where do you start?
What to Look for in a Student Loan Refinancing Company
The purpose of refinancing your student loan(s) is to secure a better interest rate or terms.
So, when looking for a student loan refinancing company, you first want to look at their terms and policies. This includes their requirements for approval, the loan terms, cosigner policies, and fees. Here’s a couple things to consider:
Is the interest rate on the loan lower than what you currently have?
Does the lender offer more favorable terms (ie. a longer repayment period) than what you currently have?
Additionally, find out what kind of benefits they offer if any. Do they offer help in the event of financial hardship like the loss of a job? This includes things like forbearance and deferment options.
Make sure the new loan you select offers you a better interest rate or more favorable terms than what you currently have. If it does neither, then refinancing is not an advantageous decision.
Best Student Loan Refinancing Companies in 2023
To help you in your search, we’ve made a list of the best student loan refinancing companies in 2023.
The Arkansas Student Loan Authority offers loans to Arkansas residents or students who have attended a school in the state. They offer competitive rates and flexible terms to those who qualify. ASLA is best ifyou either live in or attended school in Arkansas and want competitive interest rates and flexible loan terms.
Best Features
Drawbacks
• Competitive interest rates • Ability to refinance several types of loans • Variety of repayment options • Cosigner release option after 48 months • Offers 0.25% interest rate reduction for opting into auto-debit payments
• Strict residency requirements • Inaccessible for international students
Brazos is a nonprofit lender that provides student loan refinancing to Texas residents. Students must have at least an undergraduate degree in order to take out a refinance loan with them. Brazos offers competitive interest rates and flexible terms to those who qualify. Brazos is bestif you are a Texas resident and have at least an undergraduate degree, though the degree does not have to be from a Texas school.
Best Features
Drawbacks
• Work with a nonprofit, rather than a traditional lender • Competitive interest rates • Variety of repayment terms ranging from 5 to 20 years • Generous forbearance options
• Strict eligibility criteria • No cosigner release • No bi-weekly payment via autopay • Students cannot take over parent PLUS loans that parents took out on their behalf
College Ave offers student loan refinancing and is known for their strong customer service, competitive interest rates, and flexible loan terms. For example, College Ave offers nonstandard 6- or 9-year loans, which is unlike many other private lenders. College Ave is best ifyou want access to good customer service and a flexible repayment term that better matches your budget.
Best Features
Drawbacks
• Strong customer experience • Competitive rates • Choose any loan term between 5 and 15 years including nonstandard terms such as 6 or 9 years
• Limited eligibility criteria • Unclear forbearance policy • Not available to borrowers without a degree, visa holders, or those with parent PLUS loans • Doesn’t allow spousal consolidation loans
Earnest offers student loan refinancing with customizable repayment plans where you can choose your repayment term down to the month. Earnest also has forward-looking eligibility criteria and offers competitive interest rates. Earnest is best if you don’t have a cosigner and want a repayment plan customized to your situation.
Best Features
Drawbacks
• Competitive interest rates • Customizable payments and loan terms • Option to skip one monthly payment every year • Allows biweekly payments via autopay
• Refinancing is unavailable in Kentucky and Nevada • Variable interest rates aren’t available for borrowers in all states • You can’t apply with a cosigner • Student borrowers cannot take over parent PLUS loans that parents took out on their behalf
INvestED offers student loan refinancing to Indiana residents and students who attended school in Indiana. They offer a variety of repayment options, competitive interest rates, and flexible terms. INvestED is best ifyou are an Indiana resident or attended school in Indiana and want access to different repayment options.
Best Features
Drawbacks
• Competitive interest rates • You can refinance without a degree • Offers up to 36 months of academic deferment
• Only available to students that are residents of or attended school in Indiana • No biweekly payment via autopay • You can’t refinance parent PLUS loans in your name • Cosigner release option after 48 months of timely payments
ISL Education Lending is a nonprofit student lender offering both private student loans and student loan refinancing. ISL Education Lending is best for borrowers who want to work with a nonprofit lender, want competitive interest rates, or want to refinance without having a degree.
Best Features
Drawbacks
• Competitive interest rates and zero fees • You can refinance without a degree • Cosigner release option after 24 months
• Only one loan repayment term for in-school refinancing • Students cannot take over parent PLUS loans that parents took out on their behalf • No biweekly payment via autopay
LendKey’s student loan refinancing is a good option if you have graduated, have a strong credit score, and have stable income. A great feature of LendKey is that they will connect you with a network of 100+ lesser known credit unions and community banks so you can work with and take out loans from smaller institutions. LendKey is best ifyou are a creditworthy borrower and want to work with smaller lenders with low rates and good customer service.
Best Features
Drawbacks
• Work with a credit union or community bank, rather than a traditional lender • Access to competitive interest rates • Offers up to 18 months of forbearance • Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
• Eligibility criteria excludes part-time students, parents, and non-U.S. citizens/permanent residents • Varying cosigner release policies • Loans aren’t available in Maine, Nevada, North Dakota, Rhode Island, or West Virginia • Biweekly payment via autopay is not available • You may have to become a member of a credit union
Nelnet Bank offers student loan refinancing for both private and federal student loans, including parent PLUS loans. Nelnet Bank also offers a flexible forbearance policy and competitive interest rates. Nelnet Bank is best if you are looking for competitive rates and want the ability to refinance student loans, including parent PLUS loans.
Best Features
Drawbacks
• Competitive interest rates • You can refinance parent PLUS loans in your name • Offers 12 months of forbearance due to economic hardship or natural disaster • Cosigner release option after 24 months of timely payments • Flexible repayment options
• Strict eligibility criteria • No biweekly payment via autopay • Not accessible to international students or borrowers with student visas
SoFi is one of the biggest student loan refinancing companies in the industry. You have to have an associate’s degree or higher to qualify, but if you do qualify, you’ll have access to a wide variety of repayment options and exclusive member benefits. SoFi is best ifyou have at least an associate’s degree, are a creditworthy borrower, and want to take advantage of their benefits.
Best Features
Drawbacks
• Competitive interest rates • Students can refinance parent PLUS loans in their own name • Comes with borrower protections (forbearance and deferment) • Includes membership perks like career coaching, job search assistance, and wealth management
• Unclear about credit requirements • No cosigner release • Refinancing is unavailable to borrowers without a degree • No spousal consolidation loans
Final Thoughts from the Nest
While there are a variety of factors that make a lender or refinance loan good, the best loan will always be the one that works best for you. To discover the best refinancing companies and which option is best for you, complete the Sparrow application.
In just a few minutes, we’ll show you what refinance loans you qualify for with 15+ top lenders. Then, we’ll help guide you through the process of selecting the best refinance loan so you can be confident in your lending decision.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The best student loan for you will always be the one that suits your individual needs best. However, it’s helpful to have a few strong options to start with so you can get a better idea of what your loan options will look like.
Whether you’re pursuing an undergraduate degree, a law degree, or a medical degree, there are loan options designed just for you. Likewise, whether you value the ability to have a non-cosigned loan, flexible repayment options, or finding the best interest rate, there’s a loan that will meet your needs.
The loan options shared are in no particular order. Interest rates shown in this article were last updated on 03/06/23. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Best Student Loans for Undergraduate and Graduate Degrees
There are a wide variety of undergraduate and graduate student lenders, making the search process even more important. The following are our top picks for private student loans for undergraduate and graduate degrees.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Best Student Loans for Law, Dental, and Medical School
Law,dental, and medical school are notoriously expensive. So, when searching for a student loan for these programs, you’ll want to pay close attention to the lender’s borrowing limits. While you don’t need to stick with one lender for the entire duration of your program, many borrowers do for easier repayment.
If you plan to stick with one lender throughout the duration of your degree, you’ll need to make sure their maximum borrowing limit covers your estimated total cost of attendance.
Fixed Interest Rate: Starts at 2.71% Variable Interest Rate: Starts at 5.32% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700
College Ave – Law, dental, and medical school loans
Fixed Interest Rate: 5.05% to 14.47% Variable Interest Rate: 5.49% to 14.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for flexible repayment options.
Fixed Interest Rate: Starts at 4.42%* Variable Interest Rate: Starts at 5.66%* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Nelnet Bank – Law, dental, and medical school loans
Fixed Interest Rate: 4.49% to 15.47% Variable Interest Rate: 6.29% to 15.51% Maximum Borrowing Limit: $500,000 total Minimum Credit Score: 680 individually; 640 with a qualified cosigner
Best for: Borrowers who need a high borrowing limit and want competitive interest rates.
Fixed Interest Rate: 4.99% to 14.05% Variable Interest Rate: 5.99% to 13.67% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose
Many student loan options will require you to have a creditworthy cosigner in order to qualify. If you are without a cosigner, however, don’t worry. There are a variety of loan options available that do not require a cosigner.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% Variable Interest Rate: 6.15% to 16.08% Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 625 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
As an international student, there are a few factors you will want to consider when looking for a student loan:
Does it require a cosigner?Some private student loans will require you to have a U.S. citizen or permanent resident cosigner. However, as an international student, you may not have access to one. If you don’t, look for a student loan that does not require a cosigner.
What is the borrowing limit?As an international student, you will not have access to the federal aid that U.S. citizen students have. So, the cost of your education may be higher. If so, make sure the lender you choose allows you to borrow enough to cover the amount you need.
What is the interest rate? When borrowing a student loan without a cosigner, the interest rate will typically be higher. Always verify the interest rate before borrowing to make sure it is reasonable and something you’re comfortable with.
Are payments required while in school? Some international student loans may require you to make payments while in school. If this is not feasible for you, consider looking for a student loan option that allows you to defer payments until after graduation.
The following are our top picks for international student loans that dorequire a cosigner.
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Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% – 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
*Rates include a 0.25% AutoPay discount.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675
Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
Best Student Loans for Bad Credit
Most private student loans will require you to have a solid credit score or a creditworthy cosigner with one. If you do not have a solid credit score, there are options. There are private student loans with lower credit score requirements.
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See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670
Fixed Interest Rate: 4.83% to 16.16% (undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% to 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660
Best for: Borrowers who want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
What to Look for in a Student Loan
With any student loan, it’s important to consider a variety of factors before borrowing the loan:
Interest rate. The interest rate you get on a loan will directly affect how much you pay over the life of the loan. Typically, the lower the interest rate the better.
Credit requirements. Most private student loans will require you to have a certain credit score in order to qualify. If you are concerned about your credit score’s impact on your student loan eligibility, it may be beneficial to look for lenders with lower credit score requirements.
Repayment options. Each lender will offer a different selection of repayment options. While some may require you to begin repayment immediately after the loan is disbursed, others may allow you to defer payments until after graduation. Make sure the lender has a repayment option that suits your needs before borrowing the loan.
Cosigner vs. no cosigner. Many private student loans will require you to have a cosigner in order to qualify. If you do not have a cosigner, you will want to explore no-cosigner loan options.
Borrower benefits. Most private student lenders offer borrower benefits, from autopay discounts to free career training and everything in between. Consider a lender’s borrower benefits if they are an important factor to you.
Final Thoughts from the Nest
The best student loan for you will always be the loan that suits your needs and desires best. To find the loan that does that, use Sparrow. Sparrow allows you to compare personalized loan options from 17+ premier lenders side-by-side.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Earnest offers both private student loans and student loan refinancing.1 Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Fixed APR Range: 4.42% to 15.90%* (undergrad; includes 0.25% auto pay discount); 4.42% to 14.30%* (grad; includes 0.25% auto pay discount) Variable APR Range: 5.62% to 16.20%* (undergrad; includes 0.25% auto pay discount); 5.89% to 14.97%* (grad; includes 0.25% auto pay discount)
Loan Amounts: $1,000 up to the total cost of attendance
• Competitive interest rates • Flexible repayment options • Wide range of loan terms to match your budget • Nine-month grace period3 • Option to skip 1 monthly payment per year4 • Allows biweekly payments via autopay5
• Loans aren’t available to borrowers in Nevada • Students enrolled less than half-time are not eligible • No cosigner release
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for an Earnest student loan, you’ll have access to some of the best rates in the industry. Earnest’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate, MBA, Law and Medical Students
Fixed APR*
4.42% to 15.90%*
4.42% to 14.30%*
Variable APR*
5.62% to 16.20%*
5.89% to 15.97%*
*Rates as of November 1, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of in-school repayment options
Earnest offers you four repayment options for your student loans.6
If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students are limited to interest only and immediate repayment options.
Wide range of loan terms to match your budget
Earnest offers a wide range of loan terms to reduce the burden of your student debt. If you have a cosigner, you can choose a loan term of 5, 7, 10, 12, or 15 years. If you don’t have a cosigner, you’ll have to choose between a 10, 12 or 15-year loan term, unless you are a graduate student. In that case, you may be considered for 5, 7, 10, 12, and 15 year loan terms.6
Offers a nine-month grace period3
After you are no longer in school at least halftime – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. While most lenders offer a six-month grace period, some require immediate repayment.
Earnest, on the other hand, offers a nine-month grace period on its student loans. This can be a massive benefit if you need some extra time to find a job and stabilize your income.
Be careful though – interest starts to accrue as soon as the loan is disbursed so delaying your payments means you’ll be paying more interest over the lifetime of your loan.
Option to skip one monthly payment every year4
Earnest is the only lender that allows you to skip one monthly payment on your student loan every year. This can be incredibly helpful if you lose your job or face an unexpected expense.
In order to qualify, you must:
Make the request at least five business days before the payment is due.
Make the request after six months of timely payments of both interest and principal.
While this feature can be extremely helpful when life hits a bump in the road, do note that the principal and interest from that payment will be spread out across your remaining payments, resulting in increased monthly payments.
Allows biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, Earnest gives you the option to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
In addition to offering biweekly payments via autopay, Earnest gives you the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Earnest, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Drawbacks of Earnest Student Loans
Loans aren’t available to borrowers in Nevada
If you live in Nevada, you’ll have to consider other lenders for your private student loan. A variety of lenders offer private student loans to borrowers in Nevada, such as College Ave, Ascent, and more.
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through Earnest. If you’re studying less than half-time, you may want to consider another lender for your private student loan.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky. Unfortunately, Earnest does not offer any form of cosigner release. Instead, you will have to apply to refinance your student loan, which is only available once you’ve graduated.
Earnest: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.42% to 15.90%* (undergrad); 4.42% to 14.30%* (grad)
Variable APR Range
5.62% to 16.20%* (undergrad); 5.89% to 15.97%* (grad)
Loan Terms
For cosigned loans: 5, 7, 10, 12 or 15 years.6 For solo borrowers: 10, 12 or 15 years.6 For graduate students with non-cosigned loans, you may be considered for 5, 7, 10, 12, and 15-year loan terms.6
Loan Amounts
$1,000 up to cost of attendance.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
$35,000 for cosigned loans.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
65%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Primary borrower must have a Social Security number. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident.
Location
Not available to borrowers in Nevada.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Fixed repayment: Pay $25 a month during school.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
9 months.
In-school Deferment
Yes.
Military Deferment
Yes.
Internship, Residency, or Fellowship Deferment
Borrowers can defer payments for up to 48 months during a medical residency, internship, or fellowship program.
Forbearance
Up to 12 months available.
Cosigner Release
No. Borrowers may refinance with Earnest and release their cosigner.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Earnest.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Online application: a few minutes. Approval: Varies by applicant.
Before you take out a loan from Earnest…
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FAQ
Is Earnest7 a legitimate lender?
Yes, Earnest is a legitimate lender that was founded in 2013 and has been providing private student loans since 2019.
Is Earnest available in all 50 states?
Earnest is available in all 50 states except Nevada.
How long does it take to get an Earnest student loan?
Submitting an application through Earnest takes a few minutes. Once you’ve submitted your loan application, Earnest will return a decision about your eligibility, but the exact timeline of this response varies by applicant. If you qualify, you will receive the rate and terms of your loan.
What happens if I don’t qualify for an Earnest student loan?
If you don’t qualify for an Earnest student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Earnest student loans federal or private?
Earnest loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.8
Does applying for a loan through Earnest hurt my credit score?
Applying for a loan through Earnest could hurt your credit score. Earnest has both eligibility check (hard credit check that may temporarily impact your credit score) and rate check (soft credit check, which will not impact your credit score).
Earnest Disclosures
1 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for total cost of your refinanced loan.
2 Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 16.35% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
3 Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.
4 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
5 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
6 Earnest’s Loan Cost Examples: These examples provide estimates based on principal and Interest payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $118.28) and a 11.69% APR would result in a total estimated payment amount of $21,290.40. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $126.82) and a 13.03% APR would result in a total estimated payment amount of $22,827.79.
These examples provide estimates based on interest only payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $145.41) and a 11.69% APR would result in a total estimated payment amount of $26,173.03. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $156.59) and a 13.03% APR would result in a total estimated payment amount of $28,186.67. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on fixed $25 payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $169.92) and a 11.69% APR would result in a total estimated payment amount of $30,584.74. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $188.42) and a 13.03% APR would result in a total estimated payment amount of $33,915.55. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on deferred payments. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $174.79) and a 11.69% APR would result in a total estimated payment amount of $31,462.16. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $193.75) and a 13.03% APR would result in a total estimated payment amount of $34,874.28. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
7 Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.
Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.
Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
The best student loan for you will always be the one that suits your individual needs best. However, it’s helpful to have a few strong options to start with so you can get a better idea of what your loan options will look like.
Whether you’re pursuing an undergraduate degree, a law degree, or a medical degree, there are loan options designed just for you. Likewise, whether you value the ability to have a non-cosigned loan, flexible repayment options, or finding the best interest rate, there’s a loan that will meet your needs.
The loan options shared are in no particular order. Interest rates shown in this article were last updated on 11/14/2023. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Best Student Loans for Undergraduate and Graduate Degrees
There are a wide variety of undergraduate and graduate student lenders, making the search process even more important. The following are our top picks for private student loans for undergraduate and graduate degrees.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Best Student Loans for Law, Dental, and Medical School
Law,dental, and medical school are notoriously expensive. So, when searching for a student loan for these programs, you’ll want to pay close attention to the lender’s borrowing limits. While you don’t need to stick with one lender for the entire duration of your program, many borrowers do for easier repayment.
If you plan to stick with one lender throughout the duration of your degree, you’ll need to make sure their maximum borrowing limit covers your estimated total cost of attendance.
Fixed Interest Rate: Starts at 2.71% Variable Interest Rate: Starts at 5.32% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700
College Ave – Law, dental, and medical school loans
Fixed Interest Rate: 5.05% to 14.47% Variable Interest Rate: 5.49% to 14.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for flexible repayment options.
Fixed Interest Rate: Starts at 4.42%* Variable Interest Rate: Starts at 5.66%* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Nelnet Bank – Law, dental, and medical school loans
Fixed Interest Rate: 4.49% to 15.47% Variable Interest Rate: 6.29% to 15.51% Maximum Borrowing Limit: $500,000 total Minimum Credit Score: 680 individually; 640 with a qualified cosigner
Best for: Borrowers who need a high borrowing limit and want competitive interest rates.
Rates listed have an autopay discount only on the lower boundary.
Sallie Mae – Law, dental, and medical school loans
Fixed Interest Rate: 5.25% to 14.47% (law); 5.25% to 14.47% (dental); 5.25% to 14.46% (medical) Variable Interest Rate: 6.00% to 15.59% (law); 6.00% to 15.58% (dental); 5.99% to 15.58% (medical) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who need a high borrowing limit and want competitive interest rates.
Fixed Interest Rate: 4.99% to 14.05% Variable Interest Rate: 5.99% to 13.67% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose
Many student loan options will require you to have a creditworthy cosigner in order to qualify. If you are without a cosigner, however, don’t worry. There are a variety of loan options available that do not require a cosigner.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% Variable Interest Rate: 6.15% to 16.08% Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 625 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44% to 14.70% (undergrad); 4.99% to 14.48% (grad) Variable Interest Rate: 5.99% to 13.97% (undergrad); 5.99% to 13.97% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
As an international student, there are a few factors you will want to consider when looking for a student loan:
Does it require a cosigner?Some private student loans will require you to have a U.S. citizen or permanent resident cosigner. However, as an international student, you may not have access to one. If you don’t, look for a student loan that does not require a cosigner.
What is the borrowing limit?As an international student, you will not have access to the federal aid that U.S. citizen students have. So, the cost of your education may be higher. If so, make sure the lender you choose allows you to borrow enough to cover the amount you need.
What is the interest rate? When borrowing a student loan without a cosigner, the interest rate will typically be higher. Always verify the interest rate before borrowing to make sure it is reasonable and something you’re comfortable with.
Are payments required while in school? Some international student loans may require you to make payments while in school. If this is not feasible for you, consider looking for a student loan option that allows you to defer payments until after graduation.
The following are our top picks for international student loans that dorequire a cosigner.
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Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% – 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
*Rates include a 0.25% AutoPay discount.
EDvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675
Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
The following are our top picks for international student loans that do notrequire a cosigner.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
Best Student Loans for Bad Credit
Most private student loans will require you to have a solid credit score or a creditworthy cosigner with one. If you do not have a solid credit score, there are options. There are private student loans with lower credit score requirements.
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Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670
Fixed Interest Rate: 4.83% to 16.16% (undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540
Best for: International and DACA students who have a lower credit score.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.42% to 15.90%* (Undergrad); 4.42% to 14.30%* (Grad) Variable Interest Rate: 5.62% to 16.20%* (Undergrad); 5.89% to 15.97%* (Grad) Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660
Best for: Borrowers who want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% maximum (undergrad); 12.74% maximum (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Best for: International student borrowers with no cosigner.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
What to Look for in a Student Loan
With any student loan, it’s important to consider a variety of factors before borrowing the loan:
Interest rate. The interest rate you get on a loan will directly affect how much you pay over the life of the loan. Typically, the lower the interest rate the better.
Credit requirements. Most private student loans will require you to have a certain credit score in order to qualify. If you are concerned about your credit score’s impact on your student loan eligibility, it may be beneficial to look for lenders with lower credit score requirements.
Repayment options. Each lender will offer a different selection of repayment options. While some may require you to begin repayment immediately after the loan is disbursed, others may allow you to defer payments until after graduation. Make sure the lender has a repayment option that suits your needs before borrowing the loan.
Cosigner vs. no cosigner. Many private student loans will require you to have a cosigner in order to qualify. If you do not have a cosigner, you will want to explore no-cosigner loan options.
Borrower benefits. Most private student lenders offer borrower benefits, from autopay discounts to free career training and everything in between. Consider a lender’s borrower benefits if they are an important factor to you.
Final Thoughts from the Nest
The best student loan for you will always be the loan that suits your needs and desires best. To find the loan that does that, use Sparrow. Sparrow allows you to compare personalized loan options from 17+ premier lenders side-by-side.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Catholic and Community Credit Union Partners with Sparrow to Ignite Gen Z Financial Engagement
NEW YORK – December 4, 2023 – Sparrow, a pioneering fintech serving the credit union movement, proudly announces a game-changing collaboration with Catholic and Community Credit Union, a dedicated financial institution committed to community service. This collaborative partnership represents a strategic milestone, signaling Catholic and Community Credit Union’s proactive leap into a future of accelerated Gen Z membership growth by harnessing the innovative solutions provided by Sparrow’s cutting-edge student loan marketplace.
At Catholic and Community Credit Union, we recognize the imperative of engaging with the next generation, and partnering with Sparrow is our dynamic response to this need. This collaboration positions us to propel membership growth among Gen Z by offering innovative student loan solutions. Sparrow’s platform is the catalyst that will not only attract but also retain the younger demographic, establishing us as a leading financial institution for the future.
Ken Bossung, President & Chief Executive Officer of Catholic and Community Credit Union
Revolutionizing Gen Z Engagement with Data-Driven Solutions
Catholic and Community Credit Union is strategically using Sparrow’s innovative platform to redefine its approach to Gen Z engagement. By adopting Sparrow’s white-labeled student loan marketplace, the credit union gains a unique advantage, accessing a diverse network of reputable lenders and offering a broad spectrum of loan options. This strategic move is aimed at not only meeting the financial needs of Gen Z members but also fostering a lasting relationship.
We are thrilled to partner with Catholic and Community Credit Union, an institution that shares our vision for a dynamic and engaged financial future. Together, we are set to revolutionize how credit unions attract and serve the Gen Z demographic. Sparrow’s platform provides the tools and expertise needed to accelerate membership growth, and we are excited to be at the forefront of this transformative journey.
Harrison Hochman, Chief Executive Officer at Sparrow
Strategic Features to Propel Membership Acceleration
Access to 250+ unique data attributes per non-member, enabling highly personalized financial solutions.
A competitive average payout (of non-interest income) per funded student loan, adding an enticing dimension to membership benefits.
Over 25 turnkey marketing resources strategically designed to streamline cross-selling and drive Gen Z member engagement.
About Sparrow
Sparrow, one of the fastest growing student student lending platforms in the U.S., offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare real student loan rates through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Credit unions use Sparrow to accelerate Gen Z membership, engagement, and retention. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
About Catholic and Community Credit Union
Catholic and Community Credit Union is a $192M community financial institution in Shiloh, Illinois proudly serving 14,000+ loyal members. Learn more at www.catholicandcommunitycu.org. Deposits insured by the NCUA, an agency of the US government.
COLUMBUS, OHIO, October 22, 2023 – Sparrow, a pioneering financial technology startup that powers student loan marketplaces, is delighted to announce a strategic partnership with Navatros, the for-profit entity of the Ohio Credit Union League that provides products and solutions to credit unions in Ohio and surrounding states. By leveraging Sparrow’s innovative solution, credit unions in Ohio can now offer student loans without assuming the role of the lender of record and open new opportunities to engage members.
Accelerating Gen Z membership for credit unions
By leveraging Sparrow’s innovative solution, Ohio credit unions can offer student loans through a customized, white-labeled student loan marketplace, with a network of 20+ non-competitive lenders, within minutes. The Sparrow platform can also assist in generating new income and drive value-added marketing to deepen member engagement.
Navigating engagement and expectations of the Gen Z and Millennial generations is an important priority for credit unions. That’s why our partnership with Sparrow is so significant. Their innovative platform can help Ohio’s credit unions authentically engage Gen Z and Millennial members. With Sparrow, credit unions can leverage a cutting-edge platform to attract and retain the next generation of members.
Laura Auxter, Chief Revenue Officer at Navatros
The Sparrow effect
By offering student loans, credit unions can help members achieve their professional and financial aspirations while benefiting from cross-selling opportunities. Research shows that among borrowers who utilize their credit union for student loans, 65% open a checking account, 55% obtain a credit card, and 44% open a savings account.
“The rapidly changing landscape and evolving preferences of the younger generation have presented unprecedented challenges,” explained Harrison Hochman, CEO at Sparrow. “Our innovative solution empowers credit unions to adapt and engage Gen Z members like never before, providing the tools and capabilities to navigate this critical turning point. It’s a game-changing opportunity for credit unions to not just survive but thrive in this new era.”
Sparrow provides credit unions with the ability to launch their own customized, white-labeled student loan marketplaces within minutes. These marketplaces are seamlessly integrated with Sparrow’s extensive network of 20+ non-competitive student lenders. Credit unions can leverage the Sparrow platform to generate non-interest income on disbursed loans, while also utilizing automated marketing campaigns to drive membership account creation and cross-sell products.
Ohio-based credit union buy-in
Prior to public launch, two Ohio-based credit unions representing 12,326 total members and $129m in assets transitioned from a traditional affiliate student lender relationship to launching a marketplace on Sparrow.
Sparrow, founded in 2020 by Harrison Hochman, Griffin Morris, and Daniel Kahn, has emerged as one of the fastest-growing educational financing platforms in the United States, facilitating the search for over $400 million in private student loans.
About Sparrow
Sparrow, one of the nation’s fastest-growing student financing platforms, offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare personalized student loan offers through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
AboutNavatros
Navatros is an expert industry leader who advocates for credit unions, finance organizations, and more. Through a suite of personalized business solutions and trusted help, service, and advice, Navatros helps guide businesses toward success and works tirelessly to protect customer growth and well-being by solving challenges and achieving goals.
NEW YORK – August 2, 2023 – Sparrow, a pioneering financial technology startup, and SAGE Scholars, the nation’s oldest and largest private college preparation and funding organization, have announced a transformative partnership to promote accessible and sustainable ways of financing higher education. Through this collaboration, Sparrow and SAGE Scholars are set to offer innovative solutions to empower students and families seeking affordable pathways to college.
We are delighted to collaborate with Sparrow, a visionary company that shares our mission of providing affordable education opportunities. Through this partnership, we are better equipped to extend our reach and manifest our mission, enabling students to pursue their dreams without being overwhelmed by student debt.
Michael Hall, Chief Executive Officer at SAGE Scholars
Enhancing Financial Accessibility
By leveraging Sparrow’s white-labeled student financing marketplace, SAGE Scholars gains access to a vast network of reputable lenders, providing students with diverse funding options while maintaining a cohesive user experience.
With the goal of making education accessible to all, our partnership with SAGE Scholars represents a step towards ensuring the next generation has the means to pursue higher education without undue financial burdens. By leveraging the power of data-driven strategies and cutting-edge technology, we are determined to create a lasting impact on students’ lives and help them achieve their academic aspirations.
Promoting the Next Generation’s Educational Journey
As the upcoming academic year approaches, Sparrow and SAGE Scholars are set to empower students with a host of features and functionalities, including:
Access to an extensive database of personalized student loan offers with 260+ unique data attributes per user.
A three minute pre-qualification process to check rates from a vast nationwide network of lenders.
An ability to check rates with multiple lenders that do not require cosigners.
Sparrow was founded in 2020 by Hochman, Griffin Morris, and Daniel Kahn. Since its inception, Sparrow has emerged as one of the fastest-growing student lending platforms in the U.S., facilitating the search of over $500 million of private student loans.
About Sparrow
Sparrow, one of the fastest growing student student lending platforms in the U.S., offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare real student loan rates through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
About SAGE Scholars
SAGE Scholars, headquartered in Philadelphia, is the nation’s oldest and largest private college preparation and funding organization. With a mission to provide access to affordable college opportunities, SAGE Scholars brings together families, colleges and universities, and benefit providers to create college funding solutions. For more information, visit www.tuitionrewards.com.
Media Contact
Sparrow Labs Inc. | Sparrow Media Inquiry | support@sparrowfi.com
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their education. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy co-signer.
Fixed APR Range: 4.44% to 14.70%
Variable APR Range: 5.49% to 14.03%
Loan Amounts: $5,000 up to your total cost of attendance
• Competitive interest rates • Variety of repayment options • Co-signer release option after 24 months of timely repayment • Offers borrower protections (forbearance and deferment) • Includes perks like member events, wealth management, and other personal finance services
• Unclear about credit requirements • Not available to students who are enrolled less than half time • High loan minimum of $5,000
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. Although SoFi has strict qualification requirements, the borrowers who do qualify have access to some of the best rates in the industry. SoFi’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate
Parent
Fixed APR*
4.44% to 14.70%
4.99% to 14.48%
6.50% to 14.83%
Variable APR*
5.49% to 13.97%
5.99% to 13.97%
6.32% to 14.03%
*Rates as of July 21, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of repayment options
SoFi offers you four repayment options for your student loans, with terms of 5, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students (i.e. a parent loan) are limited to interest only and immediate repayment options.
Co-signer release option after 24 months of timely repayment
If you need a co-signer for your student loan, SoFi might be a good option for you. Unlike several other lenders, SoFi allows you to release your co-signer after 24 months of timely payments. This can be helpful if you want to build credit in your own name.
Offers additional borrower protections
While borrowing federal student loans gives you access to federal protections (income-driven repayment, loan forgiveness, and loan forbearance) that most private lenders cannot match, SoFi offers generous borrower protections such as deferment and forbearance. Check out the table below to see if you qualify for any of SoFi’s borrower protections:
Deferment
Forbearance
• Returning to school • Rehabilitation treatment for a disability • Unemployment • Economic hardship/job loss • Military service
• Unemployment • Economic hardship/job loss • Military mobilization • Natural disaster • National emergency
Note: During deferment and forbearance, interest will still accrue, but the loan will be re-amortized.
Includes perks like member events, wealth management, and other personal finance services
SoFi offers a variety of perks that help you take control of your financial future.
Member events: SoFi organizes workshops, speaker series, and social events to help you build a strong community.
No-fee wealth management: SoFi offers a no-fee wealth management and investing platform to help you get your money right.
Referral bonus: You can send a link to your friends to use SoFi’s student loan, investment, or credit card service and deduct up to $75 in student loans. The rules can be found here.
Discount on other SoFi loans: SoFi offers its members a 0.125% discount on additional loans taken out through SoFi, including mortgages and personal loans.
Drawbacks of SoFi Student Loans
Unclear about credit requirements
While SoFi used to have a minimum credit score requirement of 650, the company no longer shares an explicit minimum credit score. SoFi only shares that “good or excellent” credit scores will be approved, and for student loans, this usually means those around or above 700. If you do not have a strong credit score, a cosigner with a good credit score will likely be necessary.
Don’t have a strong credit score? Complete Sparrow’s two-minute form to check rates with 15+ different lenders. It’s quick, easy, and does not impact your credit score.
Not accessible to students enrolled less than half-time
If you are not enrolled in school at least half-time, you are ineligible for SoFi student loans.
Enrolled less than half-time? Complete Sparrow’s two-minute form to check rates with 15+ different lenders. It’s quick, easy, and does not impact your credit score.
High loan minimum of $5,000
SoFi does not offer private student loans below $5,000. If you need less than $5,000 to cover the cost of your education, you may be better off looking at other lenders that offer smaller loans.
Looking for a loan that’s less than $5,000? Complete Sparrow’s two-minute form to check rates with 15+ different lenders. It’s quick, easy, and does not impact your credit score.
SoFi: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.44% to 14.70%
Variable APR Range
5.49% to 14.03%
Loan Terms
5, 10 or 15 years.
Loan Amounts
$5,000 up to your cost of attendance.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
Does not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Does not disclose.
Typical Income of Approved Borrower
Does not disclose.
Maximum Debt-to-Income Ratio
Does not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. Citizen, permanent resident or non-permanent resident alien.
Location
Available in all 50 U.S. states.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid. Most four-year public and private institutions are accepted.
Percentage of borrowers who have a cosigner
83%.
Repayment Options
In-school Deferment
Yes.
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Yes, up to 12 months.
Cosigner Release
Yes, after 24 months.
Death or Disability Discharge
Yes, loans will be forgiven due to a borrower’s death while in school and/or repayment.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
MOHELA.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Within minutes.
Before you take out a loan from SoFi…
Complete the Sparrow form to compare pre-qualified rates from 15+ different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is SoFi a legitimate lender?
Yes, SoFi is one of the largest online lenders in the industry with millions of customers. The company offers student loans and student loan refinancing, along with other financial services such as mortgages, personal loans, insurance, and investment accounts.
Is SoFi available in all 50 states?
Yes, SoFi student loans are available to borrowers in all 50 U.S. states.
How long does it take to get a SoFi student loan?
Submitting an application through SoFi takes a few minutes. Once you’ve submitted your loan application, SoFi will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan:
Refinance: You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
In-School Loans: Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a SoFi student loan?
If you don’t qualify for a SoFi student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, pre-qualified rates from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are SoFi student loans federal or private?
SoFi’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through SoFi hurt my credit score?
In order to estimate what rate you qualify for, SoFi conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the SoFi loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Sikorsky Credit Union embraces innovation with Sparrow partnership to propel Gen Z membership through cutting-edge student loan marketplace.
NEW YORK – July 21, 2023 – Sikorsky Credit Union, a leading financial institution boasting assets totaling $1.1 billion, proudly announces its groundbreaking collaboration with Sparrow, one of the nation’s fastest growing student lending platforms. This strategic alliance marks a pivotal moment for Sikorsky Credit Union as it embarks on a transformative journey to revolutionize its approach to private student loans, captivating the next generation of young members.
Our commitment to driving Gen Z membership and engagement made selecting Sparrow an unequivocal decision. The remarkable implementation process and the wealth of invaluable data generated by Sparrow’s marketplace have surpassed our expectations. Empowered by Sparrow’s platform, we can effectively cross-sell our members on a range of products, elevating their overall financial journey. We firmly believe this partnership will propel our success in engaging the next generation and fostering their long-term loyalty.
Sikorsky Credit Union has embraced innovation by harnessing Sparrow’s cutting-edge platform, positioning itself as a trailblazing financial institution that reaps the rewards of student loans without shouldering the lending risk. Unlike conventional approaches, Sikorsky leverages Sparrow’s white-labeled student loan marketplace, gaining access to a vast network of more than 20 reputable lenders. This strategic advantage empowers Sikorsky to offer its members a diverse range of loan options while unwaveringly focusing on delivering exceptional member experiences.
“We are excited to join forces with Sikorsky Credit Union’s visionary team, who wholeheartedly shares our mission of delivering exceptional borrowing experiences to members,” expressed Harrison Hochman, CEO at Sparrow. “Together, we are poised to make a profound impact in engaging Gen Z and driving membership growth. Our goal is to enable credit unions to better serve their members, stay ahead of the curve, and revolutionize their strategies for acquiring Gen Z members.”
Navigating Upstream to Win Gen Z Loyalty
In anticipation of the upcoming academic year, Sikorsky’s new student loan marketplace comes equipped with cutting-edge features and functionality designed to thrive:
Access to 260+ unique data attributes per non-member using the marketplace.
Over 30+ turnkey marketing resources to automate cross-selling and member engagement.
Sparrow offers a distinct product that effectively engages Gen Z members and provides invaluable data crucial for acquiring younger members. Their innovative approach perfectly aligns with our strategy to attract and serve the next generation. Leveraging data-driven marketing strategies and tailored solutions, we are confident that our partnership with Sparrow will significantly bolster our efforts in acquiring and engaging younger members, cementing our position with the next generation.
Ken Ferrari, Chief Lending Officer at Sikorsky Credit Union
Sparrow was founded in 2020 by Hochman, Griffin Morris, and Daniel Kahn. Since its inception, Sparrow has emerged as one of the fastest-growing student lending platforms in the U.S., facilitating the search of over $400 million of private student loans.
About Sparrow Sparrow, one of the fastest growing student lending platforms in the U.S., offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare real student loan rates through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
About Sikorsky Credit Union Sikorsky Credit Union is one of the largest credit unions in Connecticut with more than 62,000 members. Membership is open to anyone who lives, works, worships, or volunteers in Fairfield, Hartford, or New Haven counties. Sikorsky Credit Union believes in banking the way you choose and gives members the option to bank at one of their convenient branch locations, online or through their mobile app. For more information, please visit www.sikorskycu.org. Deposits insured by the NCUA, an agency of the US government.
Brooke Van Vleet – Pearson, the former President/CEO of InRoads Credit Union, joins Sparrow’s Advisory Board to help accelerate credit unions’ ability to attract and retain Gen Z.
Brooke Pearson Retired President and Chief Executive Officer InRoads Credit Union, St. Helens, Oregon
NEW YORK – July 19, 2023 – Sparrow, a prominent financial technology startup revolutionizing credit unions’ engagement with Gen Z, is excited to welcome Brooke Van Vleet – Pearson, former CEO of InRoads Credit Union, to its esteemed Advisory Board. With a proven track record of doubling InRoads assets during her tenure, and leading innovative initiatives in her prior role as a long-time executive at First Tech Federal Credit Union, Van Vleet – Pearson brings over three decades experience to shape credit unions’ strategies for capturing the Gen Z market.
“Credit unions need to consistently leverage those pivotal moments with consumers that can lead to resilient, engaged member relationships. Sparrow’s groundbreaking approach has unlocked that moment for Gen Z, and I am looking forward to lending my support of their remarkable mission. Credit unions can partner with Sparrow to access their unique student loan marketplace, driving Gen Z adoption and awareness of credit unions, increasing non-interest income without any additional risk to their balance sheet.”
Brooke Van Vleet – Pearson, former President & CEO of InRoads Credit Union
Winning Gen Z effectively
Of all products tailored toward young adults, student loans reign supreme. As of March 2022, the average Gen Zer carried $15,000 of student debt. Of these borrowers, 7.4 million were aged 24 years old or younger. It shouldn’t come as a surprise that the demand for private student loans has exploded by over 200% since 2016, making it the most in-demand product for Gen Z. However, many credit unions choose not to offer student loans to members and prospective members.
Although originating student loans may not be a primary strategy, credit unions can still reap the benefit of gaining exposure and access to this important market segment and build relationships with younger consumers. We exist to ensure credit unions can leverage student loans to win the battle for Gen Z without becoming a student lender. With Brooke’s leadership, we’re expanding our platform to be completely self-serve, launchable within minutes, and highly configurable to meet the compliance requirements for credit unions of all sizes.
For every 100 borrowers who use their primary credit union to find a student loan, 65 open a checking account, 57 take out a credit card, and 20 apply for a mortgage. Partnering with Sparrow will deepen relationships with this younger demographic.
Sparrow’s turnkey platform allows credit unions to serve existing members as well as acquire new members. Existing Sparrow partners have experienced immediate impact, including:
increased the average percentage of members who find funding for their student loan by 5.53x compared to the industry average.
increased non interest income on student loans by 144%
Accelerated millenial and Gen Z membership growth, with the average age of new members 29 years old.
Sparrow was founded in 2020 by Hochman, Griffin Morris and Daniel Kahn. Since its founding, Sparrow has become one of the fastest growing educational financing platforms in the U.S., facilitating the search of over $400 million of private student loans.
About Sparrow
Sparrow, one of the fastest growing student student lending platforms in the U.S., offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare real student loan rates through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
About Brooke Van Vleet – Pearson
Brooke Van Vleet – Pearson recently retired as President and CEO of InRoads Credit Union located in Saint Helens, Oregon. Van Vleet – Pearson joined the credit union in 2012 after many successful years as an executive at First Tech Credit Union.
Under Van Vleet – Pearson’s leadership, InRoads more than doubled in size to $350 million in assets and provided valuable services to its members throughout the pandemic, including PPP loans and expanded video banking offerings. She also oversaw the successful rebranding and name change for the organization, creating greater opportunity for future growth.
She has over 30 years’ experience in financial services, and a long history of regional and national industry involvement. She recently concluded a two-year term on the Oregon Governor’s Council of Economic Advisors, providing valuable input to state economists as they develop the state’s annual budget.
Van Vleet – Pearson holds a Master of Business Administration from Portland State University and a Bachelor of Arts in Economics from San Diego State University. Van Vleet – Pearson and her husband reside in Colleyville, Texas, and enjoy gardening, golf, traveling and scuba diving.
An important factor when shopping for student loans is looking at the interest rate. But interest rates can be a little confusing. You may ask yourself questions like:
What is a good interest rate?
How do they vary?
What should I even look for?
Before you panic, don’t worry. We’ve got your back. To give you an idea of what to look for in interest rates, let’s go over the average student loan interest rates.
Average Student Loan Interest Rate
Interest rates influence the total repayment costs you’ll have. So, to help you make a better-informed decision, it’s a good idea, then, to learn what interest rates are now. The interest rates will vary depending on a variety of factors. This includes what type of loan you get, your lender, and sometimes even your credit score.
For example, let’s take a look at the different federal student loan interest rates. These all vary depending on the type of loan and student. According to the federal student aid website, the current federal student loan interest rates are as follows:
Direct Unsubsidized Loans for Graduate or Professional Students – 6.54%
Direct PLUS Loans for Parents or Graduate/Professional Students – 7.54%
These interest rates are only applicable for the 2022-2023 school year. This includes any loans taken out on or after July 1, 2022, and before July 1, 2023.
Meanwhile, the average private student loan interest rate ranges from 6% to 7% according to Education Data. The exact interest rate you might get depends on your lender and financial situation. The overall average student loan interest rate, though, is 5.8%. This number includes data from both private and federal loans.
Student Loan Interest Rates on Sparrow
When shopping around for student loans, you want to look for the best interest rates. Sparrow partners with private lenders to get you those best rates. Here’s a quick overview of what interest rates you can find on Sparrow.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Keeping in mind that you’ll repay not only the loan principal but the interest also, a good student loan interest rate is going to be low. In general, the lower, the better. This is because the interest rate is an indicator of how much interest you’ll pay. The higher the interest rate, the more you can expect to pay during repayment. For example, let’s say you took out a $30,000 loan on a 15-year repayment term. Using that information, let’s create two scenarios with different interest rates.
In the first scenario, you’ll have an interest rate of 7%. With this interest rate, you’ll pay $48,537 over the course of your repayment period.
In scenario two, you’ll have an interest rate of 5.8%. With this interest rate, you’ll pay $44,987 throughout your repayment period.
Here’s a table to help you understand the information easier:
Scenario 1
Scenario 2
Loan Principal
$30,000
$30,000
Repayment Period
15 years
15 years
Interest Rate
7%
5.8%
Total Paid
$48,537
$44,987
Notice how even just a 1.2% difference in interest rates results in saving thousands of dollars. That’s why the best interest rates are the lowest rates you can get along with good repayment terms. Doing this will help you save a lot of money in the long run.
Final Thoughts from the Nest
Interest rates can be a little tricky. They vary a lot depending on the type of loan you have (or are looking for). The most important thing to keep in mind is to try to get as low an interest rate as you can with good loan terms.
As you saw earlier, Sparrow offers great interest rates from our partnering lenders. All you have to do to take advantage of these rates is fill out the Sparrow application. Once you do, it will match you with what you are qualified for from any of our 15+ partner lenders. So, get started now to find great private loans that best match what you need.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Rates in this article were last updated on 11/07/2023. Rates may include an autopay discount and they are subject to change.
Sparrow and CULCT unite to empower credit unions and drive explosive Gen Z and Millennial membership growth
New York, NY June 22, 2023 – Sparrow, a leading financial technology startup that powers student loan marketplaces, is pleased to announce a strategic partnership with the Credit Union League of Connecticut (CULCT) to drive membership growth among Gen Z and Millennials for Connecticut credit unions. Through this collaboration, credit unions will be able to use Sparrow’s groundbreaking solution to offer student loans without having to be the lender of record, providing a new medium to engage with young adults.
Younger financial consumers have proven themselves to be an elusive population for credit unions. While fintechs and banks pay huge amounts to recruit customers, credit unions must compete differently for Gen Z hearts and minds. Sparrow helps solve this problem with its online Gen Z memberization engine. We are thrilled to partner with Sparrow to provide credit unions the platform they deserve. This is an ingenious solution that takes no time to launch or maintain, comes with no balance sheet risk, and yields non-interest income.
Bruce Adams, President and CEO at CULCT
Explosive private student loan growth
Since 2016, annual private student loan volume has grown by over 200%. Despite the steep rise, most credit unions stay on the out of the game. Only about 5% of credit unions offer student loans. However, the credit unions that do offer student loans experience tremendous cross-selling. Of the members who use their credit union for a student loan, 65% open a checking account, 55% take out a credit card, and 44% open a savings account. Using Sparrow, credit unions experience the same cross-selling efficacy without having to balance sheet the risk.
“Credit unions that have a referral relationship with an affiliate student lender or don’t offer a student loan resource are actively forfeiting membership opportunities,” said Harrison Hochman, CEO at Sparrow. “We exist to ensure every CU can surge Gen Z membership by offering student loans without becoming a student lender. The success has surpassed the disbelief of our highest expectations.”
The Sparrow effect
Sparrow enables credit unions to launch their own white-labeled, turnkey student loan marketplace within three minutes. From launch, each marketplace connects to Sparrow’s extensive network of 20+ non-competitive student lenders. Effectively, Sparrow turns the credit union into an Expedia for student loans, without having to be a student lender. Sparrow pays the credit union non-interest income on disbursed loans. Credit unions use the Sparrow platform to configure automated marketing campaigns and cross selling members on existing products.
With over 2.8 million members, PenFed uses Sparrow to power its student loan refi at scale. Sparrow’s industry leading technology gives us an edge to succeed.
Jaren Snyder, Product Manager at Pentagon Federal Credit Union
Credit unions who have switched from traditional affiliate relationships to launching a marketplace on Sparrow have experienced:
144% higher payout per funded loan
4.5x higher funding rates per hundred pre-qualifications
Access to 260+ unique data attributes per non-member
Sparrow was founded in 2020 by Hochman, Griffin Morris and Daniel Kahn. Since its founding, Sparrow has become one of the fastest growing educational financing platforms in the U.S., facilitating the search of over $400 million of private student loans.
About Sparrow
Sparrow, one of the fastest growing student student lending platforms in the U.S., offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare real student loan rates through a single form, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
About CULCT
The Credit Union League of Connecticut serves, advocates for, and advances the interests of Connecticut credit unions in order to support their growth and maximize the positive impact credit unions have on their members, communities, employees, and on all their relationships. For more than 88 years, the Credit Union League of Connecticut has helped its members position for sustainable success and growth through a variety of offerings including government relations, regulatory compliance, executive education, vendor partnerships, and marketing services. To learn more visit www.culct.coop.
Collaboration provides credit unions with the ability to reap the benefits of student loans without becoming a student lender.
New York, NY June 16, 2023 – Sparrow, an award-winning financial technology startup redefining how credit unions attract and engage the next generation, is thrilled to unveil a strategic partnership with GoWest Credit Union Association, a prominent six-state organization dedicated to serving over 300 credit unions and 16.5 million members. Recognizing the need for a solution that bridges the generational divide between credit unions and Gen Z, GoWest has turned to Sparrow’s cutting-edge platform, which offers a revolutionary approach to new member engagement.
The partnership with Sparrow represents a transformative opportunity for credit unions seeking to engage with Gen Z effectively. Our industry continues to seek connection with younger members, and Sparrow has a fresh new approach to reaching them. Their innovative model enables credit unions to launch within minutes, eliminating the need for continuous IT maintenance and mitigating any balance sheet risks. Sparrow’s solution empowers credit unions to thrive in the evolving financial landscape.
Despite a 200% rise in private student loan volume across the last five years, only about 5% of credit unions offer student loans. However, of the borrowers who used their credit union for a student loan, 65% opened a checking account, 55% obtained a credit card, and 44% opened a savings account. Through the Sparrow platform, credit unions can achieve the same cross-selling efficacy without becoming student lenders themselves.
“We’ve removed the barrier for credit unions to swim ten years upstream of the competition and win Gen Z before they’re banked,” explained Harrison Hochman, CEO at Sparrow. “It’s a magical moment when a young adult realizes they have found a trusted financial institution in a credit union. We’re excited to join forces with GoWest to bring this magic moment to credit unions up and down the West Coast.”
How Sparrow works
Using Sparrow, credit unions launch white-labeled student loan marketplaces within minutes of signing up. Each marketplace comes with integration into 20+ non-competitive student lenders. Credit unions can activate / deactivate whichever student lenders they’d like to offer on their marketplace. The marketplace generates non-interest income on disbursed loans and provides first-party data and marketing automations to drive new membership growth.
There are key moments in the life of a consumer where credit unions have the opportunity to build resilient member relationships. Sparrow’s cracked the student lending code and I am excited to support their mission. They’ve introduced ‘memberization’ into the student loan process where credit unions can quickly offer a robust student lending program without impacting current operations, projects, or having to offer the student loan off their books.
Credit unions who have switched from traditional affiliate relationships to launching a marketplace on Sparrow have experienced:
144% higher payout per funded loan
4.5x higher funding rates per hundred requests
Access to 260+ unique data points per non-member
Sparrow, founded in 2020 by Harrison Hochman, Griffin Morris, and Daniel Kahn, has emerged as one of the fastest-growing educational financing platforms in the United States, facilitating the search for over $400 million in private student loans.
About Sparrow
Sparrow, one of the nation’s fastest growing student financing platforms, offers solutions to borrowers and businesses. Borrowers use Sparrow to compare personalized student loans through a single form. Sparrow introduces simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
“Can I get a student loan even though I have bad credit?”
The simple answer: yes. The more complicated answer: welllll, yes, but it’s going to be trickier.
While most federal student loans don’t require you to have a good credit score, or any credit at all, most private student loans, on the other hand, do. If you’re worried about your poor credit score preventing you from being able to pay for college, don’t fret. While it may be more difficult, it isn’t entirely impossible.
Here’s what you can do to get a student loan with bad credit.
Generally speaking, you will need a credit score of at least 670 or higher to qualify with most private lenders. That said, what each individual lender considers “bad” credit will vary. And, there are several lenders that work with borrowers with lower credit scores.
It’s important to note that most private lenders use the FICO credit scoring model. The FICO scale uses a range of 300-850 to measure creditworthiness, so the closer you are to 850 the better.
First, here’s is a list of the top 5 student loans for bad credit. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA has a minimum credit score requirement of 670. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores. Ascent’s minimum credit requirement varies based on the loan.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos does not disclose their minimum credit requirement. Brazos is a great option if you live in Texas and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a student loan with College Ave, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. Earnest has a minimum credit score requirement of 650. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. An Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 660. It’s best for students who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Can You Get Federal Student Loans with Bad Credit?
Most federal student loans don’t require you to have a good credit score (or any credit at all). They also tend to have lower interest rates and better terms and conditions. These qualities make them a great place to start when thinking about financing your college education.
There are four main types of federal student loans, three of which do not require a credit check or a high credit score to qualify.
Federal Loans that Don’t Require a Credit Check
Direct Subsidized Loans
Direct Subsidized Loans are available only to undergraduate students who demonstrate financial need. This means that you may not qualify for Direct Subsidized Loans.
If you do, the government will pay the interest on your Direct Subsidized Loans while you are in school. Once you graduate, you’ll be in charge of paying them back, interest included.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to both undergraduate and graduate students, and you do not need to prove financial need to qualify. However, while in school, the government does not pay interest on these loans. So, while you’re hitting the books, interest will be accumulating in the meantime.
Direct Consolidation Loans
Direct Consolidation Loans allow you to combine more than one federal loan into one. So, if you have several federal loans and want to simplify your payments, you can combine them into one singular loan, and thus, one singular payment. When you consolidate, your new interest rate is the average of your previous loans’ interest rates.
Federal Loans That Do Require a Credit Check
Direct PLUS Loans
Direct PLUS Loans are available to graduate/professional students and parents of students. Like Unsubsidized Loans, you will be responsible for any interest that accrues, even while in school. However, unlike all other federal loan types, Direct PLUS Loansdo require an adverse credit check.
While the credit check process could be a bummer if you have bad credit, there is hope if you don’t pass it. Adding a creditworthy endorser to the loan may allow you to qualify.
How to Get Federal Loans with Bad Credit
In order to get federal aid, you need to fill out the Free Application for Federal Student Aid (FAFSA). This form will ask you to provide information regarding you and your family’s financial situation to determine your eligibility for aid, but it will not run a credit check as part of that evaluation.
It’s important to note that you don’t have to accept all the federal aid that you qualify for. You should always consider the terms and conditions and think about what makes most sense for you and your educational journey.
While federal loans do tend to be a better choice in comparison to private student loans, they won’t always be best. There’s a variety of different financial aid options for students, so make sure you understand what they all are and what they all mean before agreeing to one.
The goal of student loan refinancing is typically to score a lower interest rate or monthly payment, saving you money in the long run. If you have a bad credit score, it may be challenging to secure a lower rate than what you currently have.
Here is a list of the top refinance loan companies for bad credit. In just three minutes, you can compare real and personalized student loan refinancing rates from 17+ lenders – for free – by using the Sparrow application.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides student loan refinancing for Arkansas residents. ASLA has a minimum credit score requirement of 670.
College Ave offers student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. Their student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget. To qualify for a refinance loan with College Ave, you will need a credit score in the mid-600s.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 660. It’s best for students who want generous cosigner release and forbearance policies.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. Earnest has a minimum credit score requirement of 650. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
ISL is a nonprofit lender that offers both private student loans and student loan refinancing. ISL’s student loan refinancing is best if you haven’t graduated and want generous forbearance policies. ISL has a minimum credit score of 670.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with an associate’s degree or higher or borrowers with a high income. SoFi has a minimum credit score of 650.
What to Do if You Were Denied a Student Loan Due to Bad Credit
If you were initially denied a private student loan due to poor credit, your best bet is to look for a creditworthy cosigner. A cosigner is someone who agrees to sign onto the loan. In doing so, they agree that if the borrower fails to repay the loan, the cosigner will take responsibility for paying it back.
Having a cosigner is valuable because their credit score will be factored into the lender’s decision to work with you, which can also help you secure a better interest rate and terms. So, if your credit score isn’t up to par but theirs is, you may be in luck.
Make sure you don’t pick just anyone to cosign unless you really, really have to. Make sure to find someone that is creditworthy and has a history of managing their finances effectively. Additionally, always make sure to have open conversations with whoever you choose before they agree to cosign. Explain the pros and cons of being a cosigner and what impact it could have for them. Discussing expectations around repaying the loan is also important so your cosigner knows what to expect.
Improving your credit score won’t happen overnight, but it is worthwhile to take any steps you can throughout the loan process to boost your credit.
Here’s a few tips to help get your credit score in check.
Stay Aware of How Much Debt You’re Taking On
Your credit score is calculated based on a variety of factors, one being your payment history. In fact, your payment history is the most important part of your credit score, making up 35% of the calculation.
When you take on debt, such as student loans, you are doing so with the understanding that that money will be paid back and paid on time. If you make consistent, on-time payments, it’s good for your credit, as it demonstrates an ability to pay back debts successfully. If you pay late or miss payments, it could hurt your credit, as it demonstrates an inability to pay back debts successfully.
While this may sound like a no-brainer, you’ll want to be aware of how much debt you’re taking on. If you take on too much, it could make you more likely to miss a payment or go into loan default.
Remember to be realistic about how much you will be able to afford in monthly payments. Utilizing a student loan calculator to estimate your monthly loan payments after graduation is a great way to get real about whether the loan will be feasible when repayment starts. Let’s use an example here.
Let’s say you’re studying to be a public school teacher, and you land a job making $50,000 a year after graduation. This would land you around $4,200 per month (if we round up) to budget with. (For the ease of this example, we aren’t factoring in taxes.)
Now, let’s say your monthly expenses are as follows:
You’re left with $1,950 each month. This example is simple and doesn’t factor in taxes or other expenses such as savings, car maintenance, pet costs, entertainment, and more.
If you’re debating a $30,000 student loan at a 9% interest rate and a 15-year repayment term, you’d be looking at a $304 minimum monthly payment. Now remember, this is for one loan. If you took out four of these loans, one for each year you’re in school, you’re looking at an even heftier monthly payment.
So, before taking out a student loan, consider whether the estimated monthly payments would be affordable for you given your future income potential. Being realistic about what you may be able to afford could prevent you from missing a payment down the line.
The length of your credit history is another important factor in determining your credit score. The longer you have had open lines of credit, the better your credit score will typically be. Having, and properly managing, your credit for a long time shows lenders that you’re responsible.
While it may sound counterintuitive, closing any open lines of credit you currently have could hurt your credit score because it shortens the length of your credit history. Unless you absolutely need to, stay away from closing any current accounts.
Don’t Open New Lines of Credit
Opening new lines of credit will cause what’s called a hard inquiry. A hard inquiry occurs when a financial institution checks your credit report before making a lending decision. When lenders do a hard inquiry, they’re attempting to assess how you’ve handled your credit in the past.
Just like you’d only lend money to someone you trust, lenders want to make sure you’re a sound investment for them before dishing out the cash. A hard inquiry, though, can temporarily hurt your credit. So, if you’re looking to take out a student loan anytime soon, we recommend holding off on opening any new lines of credit.
Check Your Credit Report
If you have bad credit but aren’t totally sure why, you may want to check your credit report. Your credit report is important to look over for many reasons, but especially to check for errors, fraud, or identity theft. Even a small error on your credit report can significantly hurt your credit score, so we recommend checking fairly often.
There are many financial institutions, such as banks and credit card companies, that offer free credit reports. If yours don’t, utilize the free Annual Credit Report website. You are, by law, entitled to these reports yearly.
Final Thoughts from the Nest
So, yes. You can get a student loan with bad credit. However, it might make the process a bit more challenging. Start thinking ahead about where your credit is at, and if it’s not ideal, start taking small steps to build it. To find a private student loan for students with bad/no credit, complete the Sparrow application today.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
While a cosigner can help you qualify for loans and get you better repayment terms, that may not be an option for you. If you’re finding yourself without a cosigner, know that it’s okay. There are plenty of student loans you can get without a cosigner. So, let’s get into it.
Compare Student Loans without a Cosigner
To help get you started, here are our best picks for student loans with no cosigner. We recommend you use Sparrow to find the best student loan rates for no cosigner and to compare across multiple lenders in minutes.
Before you jump right into taking out loans for college, let’s explore some other ways you can get money. First, you’ll want to apply for scholarships and grants and get a couple of those. These are great ways to receive money for college because you will usually never have to pay it back. It’s basically free money.
Next, you’ll want to see if you qualify for work-study programs. Many schools participate in the work-study program, which allows college students to work on campus in exchange for financial aid. Most colleges that participate offer a wide variety of jobs. The best part? Since it’s a work-study, they’ll adjust your working schedule around your school schedule. Fill out the FAFSA to take advantage of this.
Finally, you can move on to loans. Specifically, you’ve got two main loans you’ll be hearing about: federal and private. Loans should always come last in the process of paying for college as they’re money you’ll need to pay back with interest. Plus, they may be more challenging to secure without a cosigner.
You’ll want to check out federal student loans first. These usually don’t require a cosigner in order to qualify. The only federal loan where you might need a cosigner or an endorser is with a PLUS loan. And that’s only if you have an adverse credit history. Federal student loans also have benefits like flexible repayment options and possible loan forgiveness.
After you’ve looked at federal student loans, it’s time to start looking for private student loans. There are two ways to get private student loans without a cosigner. The first is to qualify for a private student loan on your own. To do so, you’ll have to meet these general requirements:
Have a good credit score. Many lenders will do a credit check and require you to have a credit score in at least the mid-600s. So, if you don’t meet that minimum credit score, look into building your credit to help you qualify. A simple way to do this is to pay your bills on time.
Be a U.S. Citizen or Eligible Noncitizen. If you’re a U.S. citizen, be at least the age of majority in your state.
Meet the income requirements. Some lenders may require you to have a certain income in order to qualify without a cosigner.
Lenders may have their own additional requirements, but these are basic ones to meet.
The second option is to find a student loan company that doesn’t require a cosigner. While these loans typically have higher interest rates, they usually have easier requirements. So, there’s a higher chance of you being able to qualify for loans.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. In order to qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you live in Texas, have a strong credit history, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. In order to qualify for a student loan with College Ave without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5 or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. An Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA, and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at least 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. Accordingly, they’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. They do not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. Although, if you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
Final Thoughts from the Nest
Figuring out how to pay for your college career can be a hassle, especially if you can’t find a cosigner. Luckily, you now have 13 options for student loans with no cosigner. Sign up with Sparrow to help make the process easier. In doing so, you can save and compare your matches from the Sparrow application to help you make a decision.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
LendKey offers both private student loans and student loan refinancing. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan refinance offering is available to graduates with strong credit and stable income. It’s best if you want to work with a credit union or community bank to access loan offers you otherwise might have overlooked.
Fixed APR Range: 7.11% to 11.18%
Variable APR Range: N/A
Loan Amounts: $5,000 to $300,000, depending on degree
• Work with a credit union or community bank, rather than a traditional lender • Access to competitive interest rates • Offers up to 18 months of forbearance • Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
• Eligibility criteria excludes part-time students, parents, and non-U.S. citizens/permanent residents • Varying cosigner release policies • Loans aren’t available in Maine, Nevada, North Dakota, Rhode Island, or West Virginia • Biweekly payment via autopay is not available • You may have to become a member of a credit union
Compare LendKey Rates:
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
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LendKey allows you to access refinance offers from a network of non-traditional lenders that you otherwise might have overlooked. On its platform, LendKey connects you with hundreds of community banks and credit unions simultaneously. While the credit unions and community banks don’t have the name recognition that some of the traditional banks and online lenders have, they typically offer lower rates and personalized customer service. In addition, the credit unions and community banks are often non-profits, so you’ll be working with a lender that has your best interest in mind.
Competitive interest rates and zero fees for qualified borrowers
When looking to refinance your student loan, finding a low interest rate is typically a top priority. If you qualify for a LendKey student loan refinance, you’ll have access to competitive interest rates from credit unions and community banks that you might not be able to find elsewhere. While most of the lenders on LendKey’s platform do not charge any origination fees, application fees, or prepayment penalties, some may charge late fees or insufficient funds fees. The terms will vary depending on which lender you choose, so be sure to read the terms and conditions of your loan carefully.
LendKey Student Loan Refinance
Fixed APR*
7.11% to 11.18%
Variable APR*
N/A
*Rates as of September 14, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Offers up to 18 months of forbearance due to economic hardship or natural disaster
If you experience economic hardship or a natural disaster, LendKey offers generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
On 5, 7, and 10-year loans, LendKey allows you to postpone payments for up to four months at a time, for up to 12 months total.
On 15 and 20-year loans, LendKey offers up to 18 months of forbearance, in six-month increments. While LendKey handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
When you borrow through LendKey’s platform, you’ll get free access to special borrower benefits that help you achieve your financial and personal goals. These benefits include:
Career Assistance: LendKey partners with NextJob to offer free tools and online resources to help you succeed, including:
Online mock interviews
A resume builder
Hidden job opportunities waiting to be uncovered
A personality test to help you find the right career path
Credit Health Analysis: To help you reach your financial goals, LendKey has partnered with Curu, a platform that provides comprehensive credit analysis designed to help you improve your credit health
Curu analyzes your spending, net worth, and credit utilization to generate personalized tasks that show your path to credit success.
Curu displays your real-time financial account information all in one place so you always know where you stand.
Curu sends you notifications for upcoming credit card payment due dates so you’ll never miss a payment again.
Federal Student Loan Assistance: LendKey partners with Savi to provide an online, concierge service that searches across 150+ federal loan forgiveness and repayment options and recommends a path forward based on a borrower’s unique financial situation and goals. Savi then automates and digitizes the application process to reduce mistakes, simplify the process, and save time.
Access a free, instant estimate of monthly savings
Detect eligibility & simplify enrollment for national and state repayment and forgiveness programs
Receive 1:1 support as needed from a team of student loan experts
Drawbacks: LendKey Student Loan Refinance
Strict eligibility criteria
In order to qualify for student loan refinance through LendKey, borrowers must meet the following criteria:
A U.S. citizen or permanent resident
Graduated with at least an associate degree
You or your cosigner have a credit score of 660
You have an annual income of $24,000 per year, or $12,000 per year with a cosigner
LendKey’s strict eligibility criteria excludes non-U.S. citizens/permanent residents, non-graduates, parents, and those who don’t meet the credit or income requirements.
Not a U.S. citizen or permanent resident? Prodigy Finance has looser residency requirements. In addition, SoFi offers student loan refinance to international students who have a U.S. citizen as a cosigner.
Haven’t earned an associate’s degree?EDvestinU accepts borrowers without a degree.
Don’t have a credit score of 660 (or a creditworthy cosigner)? Earnest accepts borrowers with a lower credit score.
Don’t have an annual income of $24,000? SoFi doesn’t have a minimum income requirement.
If you do not meet LendKey’s criteria for a student loan, you may want to look elsewhere to refinance your private student loan. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all bidding for your business. And best of all, it won’t impact your credit score.
Varying cosigner release policies
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
If you earn less than $24,000 per year or have fewer than 36 months of credit history, a cosigner is required in order to borrow from LendKey.
Unfortunately, it’s not clear how quickly you can release your cosigner from your LendKey loan. Since LendKey partners with credit unions and community banks (each of which have their own internal policies), you will need to check with your specific lender to confirm their cosigner release policy.
Loans aren’t available in certain states
LendKey does not offer student loan refinance to borrowers who live in Maine, Nevada, North Dakota, Rhode Island, or West Virginia. If you live in any of these states, try using our rate comparison tool to see which refinance lenders you qualify with.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through LendKey, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With LendKey, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
You may have to become a member of a credit union
One of the major advantages of borrowing through LendKey is that the platform allows you to access loan offers from a network of non-traditional lenders (credit unions and community banks) that you otherwise might have overlooked.
Unfortunately, that also means you may have to become a member of the institution you borrow from, which typically costs around $5. Although the process of becoming a member of a credit union is relatively simple, it adds another step to the borrowing process that traditional banks and online lenders don’t require.
LendKey Student Loan: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
7.11% to 11.18%
Variable APR Range
N/A
Loan Terms
5, 7, 10, 15, or 20 years.
Loan Amounts
$5,000 to $125,000 for undergraduate degrees; up to $250,000 for graduate degrees; and up to $300,000 for medical, dental or veterinary degrees.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is $5 to $10, depending on the lender).
Eligibility Requirements – Financial
Minimum Credit Score
660.
Minimum Income
24,000 per year, $12,000 per year with a cosigner.
Typical Credit Score of Approved Borrowers or Cosigners
751.
Typical Income of Approved Borrower
$65,000.
Maximum Debt-to-Income Ratio
50%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after five years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens or permanent residents.
Location
Available to borrowers in all 50 states, except Maine, Nevada, North Dakota, Rhode Island, and West Virginia.
Must have graduated
Yes, with at least an associate degree.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
37%+.
Repayment Options
Academic Deferment
No.
Military Deferment
No.
Disability Deferment
Did not disclose.
Forbearance
On 5, 7, and 10-year loans, postpone payments for up to four months at a time, for up to 12 months total. On 15 and 20-year loans, postpone payments for up to six months at a time, for 18 months total.
Cosigner Release
Did not disclose.
Death or Disability Discharge
Not guaranteed by the loan agreement, but common practice, according to LendKey.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
LendKey.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
No.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
Did not disclose.
Before you take out a loan from LendKey…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is LendKey a legitimate lender?
Yes, LendKey is legitimate. The platform connects borrowers with credit unions and community banks offering private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing. Since its founding in 2009, LendKey has helped fund $3.1 billion in loans for 99,000-plus borrowers — it also services more than $2 billion worth of student loans.
Is LendKey available in all 50 states?
LendKey is available to borrowers in all 50 states, except Maine, Nevada, North Dakota, Rhode Island, and West Virginia.
How long does it take to get a LendKey student loan?
Submitting an application through LendKey takes a few minutes. Once you’ve submitted your loan application, LendKey will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. However, you can speed up the process by requesting debt payoff letters from your current lenders and loan servicers.
What happens if I don’t qualify for a LendKey student loan?
If you don’t qualify for LendKey student loan refinance, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or try with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all bidding for your business. Best of all, it won’t impact your credit score.
Are LendKey student loans federal or private?
LendKey’s student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through LendKey hurt my credit score?
In order to estimate what rate you qualify for, LendKey conducts a soft credit check — this does not affect your credit score. If you choose to accept the LendKey refinance offer, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Brazos is a non-profit lender that offers private student loans and student loan refinancing. Since it was launched in 1975, Brazos has focused on bringing transparency and low-cost loans to Texas residents. While Brazos private student loans are only available to borrowers who are residents of, or students in, Texas, the non-profit lender offers a wide range of options for undergraduate, graduate, MBA, law, medical, dental veterinary, or doctoral students, as well as parents. Accordingly, it’s best if you live, or attend school, in Texas, have strong credit, and want competitive interest rates.
Fixed APR Range: 2.71% to 6.86%
Variable APR Range: 5.32% to 9.47%
Loan Amounts: $1,000 up to the total cost of attendance, minus other aid received
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. To do so, we suggest you use the free Sparrow application to see the rates and terms you’d qualify for with 17+ premier lenders.
Here are Brazos’ rates in comparison to other top lenders:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Work with a non-profit, rather than a traditional lender
Brazos is a Texas nonprofit student loan company that has been helping Texas families finance the cost of their college education for over 40 years. Brazos is not affiliated with any school. As a non-profit, its goal is to save you money by offering the most competitive rates possible. While Brazos doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for a Brazos student loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Graduate, MBA, Law, Medical, Dental, Veterinary, and Doctoral Students
Fixed APR*
2.71% to 6.86%
Starts at 2.71%
Variable APR*
5.32% to 9.47%
Starts at 5.32%
*Rates as of November 1, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Offers up to 12 months of forbearance due to economic hardship, natural disaster or military duty
If you experience economic hardship or a natural disaster or are called up for active-duty military service, Brazos offers up generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
Brazos offers up to 12 months of forbearance, in three-month increments. While Brazos handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
In order to qualify for a private student loan through Brazos, borrowers must meet the following criteria:
A U.S. citizen, permanent resident or, if applying with an eligible cosigner, a non-citizen with a work or student visa, or a DACA recipient
Be a resident of, or student in, the State of Texas
At least 18 years old
Enrolled at least half-time in a degree-granting program
Have a credit score of 720 (or apply with a cosigner who does)
Have an annual income of $60,000-plus, or $30,000 if applying with a cosigner
Don’t live, or attend school, in Texas? Then complete our 2-minute form to see if you qualify and at what rate with over 15 different lenders. Doing so is quick, easy, and does not impact your credit score.
Don’t have a credit score of 720? Then look into Ascent and Funding U (they offer future income-based loans that don’t have a credit requirement).
Don’t have an annual income of $60,000? Then SoFi is a great option (it has no income requirement.) In addition, Ascent and Funding U offer future income-based loans that don’t have an income requirement.
Limited repayment options
Brazos only offers two repayment options on its private student loans: Immediate Repayment and Deferred Repayment. Compared to other online lenders that offer up to four repayment options, Brazos’ repayment options may seem limited.
Check out the table below to understand the difference between Brazos’ student loan repayment options: 1.) Immediate Repayment and 2.) Deferred Repayment.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no / limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky.
Unfortunately, Brazos does not offer any form of cosigner release. Instead, you will have to apply for a new loan through Brazos.
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. In addition, many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through Brazos, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Brazos, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
$1,000 up to the total cost of attendance, minus other aid received.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (5% of the monthly payment or $7.50, whichever is greater. Maximum fee is $35).
Eligibility Requirements – Financial
Minimum Credit Score
720 or 690 with a qualified cosigner.
Minimum Income
$60,000 or $30,000 if applying with a cosigner.
Typical Credit Score of Approved Borrowers or Cosigners
N/A.
Typical Income of Approved Borrower
$128,244 for borrowers or $118,262 for cosigners.
Maximum Debt-to-Income Ratio
40%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
U.S. citizen, permanent resident or, if applying with an eligible cosigner, a non-citizen with a work or student visa, or a DACA recipient.
Location
Borrower must be a resident of, or student in, the State of Texas.
Must be enrolled half-time or more
Yes.
School requirement
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
17%.
Repayment Options
In-school Repayment Options
Immediate Repayment: Make full payments as soon as the loan is disbursed, while you’re still in school.
Deferred Repayment: Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
Grace Period
No.
Academic Deferment
No.
Military Deferment
Yes, up to 36 months.
Disability Deferment
Did not disclose.
Forbearance
Yes, hardship forbearance for up to 12 months (in three-month increments).
Cosigner Release
No. Borrowers must reapply for a new loan individually.
Death or Disability Discharge
Yes, if the benefiting student dies the loan is discharged for the parent borrower and the cosigner, if there is one. If the parent borrower dies and there is no cosigner, the loan is discharged. If the parent borrower dies and there is a cosigner, the cosigner is still responsible for paying the loan.
Loan discharge if cosigner dies or becomes disabled
No. If the cosigner dies, the cosigner is removed from the loan, and the borrower continues to be responsible for repayment on the loan for the remainder of the repayment term.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark.
In-house Customer Service Team
Only for the application process.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Initial approval is online and takes only a few minutes. Brazos will then ask for documentation to verify your information.
Before you take out a loan from Brazos…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
Yes, Brazos is legitimate. The lender is part of the nation’s largest group of nonprofit student loan organizations and has $30 billion in loans for over 2 million students.
Is Brazos available in all 50 states?
Brazos is available to residents of, or students in, the State of Texas.
How long does it take to get a Brazos student loan?
Submitting an application through Brazos takes a few minutes. Once you’ve submitted your loan application, Brazos will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Brazos student loan?
If you don’t qualify for a Brazos student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Brazos’ student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Brazos hurt my credit score?
In order to estimate what rate you qualify for, Brazos conducts a soft credit check — this does not affect your credit score. If you choose to accept the Brazos loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
LendKey offers both private student loans and student loan refinancing. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan offering is available to undergraduate and graduate students. It’s best if you have strong credit and want generous cosigner release and forbearance policies.
Fixed APR Range: 4.39% to 11.11%
Variable APR Range: 5.84% to 11.11%
Loan Amounts: $1,000 up to the total cost of attendance, minus other aid received
• Work with a credit union or community bank, rather than a traditional lender • Access to competitive interest rates • Good grades could lower your rate • Offers up to 18 months of forbearance • Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
• Eligibility criteria excludes part-time students, parents, and non-U.S. citizens/permanent residents • You can’t see if you’ll qualify and at what rate without a hard credit check • Varying cosigner release policies • Biweekly payment via autopay is not available • Limited repayment options • You may have to become a member of a credit union
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
LendKey allows you to access loan offers from a network of non-traditional lenders that you otherwise might have overlooked. On its platform, LendKey connects you with hundreds of community banks and credit unions simultaneously. While the credit unions and community banks don’t have the name recognition that some of the traditional banks and online lenders have, they typically offer lower rates and personalized customer service. In addition, the credit unions and community banks are often non-profits, so you’ll be working with a lender that has your best interest in mind.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for a LendKey student loan, you’ll have access to competitive interest rates from credit unions and community banks that you might not be able to find elsewhere. While most of the lenders on LendKey’s platform do not charge any origination fees, application fees, or prepayment penalties, some may charge late fees, or insufficient funds fees. The terms will vary depending on which lender you choose, so be sure to read the terms and conditions of your loan carefully.
*Rates as of July 20, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Good grades could lower your rate
LendKey has developed the Academic Credit Score, a proprietary scoring model that assesses your creditworthiness by looking at standard metrics (you and your cosigner’s credit score) as well as non-traditional metrics such as your GPA and major. This allows LendKey to get a holistic understanding of who you are as a borrower and as a student. It also rewards you for your hard work in the classroom through lower rates on your student loan, and a lower rate could mean substantial savings over the lifetime of your loan.
Offers up to 18 months of forbearance due to economic hardship or natural disaster
If you experience economic hardship or a natural disaster, LendKey offers generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
LendKey offers up to 18 months of forbearance, in six-month increments. While LendKey handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
When you borrow through LendKey’s platform, you’ll get free access to special borrower benefits that help you achieve your financial and personal goals. These benefits include:
Career Assistance: LendKey partners with NextJob to offer free tools and online resources to help you succeed, including:
Online mock interviews
A resume builder
Hidden job opportunities waiting to be uncovered
A personality test to help you find the right career path
Credit Health Analysis: To help you reach your financial goals, LendKey has partnered with Curu, a platform that provides comprehensive credit analysis designed to help you improve your credit health.
Curu analyzes your spending, net worth, and credit utilization to generate personalized tasks that show your path to credit success.
Curu displays your real-time financial account information all in one place so you always know where you stand.
Curu sends you notifications for upcoming credit card payment due dates so you’ll never miss a payment again.
Federal Student Loan Assistance: LendKey partners with Savi to provide an online, concierge service that searches across 150+ federal loan forgiveness and repayment options and recommends a path forward based on a borrower’s unique financial situation and goals. Savi then automates and digitizes the application process to reduce mistakes, simplify the process, and save time.
Access a free, instant estimate of monthly savings
Detect eligibility & simplify enrollment for national and state repayment and forgiveness programs
Receive 1:1 support as needed from a team of student loan experts
Drawbacks of LendKey Student Loans
Strict eligibility criteria
In order to qualify for a private student loan through LendKey, borrowers must meet the following criteria:
A U.S. citizen or permanent resident
At least the age of majority in your state (typically 18 to 21)
Enrolled at least half-time in a degree-granting program
3 years of credit history
An annual income of $24,000-plus
LendKey’s strict eligibility criteria excludes part-time students, parents, non-U.S. citizens/permanent residents, and those who don’t meet the credit or income requirements.
If you do not meet LendKey’s criteria for a student loan, you may want to look to different lenders for your private student loan.
Not a U.S. citizen or permanent resident?MPOWER and Prodigy Finance offer private student loans to international students. In addition, Earnest, College Ave, and Ascent all offer private student loans to international students who have a U.S. citizen as a cosigner.
Don’t have 3 years of credit history?Ascent and Funding U offer future income-based loans that don’t have a credit requirement.
Don’t have an annual income of $24,000?Ascent and Funding U offer future income-based loans that don’t have an income requirement.
You can’t see if you’ll qualify and at what rate without a hard credit check
Unlike many other online lenders, LendKey does not allow you to qualify and receive rate estimates without undergoing a hard credit check. This means you will have to undergo a hard credit check, which temporarily hurts your credit, in order to see if you qualify and at what rate. If you want to see if you qualify and at what rate with over 17 different lenders, try our 2-minute form. It’s quick, easy, and does not impact your credit score.
Varying cosigner release policies
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
If you earn less than $24,000 per year or have fewer than 36 months of credit history, a cosigner is required in order to borrow from LendKey.
Unfortunately, it’s not clear how quickly you can release your cosigner from your LendKey loan. Since LendKey partners with credit unions and community banks (each of which have their own internal policies), you will want to check with your specific lender to confirm their cosigner release policy.
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through LendKey, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With LendKey, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
LendKey only offers two repayment options on its private student loans, both of which require you to make in-school payments. Compared to other online lenders that offer up to four repayment options, LendKey’s repayment options may seem limited. With that said, if you’re able to make in-school payments, it’s the best way to reduce interest and minimize the amount of debt you owe.
Check out the table below to understand the difference between LendKey’s student loan repayment options: 1.) Flat-fee repayment and 2.) Interest-only repayment.
Pay a flat fee of $25 a month while you’re in school for up to 60 months. Full payments are due after that point.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Interest-Only Repayment
Pay only interest while you’re in school. With this option, there is a maximum of 60 months of payments (5 years).
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments. If you plan to take more than 60 months to complete your program, you will have to make full payments after the first 60 months.
You may have to become a member of a credit union
One of the major advantages of borrowing through LendKey is that the platform allows you to access loan offers from a network of non-traditional lenders (credit unions and community banks) that you otherwise might have overlooked.
Unfortunately, that also means you may have to become a member of the institution you borrow from, which typically costs around $5. Although the process of becoming a member of a credit union is relatively simple, it adds another step to the borrowing process that traditional banks and online lenders don’t require.
$1,000 up to the total cost of attendance, minus other aid received.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is $5 to $10, depending on the lender).
Eligibility Requirements – Financial
Minimum Credit Score
660.
Minimum Income
24,000 per year.
Typical Credit Score of Approved Borrowers or Cosigners
689.
Typical Income of Approved Borrower
$32,000.
Typical Income of Approved Cosigner
$85,000.
Maximum Debt-to-Income Ratio
33%, not including housing costs.
Ability to qualify if you’ve filed for bankruptcy
Yes, after five years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens or permanent residents
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
90%+.
Repayment Options
In-school Repayment Options
Flat-fee repayment: Pay a flat fee of $25 per month while you’re in school for up to 60 months. Full payments are due after that point.
Interest-only repayment: Only pay interest while you’re in school for up to 60 months. Full payments are due after that point.
Grace Period
6 months.
In-school Deferment
No.
Military Deferment
No.
Disability Deferment
Did not disclose.
Forbearance
Yes, hardship and natural disaster forbearance for up to 18 months, in six month increments.
Cosigner Release
Yes (requires 24 months of timely repayments). Death or disability discharge: Not guaranteed by the loan agreement, but common practice, according to LendKey.
Death or Disability Discharge
Did not disclose.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
LendKey.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
No.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Immediate.
Before you take out a loan from LendKey…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is LendKey a legitimate lender?
Yes, LendKey is legitimate. The platform connects borrowers with credit unions and community banks offering private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing. Since its founding in 2009, LendKey has helped fund $3.1 billion in loans for 99,000-plus borrowers — it also services more than $2 billion worth of student loans.
Is LendKey available in all 50 states?
LendKey is available to borrowers in all 50 states.
How long does it take to get a LendKey student loan?
Submitting an application through LendKey takes a few minutes. Once you’ve submitted your loan application, LendKey will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a LendKey student loan?
If you don’t qualify for a LendKey student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are LendKey student loans federal or private?
LendKey’s student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through LendKey hurt my credit score?
Yes. In order to check your eligibility and receive your rate, LendKey will conduct a hard credit check. A hard credit check may temporarily impact your credit score.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products shown here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
EdvestinU is a student loan program from the nonprofit New Hampshire Higher Education Loan Corp. They offer private student loans and student loan refinancing to students across the country. In order to qualify for EdvestinU’s student loan refinancing, you do not need to be from New Hampshire or even have graduated school. EdvestinU’s refinance offering is best for those who do not have a degree and are looking to refinance up to $200,000 of student loans.
• Work with a non-profit, rather than a traditional lender • You can refinance your students loans without a degree • Exclusive benefits for New Hampshire residents
• Maximum loan of $200,000 is lower than most refinance lenders • Students cannot take over parent PLUS loans that parents took out on their behalf
Compare EdvestinU Refinance Rates:
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Work with a non-profit, rather than a traditional lender
EdvestinU has been helping families across the country finance the cost of their college education for nearly 60 years. EdvestinU is not affiliated with any school. As a non-profit, its goal is to save you money by offering the most competitive rates possible. While EdvestinU doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
You can refinance your student loan without a degree
While most lenders require you to have graduated in order to refinance your student loan, EdvestinU accepts borrowers who don’t have a degree. This is a huge benefit to borrowers who left school before earning their degree.
Regardless of whether or not you have earned your degree, you will still need to meet EdvestinU’s credit and income requirements to qualify for refinancing.
Credit Score: You’ll need a credit score of at least 700.
Income: You’ll need $30,000 in gross income if you plan to refinance less than $100,000. You’ll need $50,000 in gross income if you plan to refinance more than $100,000.
If you do not meet that criteria, you could still be eligible for refinancing if you apply with a cosigner who does.
Exclusive benefits for New Hampshire residents
EdvestinU, as well as many other private student lenders, offers a 0.25% discount if you enable automatic payments. This is the lender’s way of incentivizing you to turn on autopay so that you don’t miss a payment.
EdvestinU has taken this to another level by offering New Hampshire residents a 1% rate reduction on fixed rate loans and a 0.25% rate reduction on variable loans.
EdvestinU also offers in-person support and counseling to borrowers from New Hampshire.
If you’re a New Hampshire resident, EdvestinU might be the best option for you.
Drawbacks of Refinancing with EdvestinU
Maximum loan of $200,000 is lower than most lenders
While other lenders often will refinance loans up to the total cost of attendance, the maximum loan amount that EdvestinU will refinance is $200,000. Accordingly, EdvestinU is a great option if you are refinancing relatively smaller student loans. However, if you are refinancing loans from medical school or graduate school that exceed $200,000, you might want to consider other lenders that accept larger loans.
Students cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). However, EdvestinU does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through EdvestinU — it will just be in your name, not the student’s name.
If you’re looking for a lender that does allow you to transfer parent PLUS loans to the student, you may want to consider SoFi.
EdvestinU: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.41% to 7.78%
Variable APR Range
8.04% to 9.79%
Loan Terms
5, 10, 15 or 20 years.
Loan Amounts
$7,500 to $200,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, five percent of the monthly payment.
Eligibility Requirements – Financial
Minimum Credit Score
700.
Minimum Income
$30,000 if you plan to refinance less than $100,000; if you plan to refinance more than that, the minimum income is $50,000.
Typical Credit Score of Approved Borrowers or Cosigners
756.
Typical Income of Approved Borrower
Approximately $70,000.
Maximum Debt-to-Income Ratio
43%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 10 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or a permanent resident.
Location
Available to borrowers in all 50 states.
Must have graduated
No.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
52%.
Repayment Options
Academic Deferment
Yes, but interest-only payments are due during the deferment.
Military Deferment
Yes, but interest-only payments are due during the deferment.
Disability Deferment
Yes, you can postpone payment while undergoing rehab for a disability.
Economic Hardship Deferment
Yes, borrowers are eligible for 12 months of economic hardship deferment, in three-month increments, over the life of the loan.
Forbearance
Discretionary forbearance is available for 12 months.
Cosigner Release
Yes, after 36 months of consecutive, on-time payments. Borrowers must also have a credit score greater than 749 and a minimum gross income of $30,000.
Death or Disability Discharge
The loan will be forgiven if the borrower dies, but not in instances of total or permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
At least 30 days.
Before you take out a loan from EdvestinU…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is EdvestinU a legitimate lender?
Yes, EdvestinU is a legitimate lender that has close to sixty years of experience lending and refinancing in higher education.
Is EdvestinU available in all 50 states?
Yes, EdvestinU is available in all 50 states.
How long does it take to get an EdvestinU student loan?
Submitting an application through EdvestinU takes a few minutes. Once you’ve submitted your loan application, EdvestinU will immediately return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. However, you can speed up the process by requesting debt payoff letters from your current lenders and loan servicers.
What happens if I don’t qualify for an EdvestinU student loan?
If you don’t qualify for an EdvestinU student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are EdvestinU student loans federal or private?
EdvestinU loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through EdvestinU hurt my credit score?
In order to estimate what rate you qualify for, EdvestinU conducts a soft credit check — this does not affect your credit score. If you choose to accept the EdvestinU loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Refinancing your student loans can save you thousands over the life of your loan. By refinancing, you can swap your current student loan(s) for a new loan with a better interest rate or terms.
If you have excellent credit or stable income, or a cosigner who does, you may benefit from refinancing your student debt. To begin the process of refinancing, explore the best student loan refinancing options from our lending partners below.
Compare Student Loan Refinancing Rates
Finding the right refinancing option should be a simple. Use Sparrow to find the best student loan refinance optionfor you. Sparrow shows you the most important information and simplifies the entire process.
The Arkansas Student Loan Authority offers student loan refinancing to Arkansas residents or students who have attended a school in the state. They offer competitive rates and flexible terms to those who qualify. ASLA is best if you either live in or attended school in Arkansas and want competitive interest rates and flexible loan terms.
Best Features
Drawbacks
• Competitive interest rates • Ability to refinance several types of loans • Variety of repayment options • Cosigner release option after 48 months • Offers 0.25% interest rate reduction for opting into auto-debit payments
• Strict residency requirements • Inaccessible for international students
Brazos is a nonprofit lender that provides student loan refinancing to Texas residents. While you do need to have at least an undergraduate degree to refinance with Brazos, you will receive competitive interest rates and flexible terms if you qualify. Brazos is best if you are a Texas resident and have at least an undergraduate degree, though the degree does not have to be from a Texas school.
Best Features
Drawbacks
• Work with a nonprofit, rather than a traditional lender • Competitive interest rates • Variety of repayment terms ranging from 5 to 20 years • Generous forbearance options
• Strict eligibility criteria • No cosigner release • No bi-weekly payment via autopay • Students cannot take over parent PLUS loans that parents took out on their behalf
College Ave offers student loan refinancing and is known for their strong customer service, competitive interest rates, and flexible loan terms. For example, College Ave offers 6- or 9-year loans, which is unlike many other private lenders. College Ave is best if you want access to good customer service and a flexible repayment term that better matches your budget.
Best Features
Drawbacks
• Strong customer experience • Competitive rates • Choose any loan term between 5 and 15 years including nonstandard terms such as 6 or 9 years
• Limited eligibility criteria • Unclear forbearance policy • Not available to borrowers without a degree, visa holders, or those with parent PLUS loans • Doesn’t allow spousal consolidation loans
Earnest offers student loan refinancing with customizable repayment plans, allowing you to choose your repayment term down to the month. Earnest also has forward-looking eligibility requirements and offers competitive interest rates. Earnest is best if you don’t have a cosigner and want a repayment plan customized to your situation.
Best Features
Drawbacks
• Competitive interest rates • Customizable payments and loan terms • Option to skip one monthly payment every year • Allows biweekly payments via autopay
• Refinancing is unavailable in Kentucky and Nevada • Variable interest rates aren’t available for borrowers in all states • You can’t apply with a cosigner • Student borrowers cannot take over parent PLUS loans that parents took out on their behalf
INvestED offers student loan refinancing to Indiana residents and students who attended school in Indiana. They offer a variety of repayment options, competitive interest rates, and flexible terms. INvestED is best if you live in Indiana or attended school in Indiana and want access to different repayment options.
Best Features
Drawbacks
• Competitive interest rates • You can refinance without a degree • Offers up to 36 months of academic deferment
• Only available to students that are residents of or attended school in Indiana • No biweekly payment via autopay • You can’t refinance parent PLUS loans in your name • Cosigner release option after 48 months of timely payments
ISL Education Lending is a nonprofit student lender offering both private student loans and student loan refinancing. ISL Education Lending is best if you want to work with a nonprofit lender, want competitive interest rates, or want to refinance without having a degree.
Best Features
Drawbacks
• Competitive interest rates and zero fees • You can refinance without a degree • Cosigner release option after 24 months
• Only one loan repayment term for in-school refinancing • Students cannot take over parent PLUS loans that parents took out on their behalf • No biweekly payment via autopay
LendKey’s student loan refinancing is a good option if you have graduated, have a strong credit score, and have stable income. A great feature of LendKey is that they will connect you with a network of 100+ lesser known credit unions and community banks so you can work with and take out loans from smaller institutions. LendKey is best if you are a creditworthy borrower and want to work with smaller lenders with low rates and good customer service.
Best Features
Drawbacks
• Work with a credit union or community bank, rather than a traditional lender • Access to competitive interest rates • Offers up to 18 months of forbearance • Free borrower benefits like Career Assistance, Credit Health Analysis, and Federal Student Loan Assistance
• Eligibility criteria excludes part-time students, parents, and non-U.S. citizens/permanent residents • Varying cosigner release policies • Loans aren’t available in Maine, Nevada, North Dakota, Rhode Island, or West Virginia • Biweekly payment via autopay is not available • You may have to become a member of a credit union
Nelnet Bank offers student loan refinancing for both private and federal student loans, including Parent PLUS loans. Nelnet Bank also offers a flexible forbearance policy and competitive interest rates. Nelnet Bank is best if you are looking for competitive rates and want the ability to refinance Parent PLUS loans.
Best Features
Drawbacks
• Competitive interest rates • You can refinance parent PLUS loans in your name • Offers 12 months of forbearance due to economic hardship or natural disaster • Cosigner release option after 24 months of timely payments • Flexible repayment options
• Strict eligibility criteria • No biweekly payment via autopay • Not accessible to international students or borrowers with student visas
SoFi is one of the biggest student loan refinancing companies in the industry. You have to have an associate’s degree or higher to qualify, but if you do qualify, you’ll have access to a wide variety of repayment options and exclusive member benefits. SoFi is best if you have at least an associate’s degree, are a creditworthy borrower, and want to take advantage of their borrower benefits.
Best Features
Drawbacks
• Competitive interest rates • Students can refinance parent PLUS loans in their own name • Comes with borrower protections (forbearance and deferment) • Includes membership perks like career coaching, job search assistance, and wealth management
• Unclear about credit requirements • No cosigner release • Refinancing is unavailable to borrowers without a degree • No spousal consolidation loans
Frequently Asked Questions About Student Loan Refinancing
Can I refinance just my private student loans?
Yes. You can refinance just your private student loans.
Is it a good time to refinance private student loans?
Yes. You can refinance private student loans at any time. If you have federal student loans, however, we recommend waiting until the federal student loan forbearance is over.
Can you refinance a private student loan into a federal one?
No. Because private student loans are provided by private financial institutions, you cannot transfer them to federal student lenders. However, you can refinance a federal student loan into a private student loan.
What is a good interest rate for student loan refinancing?
The goal of student loan refinancing is to secure a lower interest rate or better terms than what you currently have. So, any interest rate lower than what you currently have would be a good interest rate.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products shown here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
While an important piece in determining your eligibility for financial aid, Expected Family Contribution, or EFC, is often misunderstood.
Here’s what you need to know about Expected Family Contribution for FAFSA purposes.
What is Expected Family Contribution?
Expected Family Contribution, or EFC, is a number used to determine how much financial aid you are eligible to receive, including grants and federal student loans.
EFC is calculated using a formula established by law. The formula uses information such as:
Your/Your family’s income
Your/Your family’s assets
Your/Your family’s benefits
The number of family members in college during the same year
This information is then used to estimate the amount of money you and your family would be able to contribute to one year of college costs. By doing so, financial aid programs are able to estimate what your financial need may be when it comes to paying for college.
Note that this number does not indicate how much you will receive in financial aid or how much you willhave to contribute, but rather, how much you are eligible to receive and how much you could contribute.
Your EFC is important because it contributes to how you are evaluated for financial aid overall, including federal student aid.
Expected Family Contribution and Federal Student Aid
When calculating your overall federal student aid eligibility, the federal government uses a formula that takes into account several factors such as:
Your EFC
Student enrollment status (full-time, part-time, etc)
Your year in school
The cost of attendance each respective school
Federal student aid haslimits, and thus, your overall federal student aid eligibility helps determine how much of each type of aid you are eligible for.
How Does My Expected Family Contribution Impact My Federal Aid?
Your EFC will help determine how much aid you will be eligible for. If your EFC is $0, you will be eligible to receive the maximum amount of federal aid. If your EFC is over a certain threshold, you will receive no aid at all.
Note that these numbers may fluctuate annually to reflect changes in your/your family’s income.
Your Expected Family Contribution’s Impact on Financial Aid Overall
Each piece of this overall aid eligibility equation helps paint a bigger picture regarding your finances, and therefore, helps schools understand where you may need financial aid.
How much of your financial need is covered by federal aid may impact how schools fill the remaining gap with aid such as university scholarships and grants.
Why Your Expected Family Contribution Changes
Your EFC will likely change year-to-year as you or your parent’s/parents’ income changes. Therefore, the amount of aid you are eligible for each year will also change.
Be sure to resubmit your FAFSA each year to ensure that you maintain access to the maximum amount of aid you are able to receive.
How Can I Calculate My Expected Family Contribution?
Let us say this before we give you the breakdown: While you can calculate your own EFC at home, be careful not to get overly attached to this number. At-home estimates are just that: estimates.
Add up the total parent income (both taxed and untaxed income)
Subtract allowances for federal and state taxes, as well as any Social Security paid
Subtract an Income Protection Allowance (IPA)
This number is intended to estimate how much a family would need for necessities such as housing and food based on its size. This number would be taken out of the overall income when calculating how much a parent would be able to contribute to a child’s education.
Subtract an Employment Expense Allowance
This will only apply for households where all parents are working, and will equal 35% of earned income or $4,000 — whichever is less. This amount is intended to cover the expenses that working parents have such as commuting.
After doing this calculation, you will reach what’s called your Available Income (AI). This represents how much of the parental income can be considered for college costs.
Calculating the Student Contribution to the EFC
Add up the total student income
Subtract allowances for federal and state taxes, as well as any Social Security paid
Subtract an IPA
Figure out the Student Contribution from Available Income (50% of the current total)
Finally, add the Parental Contribution to the Student Contribution to result in your family’s EFC.
Commonly Asked Questions About Expected Family Contribution
What is the Expected Family Contribution for an independent student?
When you are a dependent student, your EFC is calculated based on both your parent’s/parents’ income and your own.
However, as an independent student, your family’s income will not be used to calculate your EFC. Rather, your own income and assets will be factored into the calculation, minus some deductions.
If you are an independent without dependents, your EFC will be based on your income (and your spouse’s if you are married) minus taxes and basic living expenses.
If you are an independent with dependents, your EFC will be based on your income (and your spouse’s if you are married) minus taxes, basic living expenses, and an employment allowance. The employment allowance is available if you are a single working parent or a working student with a spouse.
There is no one specific number that makes your EFC “good.” Generally speaking, however, the lower your EFC, the more financial aid you may qualify for.
Why is my Expected Family Contribution so high?
Your EFC can be high for a variety of reasons, however, it is often high due to having a high income or a lot of assets. Assets are resources that can produce positive economic value such as:
Cash
Real estate
Stock holdings
When calculating your EFC, both liquid and illiquid assets are taken into account. Liquid assets are ones that can be sold quickly without losing a lot of their value, such as the money in your bank account or stocks. Illiquid assets, on the other hand, are ones that do lose value when sold quickly, such as cars and real estate.
If you/your family has a low income but a lot of assets, your EFC may be higher than you expected. If this does not seem to be the case, however, consider filing a financial aid appeal to have your EFC recalculated.
Your EFC is one piece of how your financial aid eligibility is calculated. While it isn’t the whole bit, it is important. By estimating your family’s EFC, you can determine what financial gaps may arise after receiving financial aid.
If scholarships and federal student aid don’t cover your financial need completely, it may be time to explore a student loan to fill the gap. When you’re ready, Sparrow is here to help.
Earning a graduate degree is a great way to increase your income potential. In fact, Indeed reported that, on average, the earnings increase from a bachelor’s to master’s degree is roughly 20%. Nonetheless, it can be difficult to understand how to pay for grad school.
Graduate school can be expensive. According to FinAid.org, a graduate degree costs anywhere from $30,000 to $120,000, depending on the program. This makes financial decisions around paying for graduate school even more important.
While that reality may be overwhelming, there are several ways to pay for your graduate degree. Let’s break down your top 5 options: scholarships, fellowships, grants, work-study, and loans.
How To Pay for Grad School
As with any degree, there is a certain order you should follow when it comes to how you finance your education.
Scholarships, fellowships, and grants are all forms of free aid, or gift aid. Typically, scholarships, fellowships, and grants do not need to be paid back, so you’ll want to accept these first.
After accepting any free money available to you, you should pursue work-study next. Federal work-study is considered earned money, meaning you have to trade your time to receive it. While not everyone will receive federal work-study, it’s a great option for those who do.
Loans should always come last in the process because they are borrowed money. When you borrow a loan, it’ll typically accrue interest, and by the time you pay it back, you’ll have paid a significant amount in interest.
#1: Finding the Best Scholarships for Graduate School
Graduate scholarships are typically awarded based on academic or professional achievements. However, there are scholarships awarded based on other factors such as:
What GPA Do You Need to Get Graduate School Scholarships?
Typically, you’ll need around a 3.5 GPA to be a competitive applicant for most graduate school scholarships. That said, there are scholarship programs that have a lower GPA minimum.
Where Can You Find Graduate School Scholarships?
You can find graduate school scholarships in a variety of places such as:
Professional organizations
From your school’s financial aid office
Online search engines
For example, the American Bar Association offers scholarships to first-year law students from underrepresented communities through theirLegal Opportunity Scholarship.
For search engines, there are a wide variety of options available such as ScholarshipOwl, Scholarships.com, Chegg, and Fastweb.
#2: Exploring Graduate Fellowship Options
A fellowship is another form of free aid that you’ll want to seek out before taking on student loans.
What is a Graduate Fellowship?
A fellowship is an award given to graduate students to subsidize the cost of education. Some fellowships are awarded simply to fund your education, similar to scholarships. Other fellowships are awarded specifically to fund academic projects such as dissertations, thesis projects, or research.
Fellowships are awarded by schools, professional organizations, and nonprofits, typically based on merit.
The amount you receive from a fellowship depends on the specific program. For example, the NSF Graduate Research Fellowship Program is a five-year fellowship that provides three years of financial support. Recipients receive an annual stipend of $34,000 and a cost of education allowance of $12,000.
The International Dissertation Research Fellowship (IDRF), however, provides a one-time stipend that varies depending on the research plan of the recipient. On average, each IDRF recipient receives $23,000.
When searching for a graduate fellowship, pay close attention to the length of the program and how the funds are disbursed to you or your university.
Is a Fellowship Better Than a Scholarship?
Fellowships and scholarships are both forms of free money, but you may have to complete an academic project to receive fellowship funding. If you’re interested in a particular academic project, a fellowship may be a solid option for you. If you’d prefer to receive free money with no strings attached, a traditional scholarship may be better for you.
While one is not necessarily better than the other, it’s important to understand how each one works to make an educated decision.
#3: Finding the Best Grants for Graduate School
Grants are similar to both scholarships and fellowships — they are free money you don’t need to pay back.
Who is Eligible for a Grant for Graduate School?
Typically, grants are awarded based on financial need. Some grant providers may have additional eligibility requirements such as having a certain GPA or enrollment in a specific program. Some may even require you to have specific research goals.
Graduate school grants can come from a variety of sources such as the federal and state government, your school, and professional organizations.
Federal Grants
To be eligible for any federal grants, you must complete the FAFSA. The information you provide on the FAFSA is used to determine your financial need, which is then used to determine your federal grant eligibility.
Does the Pell Grant Cover Graduate School?
As a graduate student, you are not eligible for the Pell Grant. The Pell Grant is intended for undergraduate students, minus a few exceptions.
State Grants
State grants are provided by individual U.S. states, and thus, each state grant program runs a little differently. Reach out to your state’s department of education to learn more about the grants they may offer.
School Grants
Some universities offer grants to students pursuing a graduate degree at their institution. Check with your specific program to learn more about the grants offered for your field of study. Don’t hesitate to ask the school’s financial aid office as well. There may be generic institutional grants available to both undergraduate and graduate students that you qualify for.
Professional Organization Grants
Professional organizations focus on advancing individuals within a particular profession or with specific interests. Because of this, they tend to offer financial assistance to those pursuing degrees within their field. For example, the American Bar Association and the American Marketing Association provide grants to eligible individuals pursuing related degrees.
Work-study is a federal aid program that provides part-time jobs to undergraduate and graduate students with financial need. To be eligible for work-study, you must complete the FAFSA. Your application will determine if your level of financial need meets the minimum requirement of the work-study program.
Both full-time and part-time graduate students are eligible for work-study. If you accept the work-study aid offered to you, you will be responsible for finding a work-study role through your college/university. Speak to your school’s financial aid office for specific information regarding how work-study functions at your school.
How Much Money Can You Get in Work-Study?
The exact amount you receive in work-study will depend on the school you attend. Although, at minimum, work-study roles must pay the federal minimum wage. However, there are some work-study roles that offer more generous hourly rates.
#5: Finding the Best Student Loans for Graduate School
Student loans should always be the last option when determining how to pay for grad school. The more you borrow, the more you will have to pay back due to the interest that accrues. That makes selecting a good student loan that much more important.
A cosigner is an individual that signs onto a loan alongside you, taking full responsibility for the loan if you’re unable to pay it back. A creditworthy cosigner can help you secure a lower interest rate and better terms.
If you don’t have access to a cosigner, that is okay, too. Non-cosigned loan options are available, but they may have higher interest rates.
If you are pursuing a graduate degree immediately after your undergraduate degree, you may not have a substantial full-time income just yet. Some private lenders have minimum income requirements, so if you plan to take out the loan without a cosigner, you’ll need to make sure you meet that income threshold.
Interest Rate
Each student loan will have its own unique interest rate and terms. Always compare interest rates carefully to select the loan that is best for you.
Each individual lender will offer a unique set of repayment options. While some lenders may offer a deferred repayment option, allowing you to postpone repayment while in school, others may only offer immediate repayment. This would force you to begin making loan payments while in school, which many students are unable to do. Be realistic about which repayment options would work for you and ensure the lender you select offers them.
Federal & Private Loan Options for Graduate School
As a graduate student, you will likely have access to both federal and private student loans.
Federal
Federal student loans are provided by the federal government. To be eligible for a federal student loan, you must complete the FAFSA.
Private
Private student loans are provided by private entities such as banks, financial institutions, and nonprofits. To see what private student loans you qualify for, complete the Sparrow application.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering private student loans to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Therefore, Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offering is available for undergraduate, graduate, professional, and career school students, as well as parents of students. Accordingly, it’s best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan offering is available to undergraduate and graduate students. In addition, it’s best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students. Accordingly, it is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that offers non-cosigned graduate student loans to international students. Accordingly, it is best for international students who don’t have a credit history and can’t access a qualified cosigner.
SoFi is a strong option for undergraduate, graduate, law, and MBA students, as well as parents looking to fund their child’s education. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
While graduate school can be a costly affair, there are a variety of ways to pay for it. When figuring out how to pay for grad school, always remember to pursue aid in the following order: scholarships, grants, fellowships, work-study, student loans.
When it comes time to check out private student loan options, start with Sparrow.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
If you want to save money, consider going to community college and transferring to a four-year college after earning all of your General Education credits. Although you may be wondering, “is community college really free?”
Over 100 colleges in the United States offer transfer options for community college students, including all of the Ivy League schools and other private/public colleges.
While the community college route is a lot cheaper than the traditional four-year route, this doesn’t necessarily mean community college is free.
The cost of community college depends on many factors, such as what state you plan to attend school in, your financial need, your field of study, as well as your involvement in any special programs.
Here’s what you need to know about attending community college.
Is Community College Free?
Community college in general is not free, but almost 30 states in the United States offer free community college programs based on income, merit, geography, and specific program requirements.
Source: CNBC
It’s important to note that you must meet all of the specified requirements laid out by your community college to qualify for having your tuition covered. For example, California offers the California College Promise Grant (CCPG), which waives tuition for community college and other fees if you meet the eligibility requirements.
Even if the cost of tuition is covered, students may be expected to cover non-tuition costs such as room and board, school supplies, meal plans, and other fees.
To find out what kind of community college programs your state or region offers, search up ‘[Your state/city] promise program community college.’ You can also look for private grants and scholarships that are specifically geared toward students who plan to attend community college and transfer.
Where is Community College Free?
Community college can be free in the following 29 states: Washington, Oregon, California, Nevada, Wyoming, Colorado, New Mexico, Kansas, Oklahoma, Minnesota, Iowa, Missouri, Arkansas, Louisiana, Indiana, Kentucky, Tennessee, New York, Vermont, Connecticut, Rhode Island, New Jersey, South Carolina, North Carolina, West Virginia, Maryland, Delaware, Michigan, and Hawaii.
Frequently Asked Questions About Community College
Is Free College Actually Free?
Community college is not actually free. The coverage of community college tuition can depend on your state, income requirements, academic requirements such as high school grade point average (GPA), field of study, age, and more importantly, the community college you plan to attend.
Before anything, you’ll need to be accepted into the community college before considering aid. Make sure to apply to multiple community colleges that you’d like to attend and submit your application on time.
After you’re accepted, you can see if you qualify for financial aid. Every community college has different college promise programs, so be sure to look into your specific community college to see what financial aid options are available to you.
Contact your financial aid advisor for more information.
What are the Top Community Colleges?
According to Niche, the top five community colleges are:
Ohio State University – Agricultural Technical Institute in Wooster, Ohio
Fox Valley Technical College in Appleton, Wisconsin
Texas State Technical College in Waco, Texas
Lake Area Technical College in Watertown, South Dakota
New Mexico Military Institute in Roswell, New Mexico
Which State Has the Cheapest Community College?
According to the Education Corner, Texas has the cheapest community college, with the Wharton County Junior College having a net average cost of $3,969.
Can You Get a Bachelor’s Degree at a Community College?
Yes, you can get a bachelor’s degree at a community college, depending on which community college you go to. Currently, 24 states have community colleges with approved baccalaureate programs.
Traditionally, community colleges only offered associate’s degrees and certificates for students who completed two years of education and 60-semester credits of study. Bachelor’s degrees could only be earned at traditional four-year schools. Now, with workforce demands and calls for educational affordability and access, almost half of the states in the U.S. have allowed community colleges to award bachelor’s degrees.
For example, in Arizona, the Maricopa Community Colleges District offer bachelor’s degrees in Data Analytics and Programming at Mesa Community College, Information Technology at Estrella Mountain and Phoenix Community College, Public Safety Administration at Phoenix and Rio Salado Community College, and Behavior Sciences at South Mountain Community College.
However, it’s important to note that most four-year institutions do not allow students to transfer to the institution if they already have a bachelor’s degree, so it’s important to look into the program requirements and keep this in mind before you pursue a bachelor’s degree at a community college.
If you don’t plan to transfer to a four-year institution, consider getting a bachelor’s degree or an associate’s degree at a community college.
What is the Difference Between a Bachelor’s Degree and an Associate’s Degree?
Bachelor’s Degree
Associate’s Degree
Four-year long program
Two-year long program
A step above an associate’s degree
A step below a bachelor’s degree
More career opportunities
Fewer career opportunities
More focused area of study
General focus area of study
More expensive
Less expensive
Do I Have to Submit my FAFSA If Attending Community College?
Yes, you must absolutely submit your Free Application for Federal Student Aid (FAFSA) even if you are attending community college. Even if the cost of community college won’t be necessarily “free,” submitting your FAFSA can get you financial aid that covers a significant portion of your tuition if you qualify.
Your FAFSA is necessary so that the federal government, state governments, and institutions can gauge your financial need and calculate your financial aid package.
On top of submitting your FAFSA, it’s important to also look into your school’s outlined requirements for financial aid applications. For example, at the University of California Santa Barbara, transfer students who want to receive aid must fill out the scholarships section of the UC application, in addition to submitting the Free Application for Federal Student Aid or the California Dream Act Application.
If you think that attending community college is the more suitable path for you, pursue it. Plenty of students go to community college and transfer to a four-year institution after earning their General Education credits, saving two years’ worth of tuition. Be sure to stay on top of the application processes for community colleges and check the qualifications for financial aid with each individual program. Even if community college is not necessarily “free,” you can still earn money to pay for college by applying for scholarships and grants.
If you’re a borrower, you may be wondering, “Are student loan payments tax deductible?”
For qualifying borrowers, the answer is yes. Student loan payments ARE tax deductible. The student loan interest deduction is a federal tax break that lowers how much of your income is taxed. The federal government created this deduction to assist borrowers in paying for higher education.
To find out if you’re eligible for this tax deduction, keep reading.
What Is The Student Loan Interest Deduction?
The student loan interest deduction is a federal income tax deduction that allows qualifying borrowers to deduct up to $2,500 from their taxable income.
Your eligibility for this deduction depends on your filing status and income level.
How Does the Student Loan Tax Deduction Work?
The student loan tax deduction enables you to subtract up to $2,500 from your taxable income for the interest paid on your student loans. Accordingly, this deduction helps you pay less in federal taxes. The Internal Revenue Service (IRS), the federal tax collection agency, offers various tax deductions, including student loan interest deduction.
To receive the deduction, you need to claim an “adjustment to income” on a 1040 form. Fortunately, you do not have to fill out a Schedule A, which is used for itemized deductions. To make this process as quick and easy as possible, gather the following information:
Filing status
Basic income information
Your adjusted gross income
Educational expenses paid with nontaxable funds
If you paid more than $600 in interest on your student loan debt, your lender/loan provider will give you a 1098-E.
Note: The deduction applies only to non-federal loans that gathered interest, as the Biden administration placed federal student loans in forbearance in 2021. Learn more about Biden’s student loan forgiveness.
Who Qualifies for the Student Loan Tax Deduction?
To qualify for the student loan tax deduction, you must meet the following eligibility requirements in income, filing status, loan timeline, and loan type.
Income Your modified adjusted gross income (MAGI) is your income after subtracting applicable tax penalties and tax deductions. While you can calculate your MAGI manually, online calculators can simplify the process.
If you are a single filer, your MAGI must be less than $85,000 to qualify for the student loan tax deduction.
If you are a joint filer, your MAGI must be less than $170,000 to qualify.
Filing Status To claim the student loan tax deduction, the eligible loan must have been borrowed for one of the following:
You are claimed as a dependent on someone else’s tax return.
You borrowed the student loan in your name but your parents are making the loan payments.
You are a parent paying for the loan taken out in your child’s name, as you are not the legal owner of the loan.
Loan Timeline The student loan must have been taken out during an academic period when you were enrolled for at least half the time at a qualifying post-secondary institution.
Additionally, it must have been used during a reasonable period after it was taken out, with loan amounts used within 90 days of the academic period.
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Loan Type Both federal and private student loans qualify for this deduction. However, you must have paid interest for the loan in 2019, as the student loan interest deduction was introduced in the 2020 Coronavirus Tax Relief.
Note: You can claim prepaid loan interest and origination fees for the student loan tax deduction.
Is It Worth Claiming Student Loan Interest on Taxes?
Regardless of your income class, you should claim your student loan interest on taxes if you qualify. Claiming this deduction will not result in any loss, as it lowers your taxable income.
How Much Can You Save with the Student Loan Interest Deduction?
The amount of money you can save depends on your income. The following table shows the average deduction values you can expect, based on your income class.
Income Class
Deduction Value
Below $10,000
$214
$10,000 to $20,000
$89
$20,000 to $30,000
$136
$30,000 to $40,000
$142
$40,000 to $50,000
$155
$50,000 to $75,000
$213
$75,000 to $100,000
$183
$100,000 to $200,000
$214
$200,000 and over
$74
Closing Thoughts From the Nest
If you qualify for the student loan interest deduction, be sure to claim the adjustment on your 1040 tax form. Doing so will reduce your taxable income. Accordingly, it will reduce the amount of taxes you owe.
SUMA Federal Credit Union selects Sparrow to power its newly launched private student loan marketplace.
NEW YORK – May 25, 2023 – Sparrow, an award-winning financial technology startup redefining how credit unions attract and engage the next generation, unveils a strategic partnership with SUMA Federal Credit Union, a $420 million credit union serving over 7,000 members. The new partnership provides SUMA with the ability to offer its members pre-qualified student loans from 20+ lenders, without having to balance sheet any of the risk.
We’d had a relationship with a single student lender for decades. Switching to Sparrow was a no-brainer. It’s a 10x better experience for our members and the credit union. We’re excited to have found a trusted partner.
The launch couldn’t have gone smoother. We had our partnership signed within three weeks of our first conversation. This platform is a game-changer for credit unions looking to effectively engage Gen Z.
Roman G Kozicky, CEO and President of SUMA FCU
Historically, most credit unions have chosen to stay out of student lending. Sparrow’s platform offers credit unions the ability to reap the benefits of student loans (most notably engaging and cross-selling Gen Z) without having to become a student lender. In less than three minutes, a credit union can launch a white-labeled student loan marketplace connected to 20+ non-competitive student lenders. Using Sparrow’s platform, credit unions can automate digital marketing to all members and non-members who pass through their marketplace.
“Credit unions that work with a single student lender on an affiliate basis are leaving tremendous opportunity on the table for themselves and their members,” said Harrison Hochman, co-founder and CEO of Sparrow. “We’re honored to have found a forward-thinking partner in SUMA FCU. We cannot wait to work closely towards this mission.”
As students begin thinking about the upcoming summer and following school year, SUMA FCU’s new marketplace has experienced an immediate impact since it went live, including:
Three minutes to launch a fully customized, white-labeled marketplace.
Access to 260+ unique data points per non-member using the marketplace.
Full control over which of the 20+ lenders is offered on the marketplace.
We conducted an exhaustive search for the best provider to replace our existing student loan relationship. Sparrow was a clear decision for our management team and Board. No other solution offers as high quality of control over the member experience, as much access to the data for marketing, and as high a payout as Sparrow does.
Yuriy Fizer, VP of Technology & Innovation of SUMA of SUMA FCU
Sparrow was founded in 2020 by Hochman, Griffin Morris and Daniel Kahn. Sparrow has become one of the fastest growing student financing platforms in the U.S., facilitating the search of over $400 million of private student loans.
About Sparrow
Sparrow, one of the country’s fastest growing student financing platforms, offers solutions to borrowers and businesses. Borrowers use Sparrow to search and compare personalized student loan offers through a single application, bringing simplicity, choice, and transparency to an otherwise inefficient and opaque lending process. Businesses use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com/crest and follow us on LinkedIn.
Your academic life is so important. The key to being successful this school year is staying on top of your studies and taking care of yourself. Below, we collected six simple, accessible tips that can positively impact your studies.
Step 1: Set the Scene
A great first step toward academic success is ensuring you have a place to make success happen. A clean, organized space for your study sessions is vital to your focus. This could be a dorm desk or a favorite study spot on campus. If your space is feeling too cluttered – try working at a coffee shop instead. On a budget? Local libraries often have plenty of open tables, and you can make yourself coffee at home! Once you get settled in a place you can focus, it’s time to find your best learning style. Consider the different ways you’ve studied in the past and figure out what works for you. You can try taking notes over what you’ve read, creating flashcards from index cards or using a digital tool such as Quizlet.
Step 2: No Cramming
You may have days where your to-do list seems impossible. Remember that trying to accomplish everything the day before can do more harm than good. Be sure to fill out your planner with assignments as soon as you know of them. This will give you the opportunity to work on upcoming assignments before they’re due. By breaking down manageable daily tasks instead of cramming it all into one all-nighter. This way you’ll not sacrifice your sleep and avoid burn out.
Step 3: Try Body Doubling
If you need some accountability — try the body doubling technique! Body doubling is the idea that you can be more productive with a friend or mentor who is also working on a project. This technique can also work for self-care tasks such as organizing your space or tackling some laundry!
Step 4: Goal Setting
Believe it or not, there is a science to setting goals. The goals you set for yourself should be both realistic and rewarding. For instance, instead of setting the goal “Get all straight A’s this semester,” try a smaller but related goal: “I’m going to study 6 hours per week.” By doing this, you’ve created a healthy, achievable goal that leaves time for plenty of study breaks, adequate rest, and avoids mental fatigue.
Step 5: Create Checklists
If you’re a visual learner, then checklists are for you! Keeping a physical list of tasks not only keeps you accountable, but helps you manage the time needed to complete the tasks. Have a lot of deadlines coming up? Use your syllabi as a guide to make a list of assignments and exams in order of their due date. This will help you focus on time sensitive tasks first and will keep important dates from creeping up on you.
Step 6: Celebrate!
Don’t forget to reward yourself for hard work. Even if it’s as small as taking breaks during an intense study session, it’s important to be kind to yourself. Be sure to step away when you’re frustrated—try switching up your study method or going for a quick walk. Remember that sitting down at a desk all day doesn’t serve you or your studying. In your free time, consider going outside or taking a yoga class. There are so many resources out there to get you outside and moving for the sake of your stressors.
Disclaimer
This blog was written by our partner, Ascent. Sparrow is not responsible for links to third- party websites where the security and privacy policies may differ.
About Ascent
Ascent is an award-winning lending company, committed to revolutionizing how students and families pay for higher education. Check out Ascent’s blog for other student tips and guides to navigate your college journey.
As the former CEO of Rogue Credit Union, a $3B financial institution, Gene Pelham has been on the forefront of credit union innovation for over 40 years. Today, he joins Sparrow’s Advisory Board to help shape how credit unions connect with Gen Z.
NEW YORK – April 6, 2023 – Sparrow, a two-year-old financial technology startup that simplifies and streamlines the student loan process, announced today that Gene Pelham will join its Credit Union Advisory Board. Having been the CEO of two credit unions, Pelham brings over 40 years of industry experience to one of the fastest growing educational financing platforms in the country.
“Our partnership is a huge win for every credit union struggling to connect with Gen Z,” said Sparrow CEO and co-founder Harrison Hochman. “With Gene’s guidance, Sparrow is extending its platform to allow credit unions to gain the benefits of student loans without becoming a student lender. Most notably, our clients leverage student loans to swim 10 years upstream of the competition to ‘memberize’ Gen Z while they’re still in college and introduce the other products offered in their ecosystem.”
There are key moments in the life of a consumer where credit unions have the opportunity to build resilient member relationships. Sparrow’s cracked the student lending code and I am excited to support their mission. They’ve introduced ‘memberization’ into the student loan process where credit unions can quickly offer a robust student lending program without impacting current operations, projects, or having to offer the student loan off their books.
Gene Pelham, Former CEO of Rogue Credit Union
Effectively engaging Gen Z
In a 2018 study, Cornerstone Advisors found that of the borrowers who used their primary credit union to find a student loan, 65% opened a checking account, 57% opened a credit card, 44% opened a savings account, and 20% obtained a mortgage. Despite these facts, less than 5% of credit unions are student lenders. Those that watch from the sidelines do so for a myriad of reasons: regulatory exposure, resource constraints, project saturation, etc.
Sparrow’s turnkey platform allows credit unions to bypass these challenges while reaping the benefits of student loans. With marketplaces launched on Sparrow, credit unions ensure all borrowers that pass through are either current members or submit applications for membership.
Driving Gen Z membership while increasing revenue
Since launching with Sparrow, credit union partners have experienced immediate impact, including:
Increased the average percentage of members who find funding for their student loan by 5.53x compared to the industry average
Increased the non-interest income that credit unions make on student loans by 144%
Accelerated membership of Millennials and Gen Z, with the average age of new members being 29 years old
AboutSparrow
Sparrow was founded in 2020 by Hochman, Griffin Morris and Daniel Kahn. Since its founding, Sparrow has facilitated the search of over $300 million of private student loans with its credit union partners. Credit unions use Sparrow to offer their customers a white-labeled student loan marketplace. Founded by students for students, Sparrow’s mission is to make education accessible and affordable for all. Learn more at www.sparrowfi.com and follow us on LinkedIn.
The average individual with a Masters in Social Work has around $68,000 to $76,000 in student loan debt. If you’re in the same boat, you’re not alone. To relieve the burden of student loan debt, consider pursuing loan forgiveness for social workers. Many federal forgiveness programs support individuals who work in public service, including social workers.
National Programs
The following loan forgiveness programs are for federal student loans only.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is a loan forgiveness program for individuals who work in public service, including social workers, teachers, nurses, and more. If you have, or plan to have, more than 10 years of full-time employment in public service and have made 120 qualifying monthly payments to your federal student loans, you may be eligible for PSLF.
You must complete the PSLF application to qualify.
National Health Services Corp Loan Repayment Programs
If you are a licensed clinical social worker, you may qualify for one of the National Health Services Corp’s three loan repayment programs:
National Health Services Corp Loan Repayment Program: For licensed primary care clinicians who serve at least two years of service at an approved site in a Health Professional Shortage Area.
National Health Services Corp Substance Use Disorder Workforce Loan Repayment Program: For health professionals who serve in a Health Professional Shortage Area and improve access to Substance Use Disorder.
NHSC Rural Community Loan Repayment Program: For health providers who work against the opioid epidemic in an approved rural community.
Perkins Loan Cancellation
Public service workers who have taken out Perkins loans before 2017 might be eligible for Perkins Loan cancellation. To verify whether you are eligible, reach out to your school’s financial aid office for the next steps.
Income-Based Repayment Forgiveness
Beyond federal student loan forgiveness programs, social workers can also take advantage of income-based repayment forgiveness.
If you make 20-25 years’ worth of repayments on any of the aforementioned repayment plans, you may be eligible for the rest of your loan balance to be wiped out.
State-Based Programs
Each U.S. state offers at least one state-specific student loan forgiveness program, which social workers may be able to take advantage of.
For example, Kentucky has a 50/50 matching loan repayment program for healthcare providers who serve in underserved and rural areas. In New York, licensed social workers who work in critical human services areas can get up to $26,000 shaved off of their loans.
Other Ways to Find Relief
Beyond student loan forgiveness programs, you can find student loan relief through other means, such as student loan refinancing.
Student loan refinancing is the process of taking out a new loan, preferably with better terms, to replace your current loan. The new loan can have a lower interest rate or monthly payment to help make the loan more affordable. Here is a list of the top student loan refinance rates. In just three minutes, you can compare real and personalized student loan refinancing rates from 17+ lenders – for free – by using the Sparrow application.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
For example, let’s say you have a student loan for $10,000 with a 10% interest rate and a repayment plan for 5 years. With your current plan, you pay $2,748.23 in interest. If you refinance your loan to have a 5% interest rate, you pay a total of $1,322.74 in interest, saving you around $1,400 in total.
To explore student loan refinancing offers, complete the free Sparrow application.
Sallie Mae and SoFi are two reputable lenders in the private loan industry, so you truly can’t go wrong with either. If you’re debating Sallie Mae vs SoFi, here’s what you should know about their private student loans before borrowing with either lender.
Sallie Mae vs. SoFi: A Side-by-Side Comparison
The table below offers an overview of what Sallie Mae and SoFi have to offer.
4.44% to 13.80% (undergrad); 4.99% to 13.60% (grad); 6.50% to 14.83% (parent).
Variable APR Rate
5.49% to 15.83%
5.99% to 14.30% (undergrad); 5.99% to 14.10% (grad); 6.32% to 14.83% (parent).
Loan Terms
10 to 20 years
5, 10, or 15 years
Loan Amounts
$1,000 to your school-certified, total cost of attendance
$5,000 up to your school-certified, total cost of attendance
Minimum Credit Score
Mid-600s
Mid-600s
Minimum Income
No minimum income requirement
No minimum income requirement
Cosigner Release Options
Yes, the cosigner can be released after 12 months.
Yes, the cosigner can be released after 24 months of timely payments.
Ability to Transfer a Parent Loan to a Student
No
No
Student Status
Students enrolled at a degree-granting institution qualify for student loans.
Must attend an institution that is authorized to receive financial aid
State Restrictions
None
None
Sallie Mae: The Pros and Cons
Sallie Mae student loans are good options for DACA recipients, international students, and individuals who want a short turnaround for cosigner release.
Pros
Cons
Offers competitive interest rates.
Sallie Mae does not offer biweekly student loan payments via autopay. Payments must be paid on a monthly basis.
Has 4 different repayment plans.
Sallie Mae does not offer loan prequalification, meaning that borrowers must submit a formal application and incur a hard credit check to see what they qualify for.
Sallie Mae offers private loans to international and DACA students.
Loans are not accessible to students who are enrolled less than part-time.
Cosigners can be released from a student loan after 12 months of timely payments.
Sallie Mae offers a 6-month grace period for students who have graduated, dropped below part-time enrollment, or left school.
Sallie Mae vs. SoFi: Which is Better for Student Loans?
In the battle of Sallie Mae vs. SoFi, there is no objectively “better” option for borrowing student loans.
If additional borrower perks like job assistance and career coaching are important to you, you may prefer SoFi. For DACA recipients and international students, Sallie Mae would be the more fitting option.
If you plan to have a cosigner on your student loan, consider asking your cosigner whether they prefer a shorter or longer cosigner release option. Sallie Mae has a cosigner release option after 12 months of timely payments, while SoFi offers the option after 24 months.
Closing Thoughts From the Nest
Both Sallie Mae and SoFi are great, reputable lenders. To compare personalized loan offers from both companies, consider submitting a free application with Sparrow. Your credit score will not be negatively affected by your pre-qualified offers.
Refinancing your student loans is a great way to lower the interest rate or monthly payment of your current loan. If you’re debating between Earnest vs SoFi, here’s what you should know about both lenders before picking one to move forward with.
Earnest offers student loan refinancing with customizable repayment plans, letting you choose your repayment term down to the month. It also has forward-looking eligibility requirements and offers competitive interest rates. Earnest is best if you don’t have a cosigner and want a repayment plan customized to your situation.
SoFi is one of the biggest student loan refinancing companies in the industry. You have to have an associate’s degree or higher to qualify, but if you do qualify, you’ll have access to a wide variety of repayment options and exclusive member benefits. SoFi best if you have at least an associate’s degree, are a creditworthy borrower, and want to take advantage of their borrower benefits.
Understanding the difference between Earnest vs SoFi can be difficult. Here’s an overview of how Earnest and SoFi differ when it comes to student loan refinancing.
$5,000 ($10,000 minimum for California residents) – $500,000
$5,000 to your outstanding balance
Minimum Credit Score
650
650
Minimum Income
No minimum income requirement. Applicants must have a consistent income or have a job offer starting within the next 6 months.
No minimum income requirement. SoFi looks at your income after taxes and any payments.
Cosigner Release Options
No option for cosigner release, but refinancing removes the original cosigner.
No
Ability to Transfer a Parent Loan to A Student
No
Yes
Must Have Graduated
Must have graduated or be in your last academic semester with either a consistent income or job offer.
Must have graduated with an Associate’s degree or higher.
State Restrictions
Residents of Alabama, Delaware, Rhode Island, Kentucky, and Nevada cannot qualify for loan refinancing.
None
Earnest: The Pros and Cons
Earnest student loan refinancing is a great option for borrowers who have fair credit and are seeking strong borrower protections and flexible repayment terms.
Pros
Cons
Individuals with fair credit can qualify for loan refinancing with Earnest. You do not need excellent or good credit to qualify.
You cannot refinance your student loans during medical or dental residency.
Earnest does not charge late fees if you miss a payment.
You cannot apply with a cosigner.
You can skip a loan payment once every six months.
You cannot transfer parent loans to your name.
Earnest lets you customize your loan term to fit your financial situation. You can choose a repayment period between 5-20 years.
You can choose your monthly payment with Earnest’s Precision Pricing program.
When looking at Earnest vs SoFi, there is no lender that is objectively “better.” Both Earnest and SoFi are reputable lenders and which one you choose should depend on your unique circumstances.
If you’re finishing your medical or dental residency, or want to transfer a parent loan to a student, you may find offers from SoFi more compelling. If you have a fair credit score, want borrower protections for loan delinquency, or want to select your repayment term, you may want to consider Earnest.
Otherwise, SoFi and Earnest are generally similar in terms of loan terms, APR rates, minimum income, and loan amounts.
To better explore your fit for student loan refinancing, use a student loan refinancing calculator to calculate what your optimal refinancing plan would be. Once you determine this, compare refinancing offers and their corresponding repayment plans from Earnest and Sofi by completing the Sparrow application.
Closing Thoughts From the Nest
Rest assured that whether you refinance with Earnest or SoFi, you truly can’t go wrong with either company. However, remember to consider your financial status and how that fits with the offerings of both companies.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products shown here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Being a military spouse requires a level of sacrifice some may never understand, and oftentimes placing your career on hold is one of them. While sometimes necessary to keep up with a life of frequent moves, it can create additional challenges when it comes to paying off student loans. That’s why it’s important to know your military spouse student loan forgiveness options.
Can Military Spouses Get Student Loans Forgiven?
Currently, there are no student loan forgiveness programs designed specifically for military spouses. However, military spouses can still receive loan forgiveness through conventional federal forgiveness programs.
For full-time teachers who have taught for 5 consecutive years at a low-income school or educational agency. If you taught secondary-level mathematics or science, or were a special education teacher, you can be eligible for up to $17,500 in loan forgiveness. All other subjects can receive up to $5,000 in loan forgiveness.
For registered nurses, nurse faculty, or advanced practice registered nurses who have attended a qualifying nursing school and work in a critical shortage facility or accredited nursing school. Recipients can receive up to 85% of their nursing loans forgiven.
For nurses who work in Medicare, Medicaid, or the State Children’s Health Insurance Program. Full-time nurses can receive up to $50,000 in loan forgiveness, while half-time nurses can receive up to $25,000.
Servicemembers Civil Relief Act
The Servicemembers’ Civil Relief Act allows military spouses to lower the interest rate on their loans to 6%, if the loan was borrowed before the service member entered active duty. While this program is not loan forgiveness, it can help lower your monthly payments. Qualifying service members include those in the Army, Navy, Air Force, Marine Corps, Coast Corps, reservists on active duty, and more.
Student Loan Refinancing
Student loan refinancing allows you to swap your current loan for one with a better interest rate or terms. In some cases, this can help lower your monthly payments, making keeping up with them a bit easier.
If you have federal loans that do not qualify for loan forgiveness, you can sometimes consolidate them to a qualifying loan type. For example, if you have Federal Family Education loans (FFEL), which do not qualify for federal loan forgiveness, you can consolidate them into a Direct loan.
Income-driven repayment is a federal loan repayment plan that bases your monthly payment based on your income. After making 20-25 years’ worth of qualifying payments, your remaining student loan balance can be forgiven
State-Sponsored Assistance Programs
Some states offer loan assistance programs for their residents. For example, Iowa offers the Teach Iowa Scholars program, which provides qualifying first-year Iowa teachers with $4,000 per year for teaching in designated shortage areas. New York offers qualifying social workers up to $26,000 in loan assistance through the NYS Licensed Social Worker Loan Forgiveness program.
Closing Thoughts From the Nest
As a military spouse looking for loan forgiveness options, be sure to exhaust all options available to you. While there are no specific loan forgiveness options for military spouses, there are plenty of programs you can still take advantage of.
The College of Wooster selects Sparrow to help their students find the most affordable financing for school.
Approximately 9% of graduating students from The College of Wooster borrow private student loans. This may seem relatively small, but with an average loan size of $16,000 – the demand for private student loans is significant. As a result, Wooster’s financial aid officers are intimately aware of how daunting securing a private student loan can be.
Complex financial jargon introduces uncertainty for students as they question whether they’ll be able to attend school and what borrowing means for the future of their financial security. As a result, questions of loan eligibility, repayment terms, and cosigners inundate the inboxes of Wooster’s financial aid officers.
“Summer is our peak borrowing season. During that three month period, it feels like every conversation is about loans,” said Scott Friedhoff, Retired Vice President of Enrollment at The College of Wooster. “How much will the loans cost? Which should I choose? How can I minimize my debt? We’re overwhelmed with requests and questions.”
Starting the search for a student loan is intimidating from the get-go.
The arduous and time consuming process of figuring out which lenders a student may be eligible for compounds the anxiety. Most private lenders have complex credit criteria that aren’t easily understood in a FAQ. To find out if one qualifies, students often submit a lengthy application. If eligible, the majority of students make the cardinal mistake: they stop searching. Why waste time completing additional applications?
“In our research, students stop searching for a private student loan after their third pre-qualified offer,” said Harrison Hochman, CEO at Sparrow. “While this may seem innocuous, the consequences can be dire. The range of APRs from different can vary heavily by many percentage points. Stated differently, finding one additional lender may result in thousands of dollars of savings.”
This challenge is not unique to Wooster. However, it’s what Wooster proactively did to address the issue that sets them apart.
Enter Sparrow.
In the Spring of 2021, Sparrow and Wooster collaborated on ways to leverage Sparrow’s platform to serve Wooster students, administrators, and parents.
Sparrow’s platform was designed as a pragmatic solution to the challenges faced by Wooster students. By completing a simple three minute form, Sparrow exhaustively searches its network of lenders to automatically pre-qualifies students for the most affordable private student loans. Sparrow is like an Expedia for private student loans.
Having spent nearly three decades as an executive in higher education, I’ve seen many attempts at trying to affect systematic change. We signed our partnership with Sparrow and had their program launched to students within three weeks. With Sparrow, we can now guide students and parents better and with great confidence that they will manage four years of college expenses wisely. Sparrow made that possible.
Scott Friedhoff, Retired Vice President of Enrollment
Sparrow boils down the complex financial lexicon into language digestible by first-time borrowers. But perhaps most importantly, by exhaustively searching the private student loan market, Sparrow empowers borrowers to pick a rate with confidence. Rather than stopping with a single lender, Sparrow pre-qualifies students with over 17 different lenders to ensure that there isn’t money being left on the table.
Prior to working with Sparrow, Wooster students took three to four weeks, on average, to apply with 17 unique lenders. After working with Sparrow, Wooster can do the same breadth of search in as little as three minutes.
If you owe more than 6-figures in student loans, you may feel overwhelmed by your debt. However, you’re not alone. In 2021, there were around 900,000 borrowers who owed $200,000 or more in student loans.
If you want to learn how to pay off $200k in student loans fast, you’re in the right place. Keep reading for the best strategies to wipe out your student loan debt balance.
Look for Student Loan Forgiveness Opportunities
Before finding ways you can pay off $200k in student loans using your hard-earned cash, you should always look for free money first. Exploring student loan forgiveness opportunities is key.
If you borrowed federal student loans, you may be eligible for student loan forgiveness. Here’s a few programs that you should explore:
Public Service Loan Forgiveness
The Public Service Loan Forgiveness program is for federal loan borrowers who work in the public sector. Whether you’re a volunteer, teacher, or nurse, you may be eligible for student loan forgiveness if you work for a qualifying U.S. federal, state, or local employer.
Here are some common professions that qualify for Public Service Loan Forgiveness:
Non-profit
Government
Lawyers
AmeriCorps
Peace Corps
Medical field
Loan Forgiveness Through Repayment Plans
Depending on your loan type, repayment plan, and the number of loan payments you’ve made, you may be able to have your student loans forgiven. If you have the Income-Based Repayment Plan, Pay As You Earn (PAYE) Plan, Income-Contingent Repayment Plan, or the Revised Pay As You Earn (REPAYE) Plan, you can qualify for loan forgiveness if you have made on-time and in-full payments for a specified amount of time.
Occupation-Based Loan Forgiveness
If you are in the Army National Guard, AmeriCorps VISTA, AmeriCorps State, or AmeriCorps NCCC, you may qualify for specialized loan forgiveness. Military service members can qualify for Public Service Loan Forgiveness, National Defense Student Loan Discharge, and more. Reach out to your military organization to see whatstudent loan forgiveness options you may have.
If you are a public school teacher who works for an eligible school, you may also be eligible for loan forgiveness. Generally, you need to have taught at a low-income school and made a minimum of 120 full and on-time payments. Some programs that you can look into are the Public Service Loan Forgiveness, Teacher Loan Forgiveness, and Perkins Loan Cancellation.
Borrower Defense
If you believe you were scammed or defrauded by your school and can prove it, you may be eligible to have your student loan balance wiped out entirely. You’ll need to file a claim with the Department of Education with evidence that you were deceived or misled by your school.
Refinance to a Lower Interest Rate
Before looking into student loan refinancing options, double-check that you do not have any opportunities for student loan forgiveness. If you refinance your student loans, you may lose eligibility for loan forgiveness in the future.
Loan refinancing is when you swap out your current loan with a new loan to pay off your debt. Generally, the new loan should have more favorable terms, such as a lower interest rate or monthly payment. This, in turn, can help you pay off your loans faster and save you money on interest.
Cut Back Expenses or Pick Up A Side Hustle
To pay off $200k in student loans, you can either increase how much you earn, reduce how much you spend, or do both. Generally, it is difficult for borrowers to cut back their expenses and pick up a side hustle, so don’t stress if that is you. Choose the strategy that works best for you.
If you’re hustling hard and looking for creative ideas to cut back on expenses or make more money, consider the following:
Do you have any paid subscriptions you forgot about? Try using a software like Rocket Money to catch any subscriptions you might be paying for without knowing it.
When was the last time you negotiated your bills? If it’s been more than a year, it’s time to call.
When was the last time you discussed your salary with your boss? While it might be an awkward conversation to have, it’s definitely in your right to talk about a pay raise.
Use Upside when purchasing gas. Not only will it tell you where the cheapest gas prices are, but it’ll give you cash back for purchasing gas (which is often a necessary expense for most individuals).
If you do not have any expenses to cut out, consider picking up a side hustle. Whether you decide to pick up a second job or explore freelance work, anything that brings an additional stream of income will help you.
Look at Your Company’s Benefits
Believe it or not, some employers will give you extra money to pay off your student loan debt. Reach out to your employer’s HR office and ask about any student loan payoff benefits they may offer. Or, if you’re applying for a new job, add in student loan repayment benefits when negotiating your salary and compensation package.
Use the Debt Avalanche Method
The debt avalanche is a popular method to tackle student loan debt. When using the debt avalanche method, you:
Pay the minimum payment for all of your outstanding debt, and;
Use your remaining money to pay off your debt with the highest interest rate.
The idea behind the debt avalanche method is to target your debt with the highest interest rate so you can spend less on interest in the long run.
For example, let’s say you are currently paying off three student loans: one of them has an interest rate of 10%, one has an interest rate of 7%, and the last one has an interest rate of 5%.
Using the debt avalanche method, you would pay off the minimum amounts for all of the loans, while directing any extra money to the loan with a 10% interest rate.
After the student loan with the 10% interest rate is entirely paid off, you would begin directing all of your money to the loan with the 7% interest rate, while making minimum payments on both the 5% and 7% loan.
How Long Will It Take to Pay Off?
To calculate how long it would take you to pay off $200k in student loans, you can use a student loan calculator. Student loan calculators allow you to adjust your monthly payment in different scenarios, allowing you to see how long different repayment plans would take.
Closing Thoughts From the Nest
While paying off $200k in student loans may seem like a daunting goal, it is definitely possible. By researching your options and being financially pragmatic, your student loan debt is something that you can overcome.
Building a college list, or a list of colleges and universities you’d be interested in applying to, is an important step when applying to college.
It can help you identify your best-fit colleges, narrow down your options, and make informed decisions about where to apply and ultimately attend.
If you don’t know how to build a college list, follow these steps.
Start Early
Rome wasn’t built in a day, and your college list shouldn’t be either.
If you have the opportunity to do so, start building your college list during your junior year of high school. That way, you’ll have plenty of time to research colleges, gather information, and make informed decisions.
Starting early can also help you reflect on your priorities and goals, without the pressure and stress of impending deadlines.
Create a List of Must-Haves
Whether it’s a fierce school spirit, an emphasis on STEM fields, or rich research opportunities, brainstorm a list of qualities you want your future college to have. This will help you narrow down your college list by allowing you to see how the schools you’ve selected differ.
Here are some factors you can consider:
Inside the Classroom
How big is the average classroom?
Do you prefer large or small classroom sizes?
What kind of academic resources does the college have?
What major/field of study is the college known for?
What are the top programs at the college?
Outside the Classroom
How many clubs (that you would be interested in) are there on campus?
What do students do for fun?
Is the campus walkable? Do you need a bike?
Do students generally live on campus or off campus?
Does the college provide housing for all four years?
Is Greek life prominent on campus?
What does the social scene look like?
Beyond the Campus
Is the campus in a small town or a big city? Which do you prefer?
What does the weather look like?
Is the nearest city accessible?
Is the neighborhood safe?
What do students usually do on the weekends?
Where are the nearest malls/grocery stores?
How easy is it to get off campus? Does the school provide transportation, or do you need your own car?
Student and Alumni Makeup
What is the most popular major?
Is the student body demographic diverse or homogenous?
What fields of work do graduates usually enter?
What’s the average graduate’s starting salary?
Are there any notable alumni?
Does the school offer need-based or need-blind financial aid?
College Statistics
What is the national school ranking?
What is the student graduation rate?
What is the student retention rate?
What is the annual tuition?
Research Schools
After narrowing down the qualities you want in a college, it’s time to start digging. Take advantage of the Internet by looking into schools of interest, reading articles, and using different online tools.
Niche is a useful site to look through if you want to know more about how different colleges are ranked in the United States.
If you want to know more about a school’s numbers, consider using the U.S. Department of Education’s College Scorecard. The website gives each college a “scorecard,” which tells you everything about the school’s graduation rate, financial aid costs, test scores, and acceptance rates.
The College Board also has a great college search tool that allows you to explore colleges by filtering through location, major, type, and campus life.
Create a Document With All the Details
Now that you have an idea of what schools you might be interested in, along with the qualities you look for in a school, it’s time to get it all on paper. List out each of the schools, how they rank in terms of the qualities you’re looking for, and whether they’re a safety, match, or reach school
Safety Schools
Match Schools
Reach Schools
A safety school is one where the student is virtually guaranteed admission.
A match school is one where the student has a good chance of admission.
A reach school is one where the student has a slim chance of admission.
Many online tools can help you determine which category the school falls into based on your academic profile, standardized test scores, GPA, and more. It’s important to have a mix of safety, match, and reach schools to increase your overall chance of admission.
Consider using this sample college profile as inspiration:
School: UNC-Chapel Hill Category: Match Acceptance Rate: 21% Potential Major: Computer Science Undergraduate Size: 19,743 National Ranking: 29 Annual Cost of Tuition: Assessed on a per credit hour basis City: College town in Chapel Hill, North Carolina Weather: Has all four seasons, sunnier than northeast schools Total Amount of Clubs: 976 Potential clubs: Apples Service-Learning Program, ArtHeels General Thoughts: First public university in the United States, well-known for academics, lots of school spirit…
Narrow Down the List
Narrowing down a college list can be challenging, but it’s an important part of the college search process. Generally, it’s recommended that students have anywhere between 5-10 colleges on their college list. Here are some steps to help you narrow down your college list:
#1: Speak With Current Students and Alumni
Speaking with current students and alumni at the schools you are interested in is an effective way to learn more about a school and determine whether you’d be interested in attending.
You can do this in several ways:
Reach out to the school’s admissions office and ask them to put you in contact with a current student.
Connect with a student or alumni on LinkedIn.
Speak with any high school alumni who attend/attended the school.
Participate in a Student for a Day program. Some schools will allow you to tag along with a student for a day to get a feel for what it’d be like to attend the university.
Make sure to ask them specific questions like:
What is your favorite and least favorite part about attending?
Do you feel like professors are helpful and responsive to your needs?
Do you feel supported by your academic advisor?
How easy or difficult was it to settle in here? (ie. to make friends, to find clubs to join, etc.)
#2: Tour the Campus
There’s no better way to determine your “fit” with a school than visiting it. This way, you can really get a feel for what the school is like and decide whether you can see yourself there for the next four years.
However, visiting in person isn’t always a make-it-or-break-it for determining whether you “fit” at a school. There are plenty of students who never visited the campus and ended up loving it, and vice versa.
If visiting in person isn’t an option for you, check whether or not the school has a tool that allows you to do virtual tours. Youtube is another great place to see what a school looks like.
#3: Seek Advice
Talk to guidance counselors, teachers, and other trusted adults to get additional perspectives. Speaking to individuals who have been through the process before can help you gain some insights into how you can whittle down your college list.
#4: Have a Serious Talk With Your Parents About Affording College
Whether or not affordability is a factor in determining which colleges you want to apply to, it’s important to have a serious talk with your parents about paying for your education. This way, your parents will have a general idea of what costs to expect, while you can gain more exposure to what finance in the real world looks like.
Speak with your parents to determine what is and what isn’t affordable.
Stay Open to the Possibilities
It’s important to keep an open mind throughout the college application process. While attending your top school may be your #1 goal, it may not always be the case that things work out the way you want them to.
Nothing is set in stone — you may be surprised by the offers you receive from other colleges and where you end up.
College is a special four years of your life, and you’ll want to make the most out of your experience. Here’s the ultimate college bucket list to make memories that will last you a lifetime.
#1: Study Abroad
Studying abroad can be a once-in-a-lifetime experience. Not only do you get to study in another country with your friends, but you get the chance to immerse yourself in a new language, with new people, and a new culture.
It’s a great opportunity to escape your comfort zone and put yourself out there.
#2: Eat at Every Local Restaurant in Town
Spend your four years in college getting to know the city you’re inhabiting.
While it is a hefty goal, aim to hit every food spot available, whether it’s an ice cream shop, an Indian restaurant, or a brewery. It’s a great way to get to know the food scene in your college town and can be a great bonding opportunity for friends.
#3: Go On A Road Trip With Friends
Develop your lifelong friendships by going on a road trip. Whether you’re going on a short trip to the mountains or the beach, road-tripping is a great way to bring your friend group together, make memories, and explore the state you’re in.
#4: Make the Dean’s List
While the college experience might be all about making unforgettable memories and having fun, remember the reason that you’re there in the first place is to learn.
Making the dean’s list is a great way to challenge yourself academically and dedicate yourself to your studies. It’s an attainable goal if you put in the hard work, and the benefits of it are definitely worth it.
#5: Dye Your Hair, Pierce Something, or Get a Tattoo
College is one of the only periods in your life when you can make crazy decisions without being judged too harshly. Take the chance and do something crazy. Whether you dye your hair bright pink, pierce your ears, or get your first tattoo, it’ll be a look to remember.
#6: Enjoy Your Student Discount
Your .edu email can save you some money on your next ASOS or Dr. Martens purchase. Certain stores and online subscriptions give you a discount just based on the fact that you’re a student. Go save some money!
#7: Apply For Your First Credit Card
Getting your first credit card is an important step to building a strong credit score and history in college. Now that you’re an adult, it’s important to focus on your financial well-being and learn to manage your finances.
#8: Participate in School Traditions
UCLA has its traditional undie run, while Duke University has the bench-burning ceremony when the basketball team wins against UNC-Chapel Hill. Take part in your school’s timeless traditions to feel more connected with your college and the history it has.
#9: Take a Picture With Your School Mascot
A picture with your school mascot will definitely be one for the books. Whether it’s a mascot statue or the mascot in costume, it’s a classic experience to add to your bucket list.
#10: Attend a Random Lecture
When you have a free day, drop into a random lecture and learn something new. When you’re in an environment where learning is happening all around you, you can most definitely sit in on a random lecture without drawing any attention.
You may be surprised by what you learn.
#11: Play An Intramural Sport
The best part about intramural sports is that you don’t have to be good at them. Usually, anyone can sign up, as long as they have a team.
Participating in intramural sports is a great way to exercise, socialize, and have fun. Consider getting a group of friends (or strangers) to form an intramural team for a sport you enjoy.
#12: Check Out the Career Fair
While the idea of a career fair might sound cheesy, they’re an incredibly valuable opportunity to network with companies and hiring managers, which could help you land a job post-grad.
Career fairs are a great way to gain exposure to different companies and explore different employment opportunities. Remember to wear your best business attire and print out copies of your resume.
#13: Venture Out to a Neighboring City
Take a little weekend trip to any neighboring cities around your college. Explore what makes the city unique, whether it’s an annual fair, a national monument, or a classic museum. If you’re balling on a budget, explore sites like Groupon and your local library for discounted tickets to events and experiences.
#14: Go To A Tailgate
Tailgates are pre-game celebrations that usually take place in a parking lot before different sports games. They usually have music, food, and drinks to ramp up the school spirit.
#15: Get Published
Whether it’s photography, poetry, an op-ed, or a podcast, submit your work to an organization on campus and get published. Plenty of clubs are looking for artist pieces to publish – take advantage of these opportunities!
With President Biden’s student loan forgiveness program dominating news headlines as the federal courts debate the legality of his debt relief plan, you may be wondering, “What is student loan forgiveness?”
If that’s the case for you, you’re in the right place. Keep reading to learn about what student loan forgiveness is and what programs you might qualify for.
How Student Loan Forgiveness Works
Student loan forgiveness wipes out all or part of your remaining student loan balance for federal loans only. However, there are strict eligibility requirements to qualify for federal student loan forgiveness. In fact, most debt relief are only offered for public service occupations.
Student Loan Forgiveness Programs to Consider
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is a program that offers debt relief for qualifying individuals who work in public service, whether that be volunteer work, medical practice, or other public sector work.
To qualify for Public Service Loan Forgiveness, you must :
Have paid the minimum amount due on time for 120 payments (10 years total).
Have worked 10 years in a public sector role.
Have borrowed Direct Loans or consolidated their federal loans into Direct Loans.
Loan Forgiveness Through Repayment Plans
Certain federal repayment plans offer loan forgiveness if enough qualifying payments are made on the loan. While this may take substantially longer than federal loan forgiveness programs, borrowers will still be able to receive debt relief.
Income-Based Repayment
Income-based repayment (IBR) is a repayment plan where the maximum monthly payments are between 10% to 15% of your discretionary income.
You must have 20-25 years of qualifying payments under your belt to be eligible for loan forgiveness.
Income-Contingent Repayment
Income-contingent repayment (ICR) is a repayment plan that is (hence the name) contingent on your income. Your monthly payments are recalculated every year based on your family size, outstanding loan balance, and gross income. Generally, your monthly payments will be around 20% of your discretionary income.
You must have 25 years of qualifying payments to be eligible for loan forgiveness.
Pay As You Earn (PAYE)
Pay As You Earn (PAYE) is a repayment plan where your monthly payments are 10% of your discretionary income and capped at how much you would pay on a regular, 10-year repayment plan.
The main benefit of the PAYE repayment plan, however, is that the government will pay 100% of the unpaid interest on your subsidized loans for the first three years.
To qualify for PAYE, you must demonstrate financial hardship and have received a federal loan after October 1, 2007. You must then make 20 years of qualifying payments to be eligible for forgiveness.
Revised Pay As You Earn (REPAYE)
REPAYE is the revised version of PAYE that has slightly different terms. The monthly payments for the REPAYE plan are 10% of your discretionary income with no cap, meaning that you could be paying more than you would on a standard 10-year plan.
With this plan, the federal government will:
Pay 100% of the unpaid interest on your subsidized loans for the first three years; or
Pay 50% of the unpaid interest on your subsidized loans and unsubsidized loans after the first three years.
Anyone with federal loans can be eligible for the REPAYE plan. You must then make 20 years of qualifying payments to be eligible for debt relief for undergraduate loans, or 25 years of qualifying payments for graduate loans.
Specialized Loan Forgiveness
If you have a specialized career, you may be eligible for loan forgiveness programs, such as:
Army National Guard Student Loan Repayment Program: If you’re a member of the Army National Guard you may qualify to have $50,000 shaved off of your federal loans. You must have Direct, Perkins, or Stafford loans.
Teacher Loan Forgiveness Program: If you are a full-time teacher who works in a low-income school or other eligible educational agency, you may be eligible for $5,000 to $17,500 in loan forgiveness. You must have worked full-time for a qualifying position for five consecutive years, and have Direct or Stafford loans.
Segal AmeriCorps Education Award: If you were a part of the AmeriCorps VISTA, AmeriCorps State, or AmeriCorps NCCC, you may be eligible to receive up to the maximum Pell Grant award to pay off your federal student loans.
Borrower Defense
If your school significantly deceived, defrauded, or scammed you, you may be eligible for borrower defense to loan payment forgiveness.
If you qualify for borrower defense, you will receive loan discharge. Loan discharge, unlike loan forgiveness, immediately stops your loan payments and may even allow you to receive a refund on your repayments.
To have your student loans discharged through borrower defense, you need to file a claim to the Department of Education with evidence that you were deceived or misled by your school.
Who Qualifies for Student Loan Forgiveness?
Eligibility for student loan forgiveness depends on the program being offered.
If you work in the public sector and have made enough qualifying payments, you may be eligible for the Public Service Loan Forgiveness program. On the other hand, if you are a teacher who’s worked for five consecutive years at a low-income school, you may be eligible for the Teacher Loan Forgiveness program.
If you feel that your career may qualify for loan forgiveness, be sure to check your eligibility with the Federal Student Aid office.
Closing Thoughts From the Nest
While the future of the Biden administration’s student loan relief program is still uncertain, you can subscribe to the Department of Education’s email updates to stay up-to-date with the latest information. Beyond Biden’s comprehensive loan forgiveness plan, remember there are still opportunities for you to have your federal student loans forgiven with existing programs.
If you are considering going to grad school after college, you may be wondering, “How much does grad school cost?”
Making the decision to attend graduate school is one thing, but paying for it is another issue. Whether you plan to take out graduate student loans, receive a scholarship, or pay out-of-pocket, being aware of the average cost of grad school and how it varies is important.
On Average, How Much Does Grad School Cost?
The average cost of tuition for public grad schools is roughly $30,000 per year, while private grad schools cost around $40,000 per year. However, these figures do not apply to specialized degrees in medicine and law, which usually cost significantly more.
While you are calculating the cost of grad school, be sure to think about the cost of attendance (COA), in addition to the tuition. The COA is the total amount of money you will have to pay to attend grad school, including tuition and other fees like transportation, room and board, school supplies, and more.
There is no “right” answer to the question of whether grad school is more expensive than undergrad, as the price depends on your field of study, type of degree, and other factors.
Generally, medical, law, and other specialized degrees cost more than an MBA or a Master of Arts. STEM degrees can also be pricier than a degree in humanities or social sciences, given that there may be additional costs in labs, equipment, and other materials.
Is Graduate School Worth the Price?
The question of whether grad school is worth the cost ultimately depends on your personal aspirations and financial standing.
Before making the decision, be sure to carefully weigh the pros and cons. Here are some things to consider:
Pros of Attending Grad School
More scholarship opportunities: Grad schools are usually more generous with their scholarship offerings than undergraduate programs are. If you take the time to find and apply for scholarships, you may be able to offset the cost of your tuition.
Career advancement: An advanced degree can unlock career doors for you that may not have been accessible with only a Bachelor’s degree.
Increased salary: The average salary of an individual with a Master’s degree is higher than the average salary of an individual with a Bachelor’s degree. By going to grad school, you can increase your earning potential.
Specialized study in the field you love: If you’re going to grad school, you are probably going to study something that you love and enjoy. By attending graduate school, you will be able to have an in-depth, specialized study of the field and become an expert.
Loss of opportunity to make more money: A majority of undergraduates decide to work in the industry after graduation. Going to grad school may be a potential loss of income that you could have made had you begun working instead.
Loss of time: Attending grad school can take anywhere from one to three years, in general, which may set you behind in comparison to your peers.
Potential student debt: If you don’t receive any financial aid or gift aid, you may need to take out graduate student loans to afford the cost of attendance. If you have previous debt from your undergraduate education, you may be shouldering even more student loan debt.
Delayed work experience: You may miss out on industry experience if you decide to go to grad school.
As with any degree, there is a certain order you should follow when it comes to how you finance your education.
Scholarships, fellowships, and grants are all forms of free aid, or gift aid. Typically, scholarships, fellowships, and grants do not need to be paid back, so you’ll want to accept these first.
After accepting any free money available to you, you should pursue work-studynext. Federal work-study is considered earned money, meaning you have to trade your time to receive it. While not everyone will receive federal work-study, it’s a great option for those who do.
Loans should always come last in the process because they are borrowed money. When you borrow a loan, it’ll typically accrue interest, and by the time you pay it back, you’ll have paid a significant amount in interest.
Attending grad school is a big decision to make. Be sure to reach out to current graduate students, academic mentors, and other role models who have been in your position before.
When it comes to financing the cost of your grad school tuition, be sure to consider all of your options. If you want to explore graduate student loans, consider submitting a free application with Sparrow. Sparrow allows you to compare your pre-qualified, private student loan options across 17+ different lenders.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
With average college tuition costs rising every year due to inflation, it’s increasingly important to be aware of the costs associated with higher education.
One aspect of this is understanding what exactly tuition is, along with how it differs across factors like geographical location and institution type.
Tuition vs. Cost of Attendance
Tuition and cost of attendance may seem like the same thing, but there is a significant difference between the two.
Tuition is the base amount of money you pay to attend the institution and take classes, while the cost of attendance is the estimated total of expenses you will pay as a student, which includes the cost of tuition, fees, and other student expenditures.
Cost of attendance = Tuition + Room and Board + School Supplies + Transportation Fees…
What is the Average Cost of Tuition in the US?
The average cost of tuition for a four-year, in-state, public institution is $9,377, while the average cost is $27,091 for out-of-state. For private institutions, the average cost of tuition for a non-profit is $37,641, while a for-profit costs an average of $18,244.
Average College Tuition by State
As you explore potential colleges, keep in mind that tuition can also be influenced by geographic region. Historically, public colleges in the northeast have been the most expensive, while the least expensive schools are in the Plains and the South.
The table below shows the average total cost of college tuition by state, ordered from greatest-to-list.
State
Tuition & Fees
Tuition + Room & Board
Vermont
$17,593
$30,752
New Hampshire
$16,749
$29,222
Illinois
$14,579
$26,252
Pennsylvania
$14,532
$26,040
Connecticut
$14,487
$28,425
New Jersey
$14,184
$28,335
Massachusetts
$13,939
$28,317
Virginia
$13,931
$25,761
Michigan
$13,716
$24,777
Rhode Island
$13,697
$26,946
South Carolina
$12,544
$23,181
Minnesota
$11,836
$21,858
Oregon
$11,537
$24,517
Arizona
$11,410
$24,681
Delaware
$11,343
$24,862
Kentucky
$10,976
$22,317
Alabama
$10,617
$20,993
Maine
$10,377
$20,677
Tennessee
$10,271
$20,639
Hawaii
$10,197
$22,012
Ohio
$10,049
$22,860
Indiana
$9,656
$20,572
Louisiana
$9,656
$20,031
Maryland
$9,401
$22,380
Iowa
$9,373
$19,788
Missouri
$9,310
$19,394
Colorado
$9,269
$22,288
Kansas
$9,081
$19,082
North Dakota
$9,065
$18,057
South Dakota
$9,012
$17,177
Alaska
$8,849
$22,185
Wisconsin
$8,782
$17,875
Nebraska
$8,761
$19,352
Mississippi
$8,642
$19,221
Arkansas
$8,468
$18,262
New York
$8,416
$24,231
California
$8,401
$24,015
West Virginia
$8,252
$19,312
Oklahoma
$8,064
$17,283
Texas
$8,016
$18,325
Georgia
$7,525
$18,711
Washington
$7,485
$21,027
Idaho
$7,482
$16,518
New Mexico
$7,393
$17,113
North Carolina
$7,260
$17,113
Montana
$6,993
$16,931
Utah
$6,764
$14,653
Nevada
$6,434
$18,065
District of Columbia
$6,152
N/A
Wyoming
$4,785
$14,584
Florida
$4,541
$15,543
Private vs. Public Schools
Public institutions are funded by the government, while private schools are funded by tuition and endowment funds.
Generally, private colleges have more expensive tuition than public schools. In the graph below, we can see that private four-year colleges have historically cost more than your average public four-year, public two-year, and private two-year school.
However, it’s important to note that the average cost of attendance differs from student to student.
A low-income student may receive more financial aid from private universities instead of public universities, given that several private universities are 100% need-based. On the other hand, it may be cheaper for an in-state, middle-income student to attend public schools instead of a private school, due to in-state grants.
All this is to say that you should explore your financial resources at every school you are interested in, public or private. Most schools offer an online tuition calculator that estimates what the total cost of tuition may be for your financial standing. Reach out to the financial aid office if you have any questions.
Closing Thoughts From the Nest
As you explore your college options, be sure to make note of the average undergraduate tuition for the institutions you are interested in. Whether you plan to borrow student loans or not, it’s important to be mindful of how much your education costs.
If you’re looking for private loans to finance your education, consider using Sparrow. Sparrow offers a free, online tool that allows you to compare pre-qualifying private loans across 15+ private lenders.
Welcome to college application season – one of the most exciting and slightly stressful milestones in your life.
Though the college application process may seem overwhelming, familiarizing yourself with what it entails, including admission requirements, deadlines, and application timelines, is key to being prepared.
Use this college application checklist to guide you at every step of your college admissions journey.
When Should I Start Applying to College?
Typically, college applications open on August 1st, and deadlines range between November and February. To have ample time to finish your college applications and have a head start, you should start applying to college in the summer before your senior year.
By beginning your college applications in the summer, not only will you have a head start on the admissions process, but you will have more time to research colleges and make sure that you are applying to schools that best fit you.
You may also have more flexibility in deciding between early admission and regular admission, as most early action/decision deadlines are in November.
A Step-By-Step College Application Checklist
Create a List of Safety, Match, and Reach Schools
Before sending out your college applications, do your research on the schools you are considering applying to. You’ll want to divide up the colleges into the following categories: safety, match, and reach schools.
Safety Schools
Match Schools
Reach Schools
A safety school is one where the student is virtually guaranteed admission.
A match school is one where the student has a good chance of admission.
A reach school is one where the student has a slim chance of admission.
As you’re applying to colleges, you’ll want to apply to a good mix of safety, match, and reach schools. This way, you will have many different options to choose from once college decisions have been released.
It’s important that all of your safety, match, and reach schools are schools that you would attend. While there is no “right college”, you should only apply to schools that you are genuinely interested in. This way, you can focus on putting your best foot forward toward schools you want to attend.
Gather the Necessary Materials
As you prepare for college application season, you may be wondering, “What documents are needed for college applications?”
Here is a general checklist of the materials you will need:
Application Form: Depending on your preference, you can use the Common Application or the Coalition Application. The Common Application is the more widely known, popularly used application portal, having over 1000 colleges you can apply to. The Coalition Application is smaller and more specific – all of its 150+ colleges offer need-based financial aid, low in-state tuition, and has at least a 70% graduation rate.
High School Transcript: Ask your high school’s administration office to send your most recent transcript to the colleges you are applying to.
Letters of Recommendation: Generally, you will need to submit recommendation letters from your academic teachers, though some schools may request more or less. It’s best to ask for these as early as possible, as most teachers will be swamped with requests closer to the application deadlines.
Standardized Testing Scores (ACT or SAT, AP exams): Generally, most schools will require you to send any standardized testing scores, including your SAT/ACT and AP exam scores. You can access your scores via the College Board.
Personal Statement Essay: Your personal statement essay is what colleges use to find out who you are behind your statistics as an applicant.
Extracurricular Activities: Have a list on hand of all of your extracurricular activities, including a description of your role(s) within the organization, and any positions, awards, or achievements.
Application Fees: If you demonstrate financial need, you will receive an application fee waiver from your high school. Otherwise, you are required to pay an application fee for each school you apply to.
Determine Application Timeline
After gathering all of your application documents, you will want to decide which application timeline you will be following.
When applying to college, you can apply as an Early Action, Early Decision, or Regular Decision applicant.
Early Action: You apply to the colleges of your choice by an earlier deadline and, in turn, find out if you were accepted, rejected, or deferred earlier. This is not a binding agreement, meaning that you do not have to attend the school if you are accepted.
Early Decision: You apply to the college of your choice by an earlier deadline and, in turn, find out if you were accepted, rejected, or deferred earlier. This is a binding agreement, meaning that if you are accepted into the school you applied early decision to, you are contractually obligated to attend. You are only allowed to apply for early decision to one school only. Early decision is best when applying to a dream school that you are absolutely certain you want to attend.
Regular Decision: You apply to the colleges of your choice by the regular deadline, which is generally in late January or early February. You can either be accepted, rejected, or waitlisted. You can apply to as many schools as you want.
Mark All Deadlines
Staying organized is key to successfully navigating through the college admissions process. When you first begin your college applications, make a list of all of the schools you are interested in applying to, along with all of their deadlines.
You can use the following table as a starting point:
School
Early Decision Deadline
Regular Application Deadline
Early Financial Aid Deadline
Regular Financial Aid Deadline
Boston University
N/A
January 4
N/A
January 4
Yale University
November 1st
January 2
November 10
February 25
Brandeis University
N/A
January 3
N/A
January 3
File the FAFSA
To qualify for federal student aid, you will need to fill out the Free Application for Federal Student Aid (FAFSA). You may need your parents’ assistance when filling out the FAFSA, as you will need to compile the following financial information and documents:
Your social security card
Your parents’ social security card
Any form of self-identification (driver’s license, real I.D., passport, etc.)
Your parents’ tax returns
Your parents’ untaxed income records
Your parents’ W-2 forms
Your parents’ current bank statements
Things to Consider
College application requirements are not always clear-cut. It’s important to thoroughly research colleges of interest to you and be aware of all of their specific application requirements.
Here are some things to consider:
Supplemental Essays: Some schools may require supplemental essays, in addition to your Personal Statement Essay. Make note of these essays, as your application may be incomplete if you do not submit yours.
College Interviews: Some schools offer college interviews to applicants. This is a great way to showcase yourself as a strong applicant, while getting to learn more about the school.
Supplemental Application Requirements: Some schools may require you to submit supplemental application materials, such as a design portfolio, websites you’ve created, or translations that you’ve done to prove your language fluency.
College Application Q & A
Should I Apply For Early or Regular Decision?
Ultimately, whether Early Action/Decision or Regular Decision is the best fit for you depends on your individual preferences. If you already have a dream school you are set on attending, consider applying for Early Decision.
If you don’t know what school you want to attend but want a head start on your college applications, consider applying for Early Action. If you prefer to take your time and compare your college options, consider applying for Regular Decision.
What is the Difference Between Early Action and Early Decision?
While Early Action and Early Decision both have earlier deadlines, Early Decision is binding, meaning that students must attend the school if they are accepted, while Early Action is not.
Can I Apply For Early Decision To Multiple Schools?
No, you cannot apply for Early Decision to multiple schools. Early Decision is a contractually-binding obligation that states that the student must attend the school if they are accepted as an Early Decision applicant. All applications to different schools must be rescinded.
Closing Thoughts From the Nest
Put your best foot forward this college application season by starting early and performing your due diligence.
If you need any assistance or have questions, consider reaching out to your school counselor or the relevant college admission office. Best of luck!
Both federal and private student loans can be used for educational expenses. While that typically means costs like tuition and fees, there’s a variety of items that fall under the umbrella.
In fact, you can use your student loans for living expenses, child support, and even study-abroad programs.
Can I Get a Student Loan to Cover Living Expenses?
Yes, you can use student loans for living expenses. After your student loans are disbursed to your school, your school will usually return the remaining funds to you after tuition, room/board, and other costs have been paid for.
These remaining funds can be used for a variety of expenses, such as institutional fees, transportation costs, and more.
What Counts as Living Expenses for Student Loans?
Any academically-related expense can be counted as a living expense for student loans. This doesn’t mean that you are strictly limited to purchasing school supplies or textbooks, however.
Your student loans cover living expenses you have to pay as a student, such as rent, bills, groceries, and even furniture for your campus apartment.
The following table outlines the most common expenses that student loans can be used for.
Expense
Tuition and Fees + Room and Board
Your institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly. If you are opting for off-campus housing, your school will usually subsidize your rent up to the amount of housing costs you would have to pay if you lived on-campus. Your remaining student loans can be used to pay your bills.
Institutional Fees
If your school has mandatory health insurance, parking fees, or other fees, you can spend a portion of your student loans to cover these costs.
School-Related Living Expenses
Student loans can cover personal expenses that are necessary for your educational career. This includes groceries, new bed sheets, furniture for your apartment or dorm, and other living expenses.
Books and Supplies
Your student loans can cover anything from textbooks, notebooks, to a new book bag.
Transportation Costs
Whether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, and other expenses.
Child Care Expenses
If you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, like daycare, baby food, and other child-specific necessities.
Study Abroad Expenses
If you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense.
What Doesn’t Count as Living Expenses for Student Loans?
Any personal costs that are not absolutely necessary as a student do not count as living expenses. The following table outlines what you can’t spend your student loans on.
Expense
Entertainment
Movie tickets, ice skating tickets, and other forms of entertainment do not count as a living expense.
Clothes
Unfortunately, buying a new wardrobe does not count as a living expense that can be covered by your student loans.
Vacation/Travel
While a spring break trip to Bali would be nice, you can’t use student loans to cover it. Personal vacations and travel do not count as a valid living expense to use your student loans on. However, your student loans can be used for study abroad programs that are approved by or administered by your school.
Down Payments
You cannot use your student loans as a down payment to buy a new car, house, or equivalent.
Debt
While it might be tempting to knock out some credit card debt with your student loans, your personal expenses do not count as a living expense. However, if you paid for academic or necessary living expenses with your credit card, an exception can be made.
Is It a Good Idea to Use Student Loans for Living Expenses?
Generally, it is okay to use student loans for living expenses. However, you should consider the cost of doing so before making the decision.
Likewise, you’ll want to make sure essential academic-related expenses are covered before covering potentially non-essential living expenses with loans.
Leftover amounts from your student loans should be saved for future, unforeseen academic expenses like books for next semester or sudden charges to your bursar account.
You can consider other avenues for paying for your personal needs, such as picking up a new side hustle, tapping into your savings, or asking your parents for an allowance.
What Happens If You Use Student Loans for Something You Shouldn’t?
While no one is actively tracking what you spend your student loans on, you can face serious consequences if you’re caught for student loan misuse.
Using your loan funds improperly is essentially breaking a contract, as you agreed to use your loans for academic expenses only in your promissory note.
If you are caught for loan misuse, you may be reported to your school’s financial aid office and the federal Department of Education and have your loans taken away.
Best Student Loan Options to Cover Living Expenses
Here are some of Sparrow’s top picks for student loans that can cover living expenses.
SoFi: Best for borrowers with a strong credit score or a creditworthy cosigner.
Closing Thoughts From the Nest
While student loans can be used for living expenses, be careful what else you use them for. While it may be tempting to use the funds to treat yourself to a fancy dinner or splurge on a new wardrobe for the semester, it’s important to use your student loans wisely. After all, student loans are borrowed money that you will have to eventually pay back in the future.
Consider using the leftover amount from your loans to make your first loan payment, or saving it for an academic rainy-day fund.
Filing the FAFSA application (Free Application for Federal Student Aid) is the first step to receiving federal financial aid. Though it may seem like a daunting task, all it takes is a little bit of preparation, time, and focus.
To save yourself from making any FAFSA errors, here are the most common mistakes that are made when filling out the FAFSA application.
What is the Most Common Mistake Made on the FAFSA?
#1: Not Using the IRS Data Retrieval Tool (DRT)
The FAFSA offers a convenient tool called the IRS Data Retrieval Tool that fills out all your tax information to your FAFSA so you don’t have to. It’s a quick and convenient way to save you time and avoid making any errors on the application. Take advantage of it!
#2: Not Reading the Directions Carefully
Some of the terminology on the FAFSA application can’t be taken at face value. The application has very specific definitions for the following words that you should be aware of.
Household size: Your family’s household size consists of: 1) Yourself; 2) Your parents; 3) Your parents’ children who receive more than half of their support; 4) Individuals who live with your parents and receive more than half of their support.
Number of family members in college: Enter the number of individuals who will be attending college for at least half-time during the same time as you (including yourself). Do not count your parents even if they are attending college.
Net worth of investments: The net worth of your parents’ investments is found by subtracting the debt amount from the investment’s value.
Taxable college scholarships and grants: When the FAFSA asks for the total amount of taxable college scholarships and grants, report any scholarship and grant amounts that are reported to the IRS as income. Use the amount reported on your tax return.
#3: Mistaking Dependency and/or Marital Status
Complex family dynamics can make completing the FAFSA a bit tricky. If your parents’ marital status is ambiguous, use the following chart provided by the Federal Student Aid (FSA) office as a guide.
Source: FAFSA
If your dependency status is unclear as well, you’ll want to double-check that you are putting down the right information. Even if you fully support yourself, you may be considered a dependent student by the Office of Federal Student Aid.
To determine your dependency status, answer the following questions.
Will you be 24 or older by Jan. 1 of the school year for which you are applying for financial aid?
Are you married or separated but not divorced?
Will you be working toward a master’s or doctorate degree (such as M.A., MBA, M.D., J.D., Ph.D., Ed.D., etc.)?
Do you have children who receive more than half of their support from you?
Do you have dependents (other than children or a spouse) who live with you and receive more than half of their support from you?
Are you currently serving on active duty in the U.S. armed forces for purposes other than training?
Are you a veteran of the U.S. armed forces?
At any time since you turned age 13, were both of your parents deceased, were you in foster care, or were you a ward or dependent of the court?
Are you an emancipated minor or are you in legal guardianship as determined by a court?
Are you an unaccompanied youth who is homeless or self-supporting and at risk of being homeless?
If you answered “yes” to any of the questions above, you are considered an independent student. If you answered “no” to all of the questions, you are considered a dependent student.
Unless you’re already in school or know what school you will be going to, don’t list only one college on your FAFSA. Add all the colleges you are considering applying to (even if you don’t know if you will be accepted or attend).
List as many schools as you want on your FAFSA application. There is no harm in doing so. If you don’t apply or are not accepted to a school you listed on your FAFSA, the school will simply disregard your FAFSA.
You can add up to 10 schools at a time. If you want to add more schools, you can replace the ones you already have.
Note: The school(s) you remove from your list will not have automatic access to any new updates or information you add to your FAFSA after removal.
#5: Not Signing the FAFSA Form
Signing the FAFSA form is probably the easiest step of the application, but it is the most commonly forgotten. Don’t let this happen to you. You will need to know your FSA ID and password (as well as your parent’s FSA ID and password) to sign.
Other FAFSA Application Errors to Avoid
Forgetting Account Information
You will want to keep your FSA ID and password in a safe place that you will be able to access. You’ll need it for every important step, whether it be starting a new application or submitting your finalized one.
Not Using Your Legal Name
You must use your legal name, or the name written on your government documents, when filling out the FAFSA application. Nicknames or other versions of your name are not allowed.
If you used the wrong name for your application, you should submit a name change for your Student Aid Report (SAR) and contact your school’s financial aid office.
Leaving Answers Blank
Having too many blank spaces on your application can result in a rejected application or a miscalculation. Instead, experts recommend putting “0” or “Not applicable” in spaces that you cannot fill out.
If you use the IRS DRT, know that the tool will not fill out the entire application for you. You will still have to fill out items like “Payments to tax-deferred pension and retirement savings plans”, which are not automatically filled out by the DRT.
Before submitting, be sure to double-check that all required information is provided and that all of your answers are accurate.
Not Ranking Your Schools Properly (State Schools Only)
Some states require you to rank a state school within your top three choices to be considered for state grants. You may not receive a state grant because you did not rank a state school you are considering “high enough” on your FAFSA.
If you’re unsure about your state’s grant requirement, rank your top choice for state schools first on your FAFSA application.
Not Filling out the Special Circumstances Section
If you had any special circumstances that impacted your family’s income, report it. Colleges offer a form you can fill out to report any special circumstances, which may help you receive more financial aid.
What Happens if There is an Error on the FAFSA?
Thankfully, it won’t be the end of the world if you make an error or two on your FAFSA application. Here are some steps you can take to remedy the mistake.
Step 1: Contact Your School’s Financial Aid Office
Reach out to your school’s financial aid office (or all the financial aid offices of the schools you’ve applied to) to alert them about the mistake. It’s probably not the first time that the office has dealt with FAFSA issues, so you’ll be in good hands.
Step 2: Make FAFSA Corrections
You can make direct changes to your FAFSA by logging into your account online. Select the option, “Make FAFSA Corrections” on the MY FAFSA page and adjust accordingly.
Step 3 (Optional): File An Appeal
You should only file an appeal for the FAFSA if you feel that your household financial situation is not reflected accurately. Individuals usually appeal the FAFSA if they feel as though they haven’t received enough financial aid or faced a drastic change in their financial situation since submitting the form.
You will need substantial evidence to prove that your FAFSA does not reflect your current finances. Reasons to appeal the FAFSA include:
While filling out the FAFSA may seem tedious, filling out the form carefully and as early as possible is key to maximizing federal financial aid. To avoid any FAFSA errors, read the directions carefully and ask for help when you need it.
Congratulations on being accepted into college! (*virtual fistbump*)
If you’re leaving home to embrace the “dorm life,” we’re here to help. Our comprehensive college dorm checklist covers everything you should and should not pack as you leave home.
What are Must-Haves for College Dorms?
When you’re moving into a college dorm room, it’s better to be prepared instead of unprepared. If you think you might need something, take it. You can always throw something out or leave it under your bed, but you can’t always go back home to grab something.
Clothing and Accessories
Consider this: You’ll want to have enough clothes to last you a full week, including pajamas, impromptu going-out nights, and mid-day clothing changes because you dislike your current outfit. Think about the weather of the region you’ll be living in. Is it notoriously cold? Does it snow? Will you be prepared for a rainstorm or scorching heat?
Underwear
Socks
Pants: jeans, leggings, trousers, sweats
T-shirts: blouses, tank tops, regular shirts
Pajamas
Slippers/flip-flops
Sweaters
Jackets (Including weather-appropriate ones like a rain jacket and/or winter jacket)
Consider this: College bathrooms are the bane of existence for many college students. You’ll definitely want to remember to pack a shower caddy and shower shoes.
Shower shoes
Towel (If you want to make laundry day easy, pick a towel color that matches the majority of your clothing. That way, you can throw everything together in one batch, rather than having to do a separate load of towels.)
Shampoo
Conditioner
Soap/Body wash
Face wash
Body lotion
Face lotion
Sunscreen
Bathrobe (Students might wear their bathrobes to/from the bathroom before/after showering. If you’d prefer to save some space, opt for a 2-in-1 situation – a towel that velcros around you – instead of a separate towel and bathrobe.)
Shower caddy
Makeup
Toothbrush
Toothpaste
Floss
Mouthwash
Q-Tips
Feminine hygiene products
Contact lens care
Tweezers
Hairbrush
Desk mirror
Full-length mirror
Health and Medication
Consider this: You’ll never be as sick as you are in college. Prepare for the worst and keep your immune system strong and healthy by eating nutritious meals, taking vitamin supplements, and exercising.
Vitamins
Aspirin or another pain reliever
Stomach medication (Antacid, Tums, etc.)
Prescribed medication
Cough drops
Bandages
First aid kit
Electronics
Consider this: Extension cords are a must-have in college. Those dorms just don’t have enough outlets. P.S. Don’t forget to bring all of the chargers for your electronics.
Laptop
Phone
Chargers
Extension cords
Speaker
Headphones
Bedroom and Laundry Supplies
Consider this: Unless you hire someone, you will have to do your own laundry in college. If you don’t know how to do it, there’s no time like the present to learn. (P.S. A mattress topper will save you in college! I’d suggest investing in a high-quality topper to get a bang for your buck during all four years of college.)
Pillows
Bed sheets
Mattress topper
Blanket
Laundry detergent
Drying sheets
Laundry basket (A functionable laundry basket will save you a lot of trouble in college. Ditch the laundry bags. We suggest getting a freestanding laundry basket with wheels.)
Kitchen Supplies
Consider this: Most students rely on the school’s dining hall for their meals. You’ll rarely find yourself having to cook in college, but you will want the basic necessities.
Water kettle
Dish soap
Cup/mug
Water bottle
Straw cleaner
One spoon (You usually won’t need a whole set of silverware because you can wash accordingly after each use!)
One fork
One bowl
One plate
Mug
Sponge
Food-storage containers
Microwave (Unless your roommate is bringing one)
A mini-fridge (Unless your roommate is bringing one)
Cleaning Supplies
Consider this: Your room, your responsibility. You can either bring or buy some cleaning supplies in college to keep your space neat and clean.
Paper towels
Hand-held vacuum
Swiffer/Broom
Cleaning wipes
Tissues
Desk Supplies
Consider this: Some things never change (like your back-to-school shopping list). Believe it or not, you’re going to want to pack your highlighters and index cards as much as you did in elementary school.
Stapler and staples
Pens
Pencils
Pencil pouch
Notebooks
Folders
Index cards
Sticky notes
Paper clips
Rubber bands
Tape
Glue
Scissors
Highlighters
Ruler
Desk lamp
Dorm Necessities and Storage
Consider this: Your dorm should look as it did when you first moved in. That means no thumb tacks or any other object that might inflict irreversible damage to your walls. The Command Hooks and Command Strips will save you!
Earplugs
Sleeping mask
Under-the-bed storage bins
Command hooks
Command strips
Air humidifier (Dorm air conditioners and heaters are known for being pretty dusty. If you’re allergy-prone, this is a must-have.)
Umbrella
Hangers (The slimmer the better – college closets and wardrobes are usually pretty tiny.)
Important Documents and Items
Consider this: It’s always good to have your important documents on hand (even if they may be a copy). If you’re driving at school, definitely don’t forget to grab your driver’s license, car registration, and insurance.
A copy of your Social Security Card
A copy of your birth certificate
Passport
Driver’s license
Credit card(s)
Health insurance information
Car insurance and registration
Nice to Have Items (as a fellow college student)
Yoga mat
Compact luggage for weekend travels
String lights
Coffee maker
Filtered water pitcher (If your college doesn’t have filtered water stations)
Tide Sticks
Bottle opener
What Not to Bring to College
Now that we’ve covered what you should pack, let’s dive into what you should not bring to college.
Candles/Incense (Prohibited)
Printer (Your dorm probably already has one!)
Pots/Pans (Cooking may be unrealistic)
Too many books (As a college student, it may be hard to find the time in the day)
Closing Thoughts From the Nest
Use this comprehensive college dorm checklist to help you be as prepared as you can for leaving home and moving into a college dorm.
Moving out to go to college is a big turning point in your life. Be sure to have grace with yourself and spend as much time as you can with family and friends. Good luck!
While there are both drawbacks and benefits of paying off student loans early, the decision ultimately depends on your financial priorities and standing.
Should I Pay Off Student Loans Early?
Ask yourself the following questions:
#1: Do you have at least 3-6 months’ worth of emergency funds?
Having a rainy-day fund that can last you roughly 3-6 months is crucial in being prepared for unexpected circumstances. Before directing your extra money to pay off your student loans, make sure you are financially prepared for any emergencies.
#2: Are you saving for retirement?
While retirement may seem far away, investing in your retirement while young is crucial to having long-term financial security. If your retirement fund is lacking, consider prioritizing it first.
Once you’re in the position to pay off your student loans while still adding to your retirement fund, then you may want to start directing some extra money to your student loan payments.
#3: Have you paid off all high-interest debt?
High-interest debt is extremely volatile, as the initial amount of money you borrowed can quickly grow larger. Any high-interest debt you have should be a priority to pay off so that the consequences of compound interest do not work against you.
#4: Do you have a “sufficient” income?
If you are able to comfortably make larger student loan payments, you’re in a good spot to pay off your loans early. However, if doing so will place some strain on your financial situation, it might not be the best idea. You’ll want to be able to meet your basic expenses like your bills, rent, and car payments first.
Benefits and Downsides of Paying Off Student Loans Early
Before making your final decision, carefully weigh the pros and cons.
Benefits of Paying Off Student Loans Early
Save Money on Interest
Student loans collect interest over time. If you pay off your student loans early, you’ll pay less in interest, saving more money overall.
For example, let’s say you have a loan of $10,000 with a 5% interest rate and a 10-year repayment plan. If you opted to pay off the loan early by adding an extra $200 to your monthly payment, you’d pay off the loan in 3 years and pay a total of $10,850, saving you $1,878 and 7 years of your time.
Lower Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is used to compare how much you earn (your gross income) against how much you owe (your total debt). [DTI = Monthly Debt ÷ Gross Monthly Income]
For example, let’s say your total debt payment per month is $3,500, including expenses like your mortgage, student loan payments, and credit card bills. Your gross monthly income, or how much you earn every month before any deductions, is $6,000.
Using the formula above, we would calculate $3,500/6,000, which is roughly 58%.
A “healthy” DTI is 36% or less. Having a DTI over 50% indicates that you owe more than half of what you make, which is a very poor ratio that lenders do not look kindly upon.
If you pay your student loans off early, you can lower your DTI quickly. Having a lower DTI will help you secure lines of credit more easily, such as a mortgage, a new credit card, and more.
You Can Focus on Other Financial Goals
If you knock out your student loans early, you can focus on other financial goals like buying a house or saving for retirement.
Downsides of Paying off Student Loans Early
Monthly Payment Will Be Higher
To pay off your student loans early, your monthly payment must be higher. For example, let’s say that you are paying $250 per month to pay off your student loan in two years. If you want to pay your loans off in just one year, your monthly payment must double to $500 because your repayment plan is halving.
If affording a higher monthly payment would be nearly impossible, or put you in a risky financial situation, it may be best to hold off.
You Won’t Be Eligible for Student Loan Forgiveness
The federal government offers several student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF) or the Income-Driven Repayment Forgiveness (IDRF).
If you are eligible for a federal student loan forgiveness program that requires you to make payments for a certain amount of time, you should not pay off your student loans early. Doing so could make you ineligible for forgiveness.
If you are not eligible for student loan forgiveness, paying your balance off early would be wise.
This only applies to borrowers with federal student loans, as private student loan borrowers do not have the option for loan forgiveness.
You May Not Be Able to Focus on Other Financial Goals for the Time Being
By directing more money towards paying off your student loans, you may not have enough money to focus on any other financial goals, like saving for a down payment on a home or contributing to a Roth IRA. So, consider your financial priorities before directing all extra funds toward student loan payoff.
Is It Worth It To Pay Off Student Loans Early?
Yes, it is worth it to pay off your student loans early if you are financially stable enough to do so. If you can afford to put more money onto your loan, it will save you both time and money in the long run.
However, there are instances when it is not worth it to pay your loans off early. For instance, if you qualify for federal student loan forgiveness, have debt with a higher interest rate, or do not have an emergency fund, it might be more advantageous to prioritize other aspects of your finances.
According to Forbes, the median total cost of becoming a doctor in 2020 was between $255,517 to $337,584, leaving many with hefty student debt totals.
If you’re looking to lower the costs of your medical school loans, consider loan refinancing. Refinancing is the process of taking out a new loan with better terms to repay your current debt. By scoring a lower interest rate or monthly payment, you may be able to alleviate some of the financial burden your medical school loans are causing you.
Keep reading for the complete guide on how, when, and where to refinance medical school loans.
When Can You Refinance Medical School Loans?
You can refinance medical school loans during residency or early in your career as an attending physician. However, the timeline of when you can refinance ultimately depends on your lender.
While refinancing as early as possible will be the most advantageous thing to do, the most important thing is that you refinance when you are in the financial standing to do so.
If you can get more competitive terms by refinancing during residency but it puts you in a tough financial spot, it may not be the optimal thing to do. It’s better to hold off on refinancing if doing so would cause you to miss a payment or wind up in loan default.
Who Should Refinance Medical School Loans?
You should refinance your medical school loans if:
You borrowed private student loans.
You are not/will not use your federal loan benefits.
You have better, improved credit from when you first borrowed your loans.
If you are a federal borrower, keep in mind that refinancing will convert your loans from federal to private loans. This means you will lose any federal benefits you have, such as an income-driven repayment plan, potential loan forgiveness, or flexible loan deferment/forbearance.
The Process of Refinancing
If you decide you want to refinance your medical school loans, you’ll want to take the following steps.
Determine If It Makes Sense for You
First and foremost, you should only refinance medical school loans if it will benefit you.
If you have federal loans, note that you will lose your federal benefits if you decide to refinance. If you don’t plan to use them, refinancing your loans for a better interest rate or monthly payment may outweigh any federal benefits you have.
If you have private loans, consider your current financial standing. If you have a better credit score from when you last applied and can qualify for better loan terms, refinancing may be the way to go. If you do not qualify for better loan terms, there may be no point in refinancing.
Compare Prequalification Offers
To be sure refinancing makes sense for you, see what you qualify forbefore submitting a formal loan refinance application with a lender. You can do this by completing Sparrow’s free, 3-minute prequalification application.
We’ll show you what loan refinancing options you qualify for across 15+ private lenders — without damaging your credit score.
Submit a Formal Loan Application
After determining which lender you’d like to refinance with, submit your formal loan application.
You’ll want to gather the following information for a speedy application process:
Your Social Security Number
Optional: Your cosigner’s Social Security Number (You do not need this information if you are not borrowing with a cosigner.)
Tax Information
Tax Returns
IRS W-2
Optional: Cosigner’s tax information (Again, you do not need this information if you are not borrowing with a cosigner.)
Personal Income Information
Information on any financial assets you have, including:
Cash in your checking and/or savings account
Investments (stocks, bonds, etc.)
Business assets
Mortgages
Start Making Loan Payments After Your New Loan Is Approved
Once your new loan is approved and you’ve signed your promissory note, your new lender will pay off your old lender. Then, you can start making loan payments on your new loan as outlined in your loan contract.
If you’re an Arkansas resident looking to refinance your medical loans, consider the Arkansas Student Loan Authority. ASLA is a state entity that offers loan refinancing for Arkansas residents.
Fixed APR range: 3.50% to 7.48% Variable APR range: N/A Refinancing amount: $5,000 to $250,000
Brazos is a non-profit lender that offers competitive loan refinancing terms for Texas residents. To qualify with Brazos, it is recommended that you have a strong credit score, a steady income, and at least a bachelor’s degree.
Fixed APR range: 4.90% to 6.99% Variable APR range: 5.32% to 9.12% Refinancing amount: $10,000 to $400,000
College Ave is a non-profit that offers competitive interest rates, zero fees, and a cosigner release option for qualifying borrowers. A highlight about College Ave is that they do not require borrowers to have a degree or qualify for financial aid. So, if you did not complete your medical degree but still have your loans, College Ave will be a great option for you.
Fixed APR range: 6.99% to 11.99% Variable APR range: 6.99% to 11.99% Refinancing amount: $5,000 to $300,000, depending on degree type
Refinancing with Earnest gives you access to merit-based rates, customizable payment, and loan terms, as well as the option to skip one monthly payment every year.
Fixed APR range: 4.96% to 9.79% (including 0.25% auto-pay discount) Variable APR range: 5.49 % to 9.74% (including 0.25% auto-pay discount) Refinancing amount: $5,000 ($10,000 for California residents) to $500,000
EdvestinU is a student loan program under the New Hampshire Higher Education Loan Corp, a non-profit based in New Hampshire. You can refinance your student loans with EdvestinU without a degree and have access to special perks if you are a New Hampshire resident. You must be a U.S. citizen or permanent resident who qualifies for financial aid.
Fixed APR range: 4.41% to 7.78% Variable APR range: 8.04% to 9.79% Refinancing amount: $7,500 to $200,000
INvestED is best for students who are Indiana residents or attend school in Indiana. You must be a U.S. citizen or qualifying resident who receives financial aid at your academic institution. The lender offers competitive interest rates, 36 months of academic deferment, and does not require a degree to qualify.
Fixed APR range: 5.85% to 9.48% Variable APR range: 8.63% to 12.27% Refinancing amount: $5,000 to $250,000
ISL Education Lending is a non-profit that offers loan refinancing options with competitive interest rates, zero fees, and a cosigner release option. You also do not need a degree to qualify, which is a perk.
You must be a U.S. citizen or permanent resident who is not based in Maine or Oregon to qualify.
Fixed APR range: 3.94% to 8.48% Variable APR range: N/A Refinancing amount: $5,000 ($10,000 for California residents) to $300,000
LendKey connects borrowers with small lenders, credit unions, and community banks. You can refinance with LendKey if you’re a graduate student with a steady income and strong credit history.
Fixed APR range: 7.11% to 11.18% Variable APR range: N/A Refinancing amount: $5,000 to $300,000 (depending on degree type)
MPOWER is a great lender that refinances loans for domestic, international, and DACA undergraduate and graduate students. To refinance with MPOWER, your loan(s) must not be cosigned.
Nelnet Bank offers competitive terms, including flexible repayment options, a cosigner release option, 12 months of forbearance, and the ability to refinance your parent PLUS loan in your name.
To refinance your student loans with Nelnet Bank, you must be a U.S. citizen or a permanent resident with a Social Security Number. You also must have obtained at least a bachelor’s degree.
Fixed APR range: 7.12% to 11.19% Variable APR range: 7.60% to 14.50% Refinancing amount: $5,000 to $225,000
SoFi is a well-established name in the student loan industry that offers one of the most competitive rates for loan refinancing. To qualify, you must have an associate’s degree or higher.
SoFi also allows borrowers to refinance parent PLUS loans in their own name, offers loan forbearance and deferment, and doesn’t have any origination fees.
Fixed APR range: 4.49% to 8.99% Variable APR range: 4.49% to 8.99% Refinancing amount: $5,000 to your total outstanding balance
Refinancing medical school loans is a great way to save money in the long run. Like all things, doing your due diligence is crucial. Look into all of your refinancing options so you know you are getting the best offer on the market.
If you need to take out student loans to pay for educational costs, you’re not alone. With rising college prices, it’s no surprise that one in seven Americans currently hold student loan debt.
If you’re a first-time borrower, you may be wondering, “How long does it take to get a student loan after submitting an application?”
While the process of loan disbursement differs between private and federal loans, it’s useful to know the general timeline of what you should expect.
How Long Does it Take to Get a Private Student Loan?
Generally, it takes around two to three weeks for funds to be disbursed after you submit your application. In the worst-case scenario, however, it may take up to two to three months if there are any delays.
It’s important to note that turnaround times for private loans vary by lender. You’ll want to contact your lender directly for a definitive answer.
How Long Does it Take to Get a Federal Student Loan?
The FAFSA is an application that gauges how much federal aid you qualify for by asking you to fill in information about your family’s financial history. The application opens every year on October 1st and closes on June 30th.
After your FAFSA is processed, your school will use the information to create a financial aid package for you. You should receive your package, which includes any federal loans you qualify for, around 3 weeks after submitting the FAFSA. If you choose to accept your aid amount, the funds will be disbursed accordingly.
If there are leftover funds after your loans are used to pay off tuition, your college will most likely refund you the remaining balance after a few weeks. Note that some schools have a 30-day delay for first-time borrowers.
How to Get Student Loans Faster
If you want to speed up the process of receiving your loan money, try out these quick tips.
Use Sparrow
If you want to check what private loans you qualify for without having to send out multiple applications, consider using Sparrow. If you submit a free application with us, you can see all the private loans you prequalify for across 15+ different lenders.
In addition to comparing your options across projected totals and interest rates, you can see how different cosigners impact your loan terms. When using Sparrow, your credit score will not be impacted and you do not have to pay any fees.
Make Sure Your Application is Completely Filled Out
Before hitting submit on your loan applications, be sure to go back and triple-check that the application is completely filled out with accurate, up-to-date information. These couple of minutes will save you more time in the long run.
With missing information, the lender will be unable to process your application and will have to contact you for any missing information. This can delay the process significantly.
Be Responsive to Emails
Keep an eye on your emails after you submit your loan applications. If the lender(s) contacts you, you’ll want to respond as quickly as possible. After all, the quicker they have all the information they need, the quicker your loan will be processed.
However, it is important to be alert about potential student loan scams. Your lender will never ask you to send any sensitive information over email or charge you an upfront fee. If you are contacted by a student loan scam, contact the actual lender immediately to report the incident.
How to Check the Status of Your Loan Application
For Federal Loans: Log into the account you created to submit your FAFSA to check the status of your federal loans.
For Private Loans: Contact the lender directly to check the status of your application. Depending on the lender, you will be able to check the status of your private loans online, by speaking with a worker on the phone, or via online chat.
Closing Thoughts From the Nest
The answer to the question, “How long does it take to get a student loan?,” varies between loan types and loan servicers. However, in general, expect at least 2-3 weeks minimum for your loans to be processed. If you don’t receive your loans for longer than expected, be sure to contact your loan servicer and/or your school’s student aid office.
Student loan refinancing is one of the best ways to save money when paying off your student loans. By refinancing, you’d take out a new loan with more favorable terms to repay your current debt. Ideally, this new loan will have a lower interest rate or monthly payment (or both). Although you may be wondering what credit score is needed to refinance your student loan.
Unfortunately, not everyone is eligible. Oftentimes, you need a strong credit score to refinance student loans, along with other qualifications to prove that you are a creditworthy borrower. Here’s what you need to know.
Do You Need Good Credit to Refinance Student Loans?
Yes, student loan lenders will generally require borrowers to have good credit to qualify for loan refinancing. This usually means a credit score of 700 or higher.
Good credit not only determines whether you are eligible for loan refinancing, but can influence how competitive your interest rate is. Certain lenders will refinance student loans for borrowers with weak credit, but the interest rates on these loans are usually higher.
If you want to refinance your loans, it’s crucial to look across multiple lenders to make sure you’re getting the most competitive terms.
If you’re an Arkansas resident looking to refinance your medical loans, consider the Arkansas Student Loan Authority. ASLA is a state entity that offers loan refinancing for Arkansas residents.
Fixed APR range: 3.50% to 7.48% Variable APR range: N/A Refinancing amount: $5,000 to $250,000
Brazos is a non-profit lender that offers competitive loan refinancing terms for Texas residents. To qualify with Brazos, it is recommended that you have a strong credit score, a steady income, and at least a bachelor’s degree.
Fixed APR range: 4.90% to 6.99% Variable APR range: 5.32% to 9.12% Refinancing amount: $10,000 to $400,000
College Ave offers competitive interest rates, zero fees, on-site loan servicing, and a cosigner release option for qualifying borrowers. A highlight about College Ave is that they do not require borrowers to have a degree or qualify for financial aid.
You must be a U.S. citizen or a permanent resident who is not based in Maine or Oregon to qualify for loan refinancing with College Ave.
Fixed APR range:6.99% to 11.99% Variable APR range:6.99% to 11.99% Refinancing amount: $5,000 to $300,000, depending on degree type
Earnest is well-known in the student loan industry and is backed by competitive refinancing terms and student loans. By refinancing your student loans with Earnest, you have access to merit-based rates, customizable payments and loan terms, as well as the option to skip one monthly payment every year.
Refinancing is not available in Kentucky and Nevada, and you will not have the option to add a cosigner to your application.
Fixed APR range:4.96% to 9.79% (including 0.25% auto-pay discount) Variable APR range:5.49% to 7.94% (including 0.25% auto-pay discount) Refinancing amount: $5,000 ($10,000 for California residents) to $500,000
EdvestinU is a student loan program under the New Hampshire Higher Education Loan Corp, a non-profit based in New Hampshire. You can refinance your student loans with EdvestinU without a degree and have access to special perks if you are a New Hampshire resident. You must be a U.S. citizen or permanent resident who qualifies for financial aid.
Fixed APR range: 4.41% to 7.78% Variable APR range:8.04% to 9.79% Refinancing amount: $7,500 to $200,000
INvestED is best for students who are Indiana residents or attend school in Indiana. You must be a U.S. citizen or qualifying resident who receives financial aid at your academic institution. The lender offers competitive interest rates, 36 months of academic deferment, and does not require a degree to qualify.
Fixed APR range: 5.85% to 9.48% Variable APR range: 8.63% to 12.27% Refinancing amount: $5,000 to $250,000
ISL Education Lending is a non-profit that offers loan refinancing options with competitive interest rates, zero fees, and a cosigner release option. You also do not need a degree to qualify, which is a perk.
You must be a U.S. citizen or permanent resident who is not based in Maine or Oregon to qualify.
Fixed APR range: 3.94% to 8.48% Variable APR range: N/A Refinancing amount: $5,000 ($10,000 for California residents) to $300,000
LendKey connects borrowers with small lenders, credit unions, and community banks. You can refinance with LendKey if you’re a graduate student with a steady income and strong credit history.
Fixed APR range: 4.99% to 10.68% Variable APR range: 4.54% to 7.39% Refinancing amount: $5,000 to $300,000 (depending on degree type)
MPOWER is a great lender that refinances loans for domestic, international, and DACA undergraduate and graduate students. To refinance with MPOWER, your loan(s) must not be cosigned.
Nelnet Bank is an online bank that provides loan refinancing for qualifying borrowers. They offer competitive terms, including flexible repayment options, a cosigner release option, 12 months of forbearance, and the ability to refinance your parent PLUS loan in your name.
To refinance your student loans with Nelnet Bank, you must be a U.S. citizen or a permanent resident with a Social Security Number. You also must have at least a bachelor’s degree.
Fixed APR range:7.12% to 11.19% Variable APR range:7.60% to 14.50% Refinancing amount: $5,000 to $225,000
SoFi is a well-established name in the student loan industry that offers one of the most competitive rates for loan refinancing. To qualify, you must have an associate’s degree or higher.
SoFi also allows borrowers to refinance parent PLUS loans in their own name, offers loan forbearance and deferment, and doesn’t have any origination fees.
Fixed APR range: 4.49% to 8.99% Variable APR range: 4.49% to 8.99% Refinancing amount: $5,000 to your total outstanding balance
Eligibility Requirements to Refinance Student Loans
While there is a minimum credit score to refinance student loans for many lenders, your credit score isn’t the only consideration. Here are a few other factors that impact your eligibility:
A Strong Credit History
A strong credit history generally consists of the following:
On-time and in-full loan payments
No history of default
No history of bankruptcy
No history of delinquency
Your credit history shows your reliability as a borrower. The stronger your credit history is, the easier it is for you to secure competitive interest rates and loan terms.
Having a steady, consistent income will show lenders that you have a stream of capital you can use to make loan payments.
A Low Debt-to-Income (DTI) Ratio
Your debt-to-Income (DTI) ratio shows the proportion of debt and income that you have. To calculate your DTI, divide your monthly debt payments by your gross monthly income.
For example, let’s say you have $2,000 in monthly payments for outstanding debt and make a monthly income of $5,000. If you divide $2,000 by $5,000, you get .4, which is a DTI of 40%.
If you have a lower DTI, this demonstrates that you make more money than you owe. However, if you have a high DTI, this shows lenders that you owe more than you make. A DTI of 35% or less is considered a good DTI.
Proof of Graduation
Generally, lenders will require borrowers to have a degree to be eligible for loan refinancing. However, there are a few lenders that don’t have this requirement.
What is the Credit Score Requirement to Refinance Student Loans?
It depends. For example, based on the lenders above, the required credit score to refinance student loans varies from 640 to 720. However, the better your score, the better terms you are likely to receive.
What to Do If You Don’t Have the Credit Score to Refinance Your Student Loans?
If you don’t meet the credit requirements to be eligible for student loan refinancing, don’t fret. You may still be able to qualify by adding a cosigner to your application.
A cosigner is an individual who agrees to take responsibility for your loan if you fail to make payments on it. Generally, a cosigner is an immediate family member, relative, or close friend.
Once you identify an individual who is willing to be a cosigner for you, you’ll want to compare the options that allow you to add a cosigner. Look at terms such as interest rate, cosigner release options, repayment terms, and more. Consider using Sparrow as a tool to compare your options and see how different cosigners impact the loan terms.
As you explore your loan refinancing options, remember to compare your options across interest rates, repayment plans, borrower protections, and other important considerations. Loan refinancing is a beneficial thing to do, but you’ll want to find the best option for your personal and financial circumstances.
You don’t have to make this decision alone. Sparrow’s form allows you to find the best student loans with the best interest rates for you. The platform makes it easy for you to compare real pre-qualified rates without having to apply with lenders one-by-one. Save time by finding the ideal interest rate for you with Sparrow!
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
As a borrower, refinancing your student loans can be beneficial. For example, borrowers who use Sparrow to refinance save, on average, $17,000 over the life of their loan.
That said, the savings can vary greatly depending on the borrower. With that in mind, you might be wondering, “Is refinancing student loans worth it?.”
It’s always a good choice to explore your options to make a financially sound decision for yourself. To determine whether refinancing is worth it for you, here’s what you should know.
How Student Loan Refinancing Works
Loan refinancing is the process of taking out a new loan to pay for your current debt. The new loan should have more favorable terms, such as a lower interest rate or monthly loan payment.
For example, let’s say you currently have a student loan of $80,000 with an 8% interest rate and a 10-year repayment plan. You decide to refinance and qualify for a new loan of $80,000 with a 5% interest rate, with a 15-year repayment plan.
Through refinancing, you have a new loan with a lower interest and longer repayment period.
To refinance your student loans, you need to submit a formal application to the lender of your choice. Generally, lenders are looking for borrowers who have a strong credit history and a low debt-to-income (DTI) ratio.
The Pros and Cons of Refinancing
To better understand if refinancing student loans is worth it for you, consider the pros and cons:
Pros of Refinancing
You Can Have Lower Monthly Payments
If your student loan payments are too high, refinancing can help relieve the financial strain. You can extend your repayment plan to reduce monthly payments and pay the loan over a longer period of time.
You Can Save More Money
By refinancing to a lower interest rate, you can save more money in the long run.
For example, let’s say you currently have a student loan of $80,000 with an 8% interest rate and a 10-year repayment plan. You decide to refinance and qualify for a new loan of $80,000 with a 5% interest rate.
After refinancing, instead of paying $36,474.49 in interest with a 8% interest rate, you’d only need to pay $21,822.89, saving you roughly $15,000.
You Can Pay Off The Loan Quicker
Just like you can extend your repayment period through refinancing, you can shorten it if you want to pay off the loan quicker. This will mean that your monthly payments will be higher, but if your financial situation allows for this increase, it may be desirable for some borrowers.
You Don’t Qualify for Student Loan Forgiveness
Refinancing may be the way to go if:
You have private student loans, which do not qualify for loan forgiveness.
You do not have an income-driven repayment plan for your federal loans.
You do not work in a qualifying public service position for Public Service Loan Forgiveness.
Refinancing is done through private student loans. If you opt to refinance a federal student loan into a private student loan, you will lose the benefits that come with federal student loans. However, if you plan to refinance a private student loan, these benefits are not at risk.
Cons of Refinancing
You Can Lose Federal Borrower Protections
If you refinance your federal student loans, they will become private loans. This means that you’ll lose out on federal borrower protections, including the opportunity for loan forgiveness, more flexible repayment plans, and loan deferment and forbearance options.
You Can’t Get a Lower Interest Rate And/Or Monthly Payment
If you don’t have a high enough credit score or a cosigner with a strong credit history, you may not qualify for a lower interest rate and/or monthly payment. If this is the case, you shouldn’t refinance your student loans because you wouldn’t be gaining anything from doing so.
You’re Almost Done Paying Off Your Student Loans
If you only have a few more payments left on your student loans, it may be better to not refinance your loans. When you refinance your loans, you have to choose a new repayment plan that can extend the life of the loan, increasing the amount you have to pay.
Instead of refinancing, pay off your loan with your current plan.
Is Refinancing Student Loans Worth It? It Depends.
You should consider refinancing if:
You qualify for a lower interest rate or monthly payment.
You do not qualify for federal loan forgiveness.
It will save you money in the long run.
You should not consider refinancing if:
You are almost done with paying off your loans.
You do not qualify for more competitive terms than the ones you already have.
You are eligible for federal student loan forgiveness.
Closing Thoughts From the Nest
Consider the pros and cons of student loan refinancing to determine whether the decision is worth it for you in the long run.
If refinancing your student loans is beneficial to you, consider using Sparrow as a tool to see your loan refinancing options. You can compare personalized offers across 15+ different lenders, all for free.
The total student loan debt, between both federal and private loans, is $1.75 trillion. If your debt is contributing to this total, it’s time to pay it off.
Whether you borrowed private loans, federal loans, or a mix of both, deciding which student loans to pay off first can be difficult. However, it’s important to keep in mind that there is no single one-size-fits-all solution.
Instead, let’s explore a few tactics that can help you save money. This will help you determine which student loans to pay off first, based on your unique financial circumstances
Option #1: Pay Off Private Student Loans First
Private student loans are offered by commercial lenders like banks and credit unions. These organizations are autonomous, meaning they have the discretion to set interest rates, repayment plans, and borrower protections for loans.
Generally, in comparison to federal loans, private loans have less advantageous terms, with no option for loan forgiveness, higher interest rates, and fewer repayment plans.
If the lack of flexibility or the higher interest rates for your private loans is a cause of concern, pay those loans off first. By doing so, you are essentially targeting the “weightier” portion of your debt.
Additionally, consider refinancing your private student loans if it’s an option. Refinancing is the process of borrowing a new loan to pay off your current debt with better terms. This can lower your interest rate and monthly payments, which will be beneficial in the long-run. Keep in mind that you will need a relatively strong credit score to qualify for loan refinancing.
Option #2: Pay Off High-Interest Student Loans First
When Einstein said, “He who understands [compound interest], earns it. He who doesn’t, pays it,” he wasn’t kidding. The debt avalanche method is most effective for minimizing the costs of compound interest, which will save you the most money in comparison to other debt payoff benefits.
With this method, you’ll make minimum monthly payments on all loans while making surplus payments on the loan with the highest interest rate. Then, once you’ve paid off the highest interest rate loan, you’ll carry that payment amount to the next highest interest rate loan.
For example, let’s say you have two student loans:
Loan A: $10,000 balance, 5% interest rate, 10-year repayment term
Loan B: $5,000 balance, 3% interest rate, 2-year repayment term
In this scenario, you would make surplus payments on Loan A while still making minimum payments on Loan B. Doing so would minimize the interest costs for Loan, given that it will accrue a greater amount in interest than Loan B.
Option #3: Get Rid of Small Loans First
Targeting smaller loans is another debt payoff strategy known as the snowball method. The logic behind this method is to get rid of the loan with the lowest balance first.
The snowball method is relatively simple. First, organize your loans based on the total amount, without regard to the interest rate. Then, make paying off the smallest loan your priority. After the smallest loan is paid off, target the next loan in line.
For example, let’s say that your debt consists of the following:
Loan A: $5,000 balance, 3% interest rate
Loan B: $2,500 balance, 6% interest rate
Loan C: $3,500 balance, 8% interest rate
In this scenario, you would pay off Loan B first, given that it has the smallest balance.
While the snowball method isn’t the best repayment option in terms of saving the most money possible, you’ll be able to knock out individual loans quicker and have more upfront victories. For some, these upfront victories are what motivates them to stay consistent with their debt payoff journey.
Which Debt Payoff Strategy Will Save You the Most Money?
The debt avalanche method, where you target your high-interest loans first, will save you the most money. This is because you’re targeting debt with the highest interest rate, which will grow the fastest.
However, even if the debt avalanche method will save you the most money, it may not be the most optimal way to repay your debt. According to a study done by Northwestern’s Kellogg School of Management, borrowers who use the snowball method are more likely to pay off all of their debt than borrowers who use other methods.
Closing Thoughts From the Nest
As you consider debt payoff strategies, remember that there is no “right” answer. Instead, think about what best fits your financial situation.
If it’s less financially straining to pay off smaller loans first, use the snowball method. If you want the most bang for your buck and are confident you will be able to stick to a plan, use the avalanche method. In the end, everything depends on what you feel is best for you.
The Free Application for Federal Student Aid (FAFSA) is open for next school year. The earlier you submit it, the better.
If you have divorced parents, navigating the FAFSA might be a little more difficult. It has its own set of guidelines on who you can report as your “custodial” parent on the application.
No matter what your family situation may be, we’re here to help. Keep reading for information on how to fill out the FAFSA with divorced parents.
Who Counts as a Parent on the FAFSA?
Only legal parents count as a parent on the FAFSA. Grandparents, foster parents, and legal guardians do not qualify unless they have legally adopted you.
Even if you don’t live with either of your legal parents, you will still need to report their financial information on the FAFSA. If you have lived with a remarried legal parent for the majority of the past 12 months, you will also have to put your stepparent’s information down.
If you are legally emancipated, were a ward of the court after the age of 13, or have deceased parents, the FAFSA considers you as an independent student. There is a separate process for filing the FAFSA as an independent.
Which of the Divorced Parents Should Complete the FAFSA?
Depending on your living circumstances, there are two options for completing the FAFSA with divorced parents:
If Your Parents Live Together
If your parents do live together, you can indicate their living status as “unmarried and both legal parents living together” on the FAFSA.
If Your Parents Don’t Live Together
If your parents do not live together, the FAFSA will ask you which parent you have lived with for the majority of the past 12 months.
If you have lived with each parent equally, you will be asked about which parent gave you the most financial support during the past 12 months.
Steps to Complete the FAFSA with Divorced Parents
There are three main steps you will have to take:
Step 1: Determine Your Custodial Parent
To figure out who your custodial parent is, ask yourself the following questions:
#1: Are your parents married? If yes, report both of your parents’ information on the FAFSA. If not, ask yourself the following question.
#2: Do your parents live together? If yes, report both of your parent’s information on the FAFSA (even if they have never been married, divorced, or separated). If the answer is no, ask yourself the following question.
#3: Have you lived with one parent more than the other within the past 12 months? If yes, report the information of the parent you have lived with more on the FAFSA. If the answer is no, go to the next step (#4).
#4: Report the information of the parent who provided you with more financial support over the past 12 months. If this parent is remarried, you will also have to report the information of your stepparent on the FAFSA.
The following infographic from Federal Student Aid (FSA) can also serve as a visual guide for determining your custodial parent.
After determining your custodial parent, keep in mind that you should only report their information when prompted on parent information (and your stepparent if you have lived with them for over 12 months).
For example, when the FAFSA asks about your parent’s highest education, you should only report your custodial parent’s information (and your stepparent’s information if applicable), and not your other parent’s information.
Step 2: Gather the Correct Information
Gather the following information to complete the FAFSA. You will most likely have to work with your determined custodial parent to collect the necessary documents.
Your social security card
Your custodial parent’s social security card
Any form of self-identification (driver’s license, real I.D., passport, etc.)
Your custodial parent’s 2021 tax returns
Your custodial parent’s 2021 untaxed income records
Your custodial parent’s 2021 W-2 forms
Your custodial parent’s current bank statements
Step 3: Include Child Support (If Applicable)
The FAFSA requires you to report any child support your custodial parent receives. Alimony is considered taxable income and is already reported on your custodial parent’s tax information, so it does not have to be reported again.
Do You Get More Money on the FAFSA if Your Parents Are Divorced?
It depends who your custodial parent is.
If your divorced parents live separately, you have to report the custodial parent’s income on the FAFSA, not the other parent’s. If you live with the parent who has a lower income, your estimated family contribution (EFC) will be lower, which can lead you to receive more aid.
That being said, child support and alimony are taken into account on the FAFSA, so there isn’t a guarantee that you’ll get more money simply because your parents are divorced.
Closing Thoughts From the Nest
As you navigate the FAFSA with divorced parents, don’t forget to ask for help. The school’s financial aid office has dealt with situations like yours and more, so don’t be afraid to reach out.
Now that your student was accepted into their dream school, it’s time to figure out how to pay for their education (as if getting into college wasn’t difficult enough, eh?). From parent loans to student loans, you have a lot of options. Therefore, finding the most suitable way to afford educational costs can be difficult to navigate. Keep reading to learn more about the best parent student loans of 2024.
Below is a list of some of the best parent student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated parent student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
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Student loans are borrowed money that can be used to pay for educational expenses like tuition, room and board, school supplies, and more. Students can only qualify for these loans if they are enrolled at an accredited institution at least half-time.
Student loans almost always accrue interest. Interest is a small percentage of the loan that is added on top of the total loan amount. Therefore, how much you originally borrow is not the amount you will pay back. Accordingly, it is essential that you choose your loans carefully and compare total cost projections.
Types of Student Loans
There are two main types of student loans you can borrow: federal student loans and private student loans.
The main difference between federal and private student loans is who offers them. The federal government offers federal student loans. In contrast, private student loans are offered by credit unions, banks, and other private institutions.
The following chart details the nuances of federal student loans and private student loans.
Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.
No financial need is required; anyone can apply.
Cosigner Needed?
No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.
In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates
Interest rates tend to be lower than that of private student loans and are always fixed, meaning they do not change.
Interest rates tend to be higher for students because they lack a strong credit history. However, rates may vary with a cosigner.
Interest rates can be fixed (meaning they do not change) or variable (meaning they change based on the economic market).
Borrower Protection Plans
The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.
Depends on the lender, but selections are often limited.
Credit Score Requirements
Typically, federal loans do not look at credit scores, except the Direct PLUS Loans.
Most private lenders will be looking for students and cosigners with strong credit histories and scores.
Borrowing Limits
For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year.
For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
Federal student loans do not have to be paid if you are a current student who is enrolled at least half-time.
Direct Subsidized, Direct Unsubsidized, and the Federal Family Education Loan have six-month grace periods before you start making regular loan payments.
Some private loan lenders provide a six-month grace period, while others will require immediate repayment upon graduating, leaving school, or dropping below half-time enrollment.
Repayment Plans
The federal government offers eight repayment options: • Standard Repayment Plan • Graduated Repayment Plan • Extended Repayment Plan • Pay As You Earn Repayment Plan (PAYE) • Revised Pay As You Earn Repayment Plan (REPAYE) • Income-Based Repayment Plan (IBR) • Income-Sensitive Repayment Plan (ISR) • Income-Contingent Repayment Plan (ICRP)
Private student loans tend to have fewer repayment options in comparison to federal student loans.
When Should You Consider Student Loans?
Before pursuing student loan options, exhaust all other financial aid options. Specifically, this includes college savings accounts, scholarships, grants, and work-study. After all, borrowing money is far more expensive than spending it.
Consider the following options to finance educational costs before resorting to student loans:
College Savings Account
If you have a 529 Plan, a mutual fund, or a Roth IRA that you specifically created to finance your child’s educational costs, tap into them. Be sure to read the fine print so you are meeting withdrawal requirements.
Scholarships
Scholarships are a form of gift aid that is awarded based on academic merit, financial need, racial/ethnic group, specific affiliations, or outstanding achievements.
If your child has received any scholarships, use that money to cover a portion of their college tuition. If not, encourage your child to continuously apply for scholarships. They are offered year-round and can amount to a hefty total.
Grants
Grants are another form of gift aid that do not need to be paid back. They are offered by federal, state, public, and private entities.
Unlike scholarships, however, grants are awarded solely based on financial need. Your child should apply to any and all grants they qualify for.
Work-Study
Work-study is a federal program that employs students with an on-campus job. Specifically, students can work for an allocated amount of hours and use their paychecks at their own discretion. Generally, only students with demonstrated financial need can qualify for federal work-study.
If there is still a lot of money left to pay after you’ve exhausted the above options, consider a student loan.
A Parent’s Role in the Student Loan Process
As first-time navigators in the student loan process, it may be difficult to draw the line in regards to how involved you or your student should be.
Here are two ways parents can aid in the student loan process:
Parents can help guide their children through the student loan process by explaining how it works. Student loans can be a great opportunity to involve your student in the family’s finances and teach financial literacy. Working with your child to find student loans and discuss long-term goals will emphasize the responsibility of student loan debt and help your child in the long run.
You can be a cosigner for your child to help them qualify for private loans they may not otherwise qualify for. Unlike most federal loans, which do not require cosigners, students are generally unable to qualify for competitive private loan terms without a cosigner. If you have a strong credit history and are willing to put your name on a loan with your student, consider cosigning. It is a great way to strengthen the chances of your child receiving a more competitive rate.
Parent Loans vs. Student Loans: What Should You Do?
Between parent loans and student loans, they both have their individual pros and cons. Consider your family’s financial needs as you choose between them.
Federal Parent PLUS Loan
The Parent PLUS loan is a parent loan offered by the federal government. This is the only federal loan option for parents.
To qualify for the Parent PLUS loan, you must:
Be the biological or adoptive parent of a dependent undergraduate student (step-parents may qualify in certain cases)
Not have an adverse credit history
Meet general eligibility requirements for financial aid
If you borrow a Parent PLUS loan on or after July 1st, 2023, and before July 1st, 2024, the fixed interest rate is 8.05%, which may be relatively high for someone with a strong credit score. You may want to consider your private parent loan options because they may offer lower, more competitive interest rates.
However, the main benefit of Parent PLUS loans is the potential for loan forgiveness. Between federal parent loans and private loans, determine which option is most viable for your family by factoring in loan forgiveness and borrowing cost projections.
Pros and Cons of a Federal Parent PLUS Loan
Pros
Cons
You may have the option for federal loan forgiveness.
Federal loans offer extensive borrower protection plans.
Federal loans offer flexible repayment options.
All federal loans have a fixed interest rate, so you’ll never have to worry about your rate increasing.
Parent PLUS loans have higher interest rates relative to some private parent loan options.
Parent PLUS loans have origination fees. While an excellent credit score is not required, you must pass a credit check.
Repayment begins immediately after the loan is disbursed.
Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc.
With a private parent loan, you borrow on behalf of your child to pay for their education. Even though the loan is for your student, you have the legal responsibility to pay back the loan because it was originated in your name.
Countless private parent loans are offered by different entities, meaning that each loan has its own repayment terms and interest rates. As you look into your private parent loan options, make sure to compare them side by side and read the fine print so you know exactly what you are getting out of each loan.
Pros and Cons of a Private Parent Loan
Pros
Cons
You can qualify for competitive interest rates if you have good or excellent credit.
Given the amount of private lenders in the market, you will have many loan options to consider.
You can borrow a private parent loan regardless of your relationship with the student.
There are low or no origination fees.
Private parent loans are not eligible for loan forgiveness.
There are limited repayment options and borrower protections, in comparison to federal loans.
Your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc. Interest rates may be higher for parents with low or bad credit.
Private Student Loan
Like private parent loans, private student loans are offered by private entities.
However, with a student loan, your child borrows the loan. While you can help your child with their loan payments, they have the legal responsibility to pay back the loan in full. If you cosign the student loan, you and your child are both legally responsible for paying back the loan.
Oftentimes, students are unable to qualify for a private student loan or receive competitive terms without a cosigner. This is because they have weak, or nonexistent, credit histories. As a parent, you can offer to cosign the loan so they qualify for more competitive loan terms.
Pros and Cons of a Private Student Loan
Pros
Cons
Your student can build up a strong credit history.
Borrowing limits usually meet, or are higher than, the tuition costs.
There is no financial need requirement.
The loan is in the student’s name if you do not cosign for it.
Private student loans do not qualify for loan forgiveness.
Students may require a cosigner to qualify.
Private student loans without a cosigner may have higher interest rates than federal student loans.
If you cosign the loan, your debt-to-income ratio may increase, which can lower your chances of qualifying for a home mortgage, an auto loan, etc.
Which Loan Option is Best for Parents?
The best loan option is the one that works best with your family’s needs.
As you are exploring federal and private parent/student loan options, consider your financial standing. Is your family more suited to pay for a private loan with a low interest rate, or would your family benefit more from more flexible repayment options?
Do you want your child to borrow a student loan so they have skin in the game, or would you rather borrow a parent loan because you qualify for a more competitive interest rate and loan terms?
These are all questions you should consider as you compare your options. Remember, there is no one “right” answer. The only right choice is the one you know works best for your family.
Closing Thoughts From the Nest
As you and your student continue to navigate through the student loan process, remember to take a breath and relax. Navigating this process can feel overwhelming, but we’re here to help.
When comparing loan options, consider using Sparrow’s free search tool. If you submit a free application with us today, you can see all the private loans you qualify for across 15+ lenders. We’ll even help you view the long-term loan projections based on different repayment plans and compare loan terms with different cosigners.
According to the Education Data Initiative, around 15% of student loans are in default at any given time.
If you are in student loan default, it’s understandable to feel overwhelmed and discouraged. However, don’t lose hope. There are many ways to financially recover from it.
A student loan default happens when you fail to repay a loan according to the terms outlined in your loan contract (also known as a promissory note).
What Happens Before Default?
Before a federal student loan default, your loan enters into a stage called delinquency. You enter into loan delinquency when you miss one federal student loan payment.
While your federal student loan is delinquent, you still have the opportunity to:
Switch repayment plans to receive a lower monthly payment
Contact your loan servicer to discuss your next steps as soon as you enter federal loan delinquency. It is crucial to take advantage of the federal borrower protections you have while you are delinquent so you will not default on your loan.
On the other hand, private student loans do not enter delinquency after a missed payment. They simply default after you miss the number of payments outlined in your promissory note. Contact your loan servicer to discuss what options you have after missing a payment. Depending on your loan, you may have to enter loan deferment/forbearance, or lower your monthly payment temporarily.
When Does a Student Loan Enter Default?
Federal and private student loans enter default at different points.
Federal student loans enter default if payment has not been made for 270 days, or around around nine months of missed payments. Defaulting on a federal student loan makes you ineligible for forbearance and deferment, repayment plans, and applying for any other federal student loans.
Private student loans usually enter default after you miss three monthly payments, or if payment has not been made for 90 days. They can also enter default if you declare bankruptcy, default on another loan, or pass away. However, not all loans default after three missed payments.
Always read the fine print on your promissory note to be aware of the specific default timeline for your loan.
How to Know if Your Student Loans are in Default
To verify whether your student loans are in default or not, you have the following options:
Contact your loan servicer. This is the best way to determine whether your loans are in default, as your servicer will be able to provide you with up-to-date information.
For federal student loans: Log into your Federal Student Aid account and check whether or not your loans have entered into default. You may be able to find similar information by logging into your private student loan account as well.
Check your credit report. Your credit report will list all federal and private student loan defaults. However, this may not be the most accurate way to check because credit reports are not constantly being updated.
What Happens if You Default on a Student Loan?
Student loan default can impact you in the following ways:
Your credit score is damaged.
Entering student loan default and missing loan payments will be reflected on your credit history for the next seven years. Because your credit score will be significantly impacted, your chances of qualifying for new lines of credit may be extremely difficult (and in worst cases, impossible).
You’ll owe more money.
Despite being in loan default, late fees and interest will continue to be applied to your debt. Debt collection agencies may also charge collection fees, adding to the amount of money you owe. Try to get your loan out of default as quickly as possible to avoid incurring additional costs.
You may be contacted by debt collectors.
A collection agency is a company that loan servicers use to recover loans in default.
If you default on a federal loan and make no actions for payment arrangements, loan servicers can place your loan with a collection agency. Defaulted private loans are considered “uncollectible,” or “charged-off,” and can be sold to a collection agency.
Once your defaulted loan is in the hands of a collection agency, debt collectors can contact you to recover your delinquent funds. Oftentimes, debt collectors will use aggression or scare tactics to coerce you into paying off your debt.
That said, debt collectors are legally obligated to follow the Fair Debt Collection Practices Act, which provides borrowers certain rights. If any of your rights are violated, submit a complaint to the Consumer Finance Protection Bureau.
The federal government may withhold your wages, tax refunds, and/or federal benefits.
To collect on federal student loans, your loan servicer has the legal discretion to withhold your wages, tax refunds, and government payments. In addition to garnishment, you will not be eligible for any federal financial aid or federal borrower benefits.
Your loan servicer may sue you.
Unlike federal student loans, private student loan servicers cannot garnish your wages or tax refunds. Instead, however, they have the legal discretion to take you to court. If you are sued by your loan servicer, the court can rule in their favor and require you to give up your bank accounts, paychecks, or any capital to pay off your debts.
Your professional license can be suspended.
License suspension laws vary from state to state, but bear in mind that any licenses you have (ex. professional license, driver’s license, etc.) can be suspended if you default on your student loans. While this may be an extreme case, it is still possible.
How to Recover from a Student Loan Default
If you have defaulted on a student loan, do not feel discouraged. You still have many opportunities to recover from a student loan default.
How to Recover from Federal Student LoanDefault
If you want to recover from a federal student loan default, consider the following options.
Rehabilitation
Usually, student loan rehabilitation is the best way to recover from federal student loan default because it removes the default from your credit report (though late repayments will remain).
Contact your loan servicer to inquire about loan rehabilitation.
Make nine consecutive monthly payments that are 15% of your discretionary income. You may request a lower amount if need be.
Note, however, that loan rehabilitation is a one-time opportunity.
Consolidation
Student loan consolidation is when you merge your defaulted loan(s) and current loan(s) into oneDirect Consolidation Loan.
To consolidate your defaulted federal loans, you need to:
Agree to repay the new Direct Consolidation Loan under an income-driven repayment plan.
Make three consecutive, on-time, full monthly payments on the defaulted loan.
Enroll in Fresh Start.
What is Fresh Start?
Fresh Start is a new federal program that aims to help defaulted borrowers. The program will begin in December 2023, a year after the COVID-19 payment pause ends.
Through Fresh Start, borrowers will temporarily recover student aid benefits and have the opportunity to get out of loan default.
Federal Student Aid (FSA) will reach out to you in the coming months if you are eligible to participate in Fresh Start. Therefore, you’ll want to make sure your contact information is up-to-date with your loan servicer.
Which Is Better for a Federal Student Loan Default: Loan Rehabilitation or Loan Consolidation?
Between federal loan rehabilitation and loan consolidation, there is no “right” answer. Instead, you should examine which option best meets your financial needs.
That said, there are a few things you should consider as you make your decision:
Loan rehabilitation is a one-time opportunity. If you fail to rehabilitate your loan(s) the first time around, you will not be able to do it again.
Loan rehabilitation requires nine monthly payments, while loan consolidation only requires three monthly payments to qualify.
Loan rehabilitation removes the loan default from your credit history, though any reported missed payments will remain. Loan consolidation does not remove your default.
The following chart details the benefits you gain from loan rehabilitation and loan consolidation.
Benefits
Loan Rehabilitation
Loan Consolidation
Loan Deferment
Yes
Yes
Loan Forbearance
Yes
Yes
Eligibility for Federal Financial Aid
Yes
Yes
Repayment Plans
Yes
Yes
Loan Forgiveness
Yes
Yes
Removal of Default from Credit History
Yes
No
How to Recover From Private Student LoanDefault
Unfortunately, private student loans don’t offer the same recovery options as federal student loans. You will need to contact your lender to discuss options for getting out of loan default. You may be able to negotiate a resolution or work out a payment plan that works for your financial needs.
If you need additional assistance, consider contacting a student loan lawyer.
How to Fix Your Credit After Defaulting
Take the following steps to fix your credit after defaulting on student loans:
Get out of default.
The first thing you should do to repair your credit after a default is ensure that you are completely out of default. While getting out of default won’t instantly fix your credit score, it’s the first step in getting it back up.
Pay off your debts.
In addition to paying off your defaulted loan, you will want to stay on top of paying off any other debts you may have (credit card debt, home mortgage, etc.) Having less debt will lower your debt-to-income ratio, which in turn will help raise your credit score.
Do not open new lines of credit.
While you might consider borrowing a personal loan to pay off your student loans, experts advise against this. Borrowing more money will only put you in further debt. Instead, use your current resources to manage your debt balances.
Closing Thoughts From the Nest
While defaulting on a student loan may feel like the end of the world, you can still recover from it. The best thing to do is to attempt to get out of it. Contact your lender or loan servicer as soon as possible to set up payment arrangements that work for you. In addition to that, remember your borrower rights if you are contacted by debt collectors.
Borrowing a student loan is a big decision. Figuring out how much to borrow, where to borrow from, and how to navigate getting the money where it needs to go can be confusing.
Before anything else, you should consider what you intend to use the loan money for. While student loans need to be used for academic expenses, there are a variety of items that fall under that umbrella.
If you’ve ever wondered, “What can student loans be used for?,” you’re in the right place. Keep reading to learn about the do’s and don’ts for student loan usage.
What Can Student Loans Be Used For?
Student loans can only be used for academic expenses. Here are some of the common expense categories that qualify as an academic expense.
Expense
Tuition and Fees + Room and Board
Your institution will usually take a portion of your student loans to cover costs such as tuition and fees, room and board, and your meal plan. You will not have to pay the university directly.
Institutional Fees
If your school has mandatory health insurance, parking fees, or other institutional requirements, you can spend a portion of your student loans to cover these costs.
School-related Living Expenses
Student loans can be allotted to cover personal expenses that are necessary for your educational career (ex. a desk lamp to study, new bed sheets, or a microwave).
Books and Supplies
Your student loans can cover anything from textbooks, to notebooks, to multicolor highlighters, to a new bookbag.
Transportation Costs
Whether you commute or drive to school, you can use a portion of your student loans to cover transportation costs like gas, bus fares, etc.
Child Care Expenses
If you are supporting yourself in addition to a dependent, you can use your student loans to cover child care expenses, whether that be daycare, baby food, or other child-specific necessities.
Study Abroad Expenses
If you decide to study abroad, you can use a portion of your student loans to cover any related expenses. Note that the study abroad must be either approved by or offered by your school to be a qualifying expense.
Generally, federal student loans and private student loans have the same guidelines for usage, but make sure to double-check with your lender before spending any money.
What Student Loans Can’t Be Used For
Your student loans cannot be used to cover any personal expenses like:
Travel: Unless you go on a study abroad/school trip, you cannot use your student loans to fund personal travels.
Entertainment: Dinners with friends, movie tickets, and retail therapy cannot be covered by your student loans.
Personal finances: Down payments for a house, credit card payments, and other personal finances do not qualify as educational expenses.
These expenses must be paid for with your own money.
What Happens If You Use Student Loans for Something Else?
As tempting as it may be, it is extremely ill-advised to use your student loans for anything other than educational expenses for the following reasons:
Using your student loans for other expenses is essentially breaking a legal contract. The promissory note/loan agreement you signed when you took out the loans specifically outlines that you agree to only use your loan for educational expenses. Therefore, breaking this legal agreement you signed under “penalty of perjury” can have serious consequences.
While schools don’t actively look for student loan misuse, if you are caught for this charge, you may be reported to the federal Department of Education and have your student loan money taken away.
Beyond all legal reasons, misusing your student loan money can put you in more debt than you initially started with. Depending on your loan repayment plan, your debt will begin to accrue interest either after you graduate or from the first loan disbursement. If you use your student loans to buy nonessential items, you will end up having to pay more for the accrued interest on your debt.
If you deplete your student loan balance quickly, you may not have enough money to pay for future educational expenses.
What About Student Loan Refunds?
After covering all of your educational costs, including transportation, school supplies, and institutional fees, you may still have some money left.
Experts recommend that you do the following with the remaining student loan refund balance you have:
Return the money if your lender does not charge prepayment penalties. In addition to lowering your balance, returning the extra money will prevent unnecessary interest from accruing. Contact your lender to determine how you can return any excess student loan amounts.
Save the money. You may have future educational expenses you can put the money toward. Put the remaining balance into your savings account for unforeseen circumstances.
Use the money on your initial loan payments. With the extra cash you have, you can lower your debt even before repayment starts. If your repayment starts as soon as the loan is disbursed, you won’t have to pay out of pocket for your initial repayment.
Closing Thoughts From the Nest
Using your student loans responsibly is crucial to be out of debt quicker. Remember to use your student loans for academic purposes only and return or save what remaining balance you may have.
If you’re looking to explore private loan options, consider using Sparrow. Sparrow allows you to visualize the cost of your loans side-by-side so you can compare options and know exactly how much you’ll be paying off in your repayment period.
According to a study done by Fidelity, 42% of parents wish they started saving for college earlier. While saving for college can seem like a daunting challenge, we’re here to help.
If you’re wondering when you should start saving for your child’s college education, you’re in the right place. Keep reading to learn about when you should start that college fund, how much money you should save, and what college savings options you have.
When Parents Should Start Saving for College
The cost of college tuition rises annually due to inflation. In fact, between 1980 and 2020, the cost of tuition rose by 169%. So, it’s important that parents start saving for college as early as possible.
That said, experts advise that worries about the “when” should not hinder parents from saving now. Annette VanderLinde, the Chief Client Officer for Portfolio Solutions, states that, “Either there’s too much stress placed upon opening a college savings account right after birth, or regret in not starting a savings account earlier. The key is to just get started and let go of the worry.”
Whether your child is six or sixteen, you should be looking into options and saving for college as soon as possible.
It is important to note that parents who begin saving later will have to contribute more money than parents who began saving earlier to “catch up.” Parents who begin saving earlier have time and compound interest on their side, meaning that their gains may be substantially larger.
What to Do If You’re Getting a Late Start on Saving
If you are starting late on saving for college, it may be smarter to take on less risk as market fluctuations can be a detrimental player to your college savings goal. Perhaps it would be wiser to look into more safe, secure investments or age-based plans.
While there is no “right” answer to how much parents should save for college, here are some general guidelines for how much you should have saved by the time your child enters college.
The ⅓ Rule
The ⅓ rule states that parents should be able to pay for their child’s college in thirds:
⅓ of the tuition should be paid by the parents’ income
⅓ should be paid by savings
⅓ should be paid for by grants, scholarships, and other sources of financial aid.
To calculate what ⅓ of tuition may cost when your child enters college, use a college cost projector calculator such as Vanguard’s. Then, divide the projected cost by 3 to find the amount you should aim to save.
For example, let’s say that your child was born in 2015. While you don’t know which school your child will attend, you know they will enroll in around 11 years. According to Vanguard, 4 years of college will cost around $167,266 total by that time. So, you’d want to aim to save $55,755.
The 2k Rule expects that the cost of tuition will grow 3% above the national inflation rate in a four-year period and that parents will cover 50% of their child’s tuition with savings.
To calculate how much you will need to save to cover 50% of your child’s tuition with +3% to the national inflation rate every four years, take the following steps:
Multiply your child’s current age by $2,000. (Ex. Your child is 16 years old. 16 x 2,000 is 32,000).
Calculate how many years left until your child goes to college, and multiply that number by $2,000. (Ex. Your child is 16 years old and you expect them to go to college in one year. 1 x 2,000 is 2,000.)
Add up the totals from steps one and two to determine roughly how much money you will need to save up to pay for 50% of your child’s tuition by the time they go to college. (32,000 + 2,000 is 34,000).
A 529 Plan is a college savings plan that offers both federal and state benefits when you use the money for educational purposes. There are two types of 529 Plans: an educational savings plan and a prepaid tuition plan.
Educational Savings Plan: Parents can contribute money to the educational savings plan and choose investment options.
Prepaid Tuition Plan: Parents can pay tuition that is based on the current tuition in advance for a specific university/group of universities.
Pros of the 529 Plan
Cons of the 529 Plan
Earnings and withdrawals are tax-free for educational expenses.
There will be penalties if the money is used for non-educational purposes.
Investments can grow up to $500,000 over the life of the account.
Limited investment options in comparison to other savings options.
When the owner of the 529 Plan is a custodial parent or the dependent student, the total value must be reported as a parent asset on the FAFSA.
Mutual Funds
Mutual funds are a type of investment fund that allows you to diversify your stock holdings by buying different stock options instead of just one. Your investment portfolio is usually managed by financial advisors, to whom you give your money to. As a parent, this option is a great way to start saving for college.
Pros of Mutual Funds
Cons of Mutual Funds
Money can be used on anything.
Earnings are subject to annual income tax.
No limits to investing.
Capital gains are subject to tax when sold.
Earnings made on mutual funds will be viewed on your child’s FAFSA, affecting financial aid eligibility.
Custodial Accounts
Custodial accounts are brokerage accounts that you open for your child and transfer to them once they reach the age of 18, 21, or 25 years old. You can invest in stocks, mutual funds, and bonds with a custodial account.
Pros of Custodial Accounts
Cons of Custodial Accounts
Money can be used on anything.
Your child may be subject to the kiddie tax when they receive the account. The tax is on any unearned income they receive that exceeds $2,300 when or before they are 23 years old.
No limits to investing.
The brokerage account will be viewed as your child’s financial assets on their FAFSA, affecting financial aid distribution.
The account’s value can be removed from your gross estate.
Savings Bonds
Savings bonds are securities that are backed by the United States Government. They are incredibly safe investments with a 100% money-back guarantee, along with any interest that accrues.
Pros of Savings Bonds
Cons of Savings Bonds
Federal tax-deferred and state tax-free.
$10,000 limit for individuals and $20,000 limit for joint couples annually.
Safe, guaranteed return on investment.
Lower returns compared to other investment options.
Roth IRAs
Roth IRAs are individual retirement accounts that you can put after-tax money into and enjoy tax-free growth and withdrawals. Penalties can be waived if money is withdrawn and used for educational expenses.
Pros of Roth IRAs
Cons of Roth IRAs
Offers a wide range of investment options.
Maximum annual contribution is $6,000 if you are under 50 years old.
Not counted as a parent asset on the FAFSA.
Educational withdrawals will count as untaxed income and reduce your child’s financial aid eligibility.
Only for individuals who earn less than $144,000 or joint individuals who earn less than $214,000 annually.
Should Parents Save for Their Child’s College?
Saving for your child’s educational expenses comes with many benefits. For one, it will alleviate the thousands of dollars in debt that your child will have to pay off. If you start early, you will have the power of compound interest and time on your side, allowing you to save more with less. Plus, it is better to save money now rather than borrow later.
However, there are certain things that are far more financially beneficial for your family and should take precedence over a college fund, such as:
An emergency fund: Every family needs a rainy day fund for any storms that life throws at you. Whether it is an unexpected medical emergency, a necessary home repair, or an out-of-the-blue expense, you’ll want to be prepared for whatever comes your way.
Paying off high-interest debt: High-interest debt is notorious for growing exponentially, putting many families in more debt than they expected in a short amount of time. Before your debt becomes a larger problem than it has to be, paying off your high-interest debt should be at the forefront of your financial priorities.
In some cases, a retirement fund: Retirement can be expensive. According to the World Population Review, you need at least $905,000 in your retirement savings to retire comfortably in 2022. It’s a difficult position to be in, but you’ll have to determine what costs more: the financial burden you may be on your children when you are retired versus the student debt your child will have to shoulder.
Saving for college costs should ultimately depend on your family’s financial situation. For some, it is more beneficial to save money now than to borrow later. For others, spending money to tie up loose ends is far more important than putting the money into a savings account.
Saving for college as a parent can be a large concern. If your family is in the financial standing to save for college, remember to start saving early. Compound interest and time will be your two financial saviors in the face of college inflation.
Between the college fund options discussed above, be sure to thoroughly research each one to find what’s most suitable for you and your child.
Remember, not all families are in the position to start saving for college, and that is okay. Paying off high-interest debt, saving for your retirement, and adding to your emergency fund are all valid alternatives that will benefit your family in the long run.
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If you’re a parent looking for an alternative to private student loans, consider applying for Parent PLUS loans. Parent PLUS loans are a type of federal loan offered to parents of dependent college students. Known for varied repayment plans and strong borrower protection, they’re a great option to finance your child’s education.
In this article, we’ll tell you everything you need to know about how to apply for Parent PLUS loans.
Complete the FAFSA
To determine whether you’re eligible for the Parent PLUS loan, complete the Free Application for Federal Student Aid (FAFSA). The FAFSA checks your eligibility for not just Parent PLUS loans, but for general student financial aid. The application must be filled outannually if you want your child to be considered for federal aid.
How to Complete the FAFSA
Each year, the FAFSA opens on October 1st and closes on June 30th. Experts recommend submitting the FAFSA as close to the opening date as possible. This is because some financial aid is distributed on a first-come, first-served basis.
Make sure that filling out the FAFSA is a collaborative process with your student. It’s important that they understand how their education is being financed and how to navigate the FAFSA process.
You and your child’s driver’s license (if applicable)
Tax returns from two years prior
Untaxed income records from two years prior
W-2 forms from two years prior
Current bank statements
While you may know some of the above information by heart, never go off memory. It is crucial that your submission is accurate. Typically, it takes around an hour to complete, including time to double check your answers.
Around 4 to 6 weeks after submission, your student will receive their financial aid summary. The financial aid summary will detail what and how much aid your child qualifies for. It will also show whether you’re eligible to borrow Parent PLUS loans.
Check Your Eligibility for the Parent PLUS Loan
Even if Parent PLUS loans are included in your child’s financial aid summary, you’ll need to apply again to re-check your eligibility.
You must meet the following requirements to be eligible for the Parent PLUS loan:
Be a U.S. citizen or eligible non-citizen.
Be the biological or adoptive parent (stepparents may be eligible in certain cases) of a dependent college student who is enrolled at least half-time at a qualifying institution.
Have a decent credit history or add an endorser (also known as a cosigner) to the loan.
Have not defaulted on previous federal loans.
Unlike some other forms of aid, you do not need to demonstrate financial need in order to be eligible for a Parent PLUS loan.
Determine How Much to Borrow
The maximum amount you can borrow in Parent PLUS loans is the total cost of attendance (COA) minus any financial aid received.
Example
Cost of Attendance
Financial Aid Received
Parent PLUS Loan Borrowing Limit
A
$35,000
$10,000
$25,000
B
$52,000
$17,000
$35,000
C
$27,650
$5,120
$22,530
The COA and borrowing limits are determined by your student’s institution. Contact the school’s financial aid office to address any questions that you may have on Parent PLUS loans, to determine your borrowing limit, and to clarify any application processes.
How Much Should You Really Borrow in Parent PLUS Loans?
A good rule of thumb when it comes to determining the amount of money you should borrow is to borrow the least amount of money possible to cover your child’s cost of attendance. The more you borrow, the more you will end up paying. Parent PLUS loans have relatively higher interest rates than most loans, and interest can capitalize very quickly.
Complete the Application
Most schools will require you to submit your Parent PLUS loan application through the Federal Student Aid website, though certain schools may have their own application processes. To begin the application, create your own Federal Student Aid (FSA) ID. Your FSA ID will be used to log in and out of your account.
Gather the following materials to complete the application:
Borrower Information
Student Information
Employment Information
Academic Information
Loan Details
Name
Social Security Number (SSN)
Date of Birth
Citizenship Status
Phone Number
Email Address
Mailing Address
Student’s Name
Social Security Number (SSN)
Date of Birth
Phone Number
Mailing Address
Employer Name
Employer Address
Employer Contact Information
The name of your student’s institution
Address of your student’s institution
School year that you want to pay for
Type of loan
Amount of money you intend to borrow
After submitting the application, an automatic credit check will incur. If you have a qualifying credit score, the page will refresh to a confirmation page. Then, the institution will review your application to determine your eligibility.
If you do not have a qualifying credit score, the Parent PLUS loan application will not go through. Fret not if this is the case for you – you can either add an endorser to the loan or complete the PLUS Credit Counseling module.
Sign the Master Promissory Note
If you are approved by your student’s institution for a Parent PLUS loan, the last step you will need to take is signing the Master Promissory Note (MPN). Keep in mind that you must sign into your personal FSA account and complete the MPN in one sitting.
The Master Promissory Note is a legal contract that outlines the repayment terms of the loan. By signing, you agree to repay your loan, including any accrued interest and fees. To complete the MPN, you’ll need to provide the same information from the Parent PLUS loan application, as well as the names and contact information of two references.
After signing, you’re done. The loans will be disbursed to your student’s institution in a few weeks.
Note: You can borrow additional federal loans of the same type without having to sign multiple MPNs — MPNs last up to 10 years.
FAQs About Applying for a Parent PLUS Loan
How long does it take to be approved for a Parent PLUS loan?
It may take several weeks for your Parent PLUS loan to be approved. Contact your student’s institution if you have not received any communication for an extended period of time.
What is the deadline to apply for a Parent PLUS loan?
The deadline for applying for a Parent PLUS loan is June 30th, when the FAFSA closes.
Why would a Parent PLUS loan be denied?
A Parent PLUS loan could be denied for the following reasons:
Adverse credit history
Recent bankruptcies
Debt delinquencies
Tax liens
Wage garnishment
Closing Thoughts From the Nest
Before applying for a Parent PLUS loan, be sure to explore all loan options so you can be confident a Parent PLUS loan is truly the best option for you. Oftentimes, private loans offer more competitive interest rates, which would save you money in the long run.
If you want an easy way to see all of the private loans you qualify for, consider submitting a free application with Sparrow today.
Americans have borrowed more than $136 billion from private student lenders. Private student loans are a popular option because they can help fill the monetary gaps that federal student loans and financial aid do not.
If you think borrowing private loans is the right option for you, keep reading. We’ll tell you everything that you need to know about how to apply for private student loans.
Make Sure Private Student Loans Are Right for You
Experts recommend that students exhaust federal financial aid options before borrowing private student loans. After all, private student loans do not come with the potential loan forgiveness, strong borrower protection, and varied repayment plans that federal loans offer.
If you haven’t taken advantage of all your federal options, consider exhausting these resources before resorting to private student loans.
However, if you are in the position where you need a private student loan, follow these five steps to apply:
Step 1: Figure Out How Much You Need to Borrow
Unlike federal loans, private loans generally do not have a hard “limit” in regards to how much you can borrow. With some lenders, you can borrow up to $500,000, depending on the degree type. Because of their high borrowing limits, these loans will usually cover your entire cost of attendance.
While you can borrow a significant amount, that doesn’t mean you should. Only borrow what you need, and try to minimize that amount before even considering private student loans.
Remember, the more you borrow, the more debt you will be in. And, given the way private student loans accrue interest, the amount you pay back will likely be much larger than the amount you borrow.
To determine how much you need to borrow in private loans, calculate the sum of the following:
Scholarships
Grants
Any out-of-pocket payments (whether made by you or your parents)
Federal loans
After adding up the total, subtract it from the total cost of attendance. This will give you a sense of how much you will need to borrow in private student loans.
Scholarships
Grants
Out-of-Pocket Payments
Federal Loans
Total
Cost of Attendance
Remaining Amount to Cover in Private Student Loans
$5,000
$3,000
$4,000
$6,500
$18,500
$22,000
$3,500
Step 2: Check Your Eligibility
Private student loans are distributed by private institutions like banks. Because each entity is separate, eligibility requirements for private loans will not be the same across the board.
However, there are general eligibility requirements that all borrowers will have to meet:
Be enrolled in a qualifying program. Private student loans are for students only, meaning you will have to be enrolled in an eligible university, trade school, college, etc.
Be a U.S. Citizen, permanent resident, or an eligible international student. Generally, private student loan lenders require you to have a Social Security Number and an eligible citizenship status. (If you are an international student, don’t worry. There are other options if you don’t have an SSN.)
Step 3: Complete the Sparrow Form
The Sparrow prequalification form allows you to receive personalized private loan offers from 15+ premier student loan lenders. The form takes just a few minutes and will ask you information such as:
Personal Information
Address
Loan Information
Financial Information
School Information
First and last name Email address Phone number Date of birth Citizenship status Social Security Number
Permanent address Mailing address
Amount needed When you need funds disbursed
Income Housing expenses
Name of school Degree(s) Grade level Expected graduation date
Step 4: Compare Loan Options
After submitting the Sparrow form, you’ll be able to see which private student loans you’re prequalified for. Then, it’s time to compare the loan offers side-by-side so you can select the best loan for you.
You’ll be able to compare aspects such as the interest rate, repayment term, and total cost of the loan(s). Make sure to consider the following:
Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is the yearly interest charged on the loan, including any additional fees like origination fees. The larger the annual percentage rate is, the more money you will have to pay. Therefore, it’s best to secure the lowest APR possible.
Interest Rate
An interest rate is the amount you will be charged to borrow the loan (not including any fees), expressed as a percentage of the principal amount you borrow. For example, if you borrow a loan of $20,000 with an interest rate of 12%, the interest that accumulates on the loan will be $2,400. Therefore, you will have to pay a grand total of $22,400. The larger the interest rate is, the more money you will have to pay. Therefore, Like APR, it’s best to secure the lowest interest rate possible.
Fixed vs. Variable Interest Rate
Fixed rates are set and will remain the same for the entirety of the loan. Variable rates, on the other hand, change based on the state of the economy.
Fixed rates tend to ease borrowers’ minds, given that you’ll never be subject to a higher interest rate, regardless of how the market changes. However, fixed rates can be higher than variable rates. While variable rates tend to be lower, they can be volatile depending on the market conditions.
Determine which you are more comfortable with, then opt for that type of interest rate.
Monthly Payment
Depending on the interest rate and repayment period you receive on each loan, your monthly payment may differ significantly. Therefore, compare the monthly payments you will have to make with each respective loan, and determine whether or not the amount will fit in your budget.
Repayment Terms
Repayment terms are basically the “contract” for private loans – it covers the interest rate of the loan, your specific repayment plan, any penalties you may be subject to, deferment and forbearance options, and more. Be sure to thoroughly understand each loan’s repayment terms so you know exactly what you are getting into.
Grace Period
A grace period is a period of time where borrowers do not have to make any student loan payments. Generally, borrowers have a grace period of six months after graduation. Determine if each student loan has a grace period, and gauge how useful it will be for your financial situation.
Cosigner Terms
Some private lenders may require you to have a cosigner to strengthen your credibility as a borrower. Think of it this way: lenders want to be confident you’ll return the money you borrowed safe and sound. So, if you don’t have a history of effectively managing debt (which is common for college-aged borrowers), you may need someone who does to cosign the loan alongside you.
Before accepting a loan offer and adding a cosigner, check if the lender offers the option for cosigner release. Some cosigners prefer to be released from loan after helping the borrower secure it, and without a cosigner release policy, they’ll be stuck with the loan until it’s paid off.
Forbearance
Forbearance is a period of time where you can stop making student loan payments due to financial hardship or other extenuating circumstances. Keep in mind that interest will still accrue during forbearance periods, however, it’s good to have as a back-up option if you need it.
Some private lenders offer forbearance options for borrowers, while others don’t. While you may never need to use it, it could be a safe option to have.
Total Cost
It’s important to calculate the total cost of the loan to see how much you’ll pay over time. This way, you can see how interest, fees, and other costs will affect the loan options, even when borrowing the same amount.
Lender Benefits
Some private lenders offer benefits like referral bonuses, free financial planning, airline miles, and other perks if you borrow with them. While lender benefits shouldn’t be the most important factor, they can be useful to consider when two loan options are virtually the same.
Step 5: Complete the Formal Application with the Lender You Choose
After identifying the private loan that best suits your needs, it’s time to submit a formal application with the lender.
Gather the following materials to make applying for the loan an easier process:
Social Security Number
Permanent address and/or school address
School enrollment information
Employment information
Financial information (monthly mortgage payments, income, auto payments, etc.)
Loan amount you are requesting, as well as information on financial aid
Closing Thoughts From the Nest
Searching for, choosing, and being approved for a private student loan can be a difficult and tedious process. However, Sparrow is here to help. Consider submitting a free application with us today to see which private student loans you qualify for.
Borrowing student loans is a common practice to afford educational expenses. That said, deciding which option is best can be a difficult decision to make. In the debate of student loan vs. parent loan, here’s what you should consider.
What to Consider Before Pursuing Loans
Before considering any loan, maximize all available financial aid. This includes scholarships, grants, and work-study. Both scholarships and grants are free aid, which means you won’t have to pay it back down the line. Work-study, on the other hand, is earned aid, meaning your child will have to work to receive the funds.
Only after exhausting all free and earned aid options should you consider borrowed money. When you do get to the point of considering loans, consider both a student loan and parent loan to determine which is better for you.
Student Loan vs. Parent Loan: What’s the Difference?
The main difference between a student loan and a parent loan is who borrows the loan. A student loan is borrowed by a student, while a parent loan is borrowed by a parent.
While parents can cosign a student loan, the student remains the primary borrower. This distinction determines who is ultimately responsible for the loan, at least on paper. Plus, for whoever’s name is on the loan, their credit score and history will be affected.
With that in mind, there are three main ways you can go about borrowing a loan:
Your student opens their (possibly) first line of credit and begins to build their credit score and history.
Your student could potentially receive unfavorable loan terms because they do not have a strong credit history (or a credit history at all), or they may not qualify for the loan at all.
Your student becomes financially responsible and builds financial skills necessary in the real world.
Your student takes on new outstanding debt, which could impact their credit score and chances of being able to buy a house or open new significant lines of credit in the future.
What is the Best Student Loan Option for my Child?
If your child decides to borrow a student loan, consider federal loan options first. Experts recommend maximizing federal aid options before pursuing private options due to federal benefits like flexible repayment options, potential loan forgiveness, and strong borrower protections.
Additionally, federal student loans tend to have lower interest rates than private student loans and don’t require credit checks for students. This often makes federal student loans more affordable and accessible than private student loans.
While private loans are a good option, federal options should be pursued first.
(Option Two) Student Borrows the Loan and You Cosign
Pros
Cons
Your student receives better loan terms because you, a creditworthy borrower, have cosigned the loan.
Cosigning a loan can increase your debt-to-income ratio, reducing your chances of opening new lines of credit.
Your student begins to build their credit score and history.
Any late or missed payments will negatively impact your credit history and the student’s credit history.
Your student becomes financially responsible and builds the financial skills necessary in the real world.
Should I Cosign for My Student’s Private Loan?
You should only cosign your child’s private loan if you are in a financial place to do so. As a cosigner, you are equally responsible for the loan. So, in the event that your child fails to make a payment, you’ll need to be able to make it.
Before you cosign your student’s private loan, be sure to read the fine print of the loan terms. Consider the following questions: Are there cosigner release terms? What will happen to the loan if you go bankrupt or default on it?
You receive more favorable loan terms because you have a stronger credit score and history than your student.
Your student is not building their credit score and history from managing outstanding debt.
You protect your student’s credit history from having outstanding amounts of debt, which can help them when applying to open lines of credit in the future.
You are 100% responsible for paying the student loan debt (on paper).
What Parent Loan Options Do I Have?
As a parent borrower, you have two loan options:
Federal Parent PLUS Loan The federal Parent PLUS loan is designed for parent borrowers. While a credit check is required to be eligible, you can add an endorser if necessary.
If you are a creditworthy borrower, you may find that the interest rate for the Parent PLUS loan is higher than what you qualify for with a private lender. In that case, a Parent PLUS loan may not be the better loan option.
Private Loan Private loans are offered by private companies like banks and credit unions. To qualify for a private loan, you will need a relatively strong credit score and history. Depending on your qualifications as a borrower, you may receive competitive loan terms.
Is It Better to Get a Student Loan or a Parent Loan?
Between student loans and parent loans, the option ultimately depends on your family’s financial situation and what works best for you and your student. Therefore, it is important to explore your loan options to find the best one on the market.
The most important thing about this process is making sure that looking for a loan is a collaborative process between you and your child. You will want to reinforce the importance of student borrowing and the responsibility that comes with loans from the onset so that your child learns important financial skills that will last them a lifetime.
Closing Thoughts From the Nest
While comparing a student vs a parent loans may be a tedious process, it is an important decision that will affect either you or your child’s finances for the foreseeable future. Perform due diligence and use the situation as a learning opportunity for your child. If you are looking for private student loans, consider exploring your options with Sparrow. If you submit a free application with Sparrow, you can compare what private loans you qualify for across 15+ different lenders.
Now that you’ve been accepted into college, it’s time to figure out how you are going to pay for your education. As you sift through your financial aid packages, it may be confusing to differentiate between the different types of financial aid you were offered.
In this article, we’ll cover everything you need to know about the different types of financial aid and how you should go about accepting your financial aid package.
The 4 Types of Financial Aid
There are four key types of financial aid: scholarships, grants, work-study, and loans.
Scholarships
Scholarships are a form of financial aid that is awarded based on academic merit or other achievements. They do not need to be paid back (yay!).
Scholarships are a popular form of financial aid. In fact, 58% of families paid for some amount of their college tuition with scholarships in 2020.
Scholarships come in all shapes and sizes. Depending on the organization that is offering the scholarship, scholarships can range from $100 to the entirety of your four-year tuition.
Usually, you have to apply for scholarships by providing general information about yourself, writing an essay to a prompt, and demonstrating why you are the best candidate for the scholarship. However, there are also scholarships that you can apply to with a single click of a button or through other creative means.
Where Do Scholarships Come From?
Scholarships come from a variety of sources, including state governments, private organizations, non-profit organizations, academic institutions, and more.
What Can I Use Scholarships For?
This depends on the type of scholarship you receive. Some scholarships require students to use the money on specific expenses, such as textbooks and school supplies, tuition, or university housing costs. Other scholarships are more flexible and allow the student to use the money on an educational expense they deem fit.
How Do I Find Scholarships?
There are a variety of ways you can find and apply for scholarships. You can:
Reach out to your high school and/or college’s financial aid office and ask for assistance in finding scholarships.
Find organizations that specialize in your academic field of study. For example, if you are on a pre-dental track, find dental organizations and see if they offer any scholarships.
Grants
Like scholarships, grants do not need to be paid back. However, grants are only issued based on financial need, meaning you must meet a specified financial threshold to be an eligible recipient.
Most likely, federal grants, which are offered by the federal government, will be applied to your financial aid package. Non-federal grants are very similar in nature to scholarships, so this article will focus on the different types of federal grants.
Work-study is a federal program that allows undergraduate and graduate students to work on-campus and earn money to pay for their educational expenses. Any money earned from the federal work-study program does not need to be paid back or used towards tuition – the student can use the money how they deem fit.
Who Is Eligible for Work-Study?
To be eligible for work-study, you must meet the following requirements:
You must be enrolled as a full-time student at an accredited university.
There are two main types of loans: federal student loans and private student loans. Because loans are borrowed money, they must be paid back with interest.
Accepting loans is a large responsibility – you’ll want to know exactly what you are getting into before you take on any debt.
Federal Student Loans
Federal loans are a type of loan that is offered by the federal government. Generally, federal student loans are the best option for student borrowers because of their varied repayment plans, strong borrower protection, flexible eligibility requirements, and potential for federal loan forgiveness.
All federal student loans have a fixed interest ratethat is set by Congress, meaning the interest rate you receive when you originate the loan will remain the same throughout the life of the loan.
Offered to undergraduate and graduate students with no financial requirements.
Only offered to undergraduates who demonstrate financial need.
Accrue interest during the entire life of the loan, whether it is during the school year, grace period, or any deferment period.
Do not accrue interest if the student is enrolled at least half-time during the school period, during the grace period (six months after you graduate), and during any period of loan deferment.
Between unsubsidized and subsidized loans, subsidized loans are clearly the winner. However, you cannot pick and choose between these loans – you must meet a financial requirement to be eligible for subsidized loans.
Private Student Loans
Private student loans are offered by private entities like banks, financial institutions, and other private companies. Private student loan lenders are autonomous, meaning they set interest rates, repayment plans, and borrower protections as they please.
If you are a first-time borrower, it may be difficult to receive a private student loan that has a fair interest rate, or even receive a private student loan at all. You will most likely need to add a cosigner that has a strong credit history to your loan to receive better terms.
Generally, experts recommend that you accept federal loans before private loans because federal loans tend to have better interest rates, repayment terms, and borrower protection plans for the borrower.
Accept Financial Aid in This Order
If there is one thing to take away from this article, it is FEB — Free, Earned, Borrowed.
You’ll want to accept financial aid in this order, starting with any free money, then earned money, and then borrowed money. Accepting aid this way will help you minimize the amount of debt you incur.
Free Money: Scholarships and Grants
Scholarships and grants are essentially free money. They do not need to be paid back, so feel free to take as much as you can get. Any federal grants that you are eligible for will show up on your financial aid package, so you can accept them through your account portal.
On the other hand, you will have to apply for a majority of scholarships, so be sure to do that.
Earned Money: Work-Study
Next, you’ll want to accept any work-study that is offered on your financial aid award. While work-study money is earned and is not free, work-study still lowers the amount of money that you will need to borrow.
Borrowed Money
Borrowing money is a large responsibility, given that the amount you owe can spike immensely with interest accrual. You’ll want to accept any borrowed money in the following order so that you can graduate with the least amount of debt.
#1: Federal Subsidized Loans
Federal subsidized loans do not accrue any interest while you are enrolled at least half-time in school, during your grace period, as well as during loan deferment periods. Because interest does not capitalize on these loans, federal subsidized loans will be your cheapest loan option.
#2: Federal Unsubsidized Loans
Federal unsubsidized loans accrue interest for the entire life of the loan. However, because the loans are offered by the federal government, they come with a myriad of repayment options, borrower protection plans, potential loan forgiveness, and deferment plans.
#3: Private Student Loans
Private student loans should be accepted last. While you may be able to receive a more competitive interest rate if borrowing with a cosigner, private student loans have more limited repayment options and are not eligible for loan forgiveness.
Closing Thoughts From the Nest
As you navigate through your financial aid packages, remember to accept your financial aid in the following order: FEB (Free, Earned, Borrowed). It is a helpful guide for accepting financial aid to take on the least amount of debt possible.
If you are still exploring private student loan options, consider using Sparrow. We offer a quick, free application that allows you to see which student loans you qualify for across 15+ private lenders.
Borrowing federal student loans is a popular, oftentimes necessary practice to finance the cost of college. In 2022, 43.4 million borrowers carried federal student loans.
Applying for federal student loans is fairly simple – all you need to do is submit the Free Application for Federal Student Aid, and the U.S. Department of Education determines which federal student loans you qualify for. You only need to submit an individual application outside of the FAFSA if you are applying for federal PLUS loans, which are for parents and graduate students.
In this article, we’ll cover everything you need to know about applying for and accepting federal student loans. Let’s dive into it.
Collect Necessary Paperwork
First off, you’ll need to collect the necessary paperwork to fill out your FAFSA. If you are submitting your application as a dependent, you will need your parents’ financial documents.
Your Social Security Number (never go off memory!)
Your parent(s)’ Social Security Numbers
Tax Information (ie. Tax Returns, IRS W-2 Parent(s) tax information)
Family income
Records of untaxed income. This includes items such as child support and/or Veteran benefits. (Gather only what applies to you.)
Information on any financial assets your parents have. This includes items such as cash in your checking and/or savings account, investments like stocks and bonds, business assets, mortgages. (Gather only what applies to you.)
Fill out the FAFSA
It is strongly encouraged that you submit your FAFSA as close as you can to the application opening date, which is October 1st. Some financial aid is distributed on a first-come, first-served basis, so submitting the FAFSA as soon as possible will increase your chances of receiving more aid.
If you are a first-time applicant, you will need to make an account on the Federal Student Aidwebsite. If you are a returning applicant, log into your account.
It can take anywhere from 45 minutes to 1 hour to fill out the FAFSA if you have all the necessary materials on hand. Try not to rush through the application, as the information needs to be accurate. Fixing your mistakes now will be a lot easier than having to remedy them after submission.
Double Check Your Student Aid Report
After submitting the FAFSA, you will receive your Student Aid Report (SAR). Your SAR will have all of the information you submitted in your FAFSA, as well as your Expected Family Contribution (EFC). The EFC is how much you and your family are expected to pay out of pocket.
You will receive your SAR after two weeks of submitting your FAFSA. After receiving your SAR, double-check that all the information you submitted is correct.
Review Your Financial Aid Letter
Soon after, you will begin to receive financial aid letters from the schools you were accepted into — typically around March or April. These letters will detail how much financial aid you are receiving and whether it is work-study, federal loans, grants, etc. This will give you a solid idea of how much you’ll need to pay out of pocket.
Compare your financial aid letters to see which institution is offering the best financial aid package. You can do so by creating a table to organize your offers:
School Name
Cost of Attendance
Free Money (Grants and scholarships)
Borrowed Money (Loans)
Net Cost
Duke University
$80,000
$30,000
$20,000
$50,000
Cornell University
$65,000
$50,000
$10,000
$15,000
Keep in mind that most institutions will not meet 100% of the student’s demonstrated financial need, meaning you will most likely have to pay out of pocket or take out student loans. Compare your financial aid awards to see which one is more suitable to your needs as a student.
Accept Your Loans
You’ll want to accept financial aid in this order: Free, Earned, and Borrowed (FEB).
After accepting all of your free and earned financial aid (grants, scholarships, work-study), it’s time to accept your federal student loans.
You will want to accept your federal loans in this order:
Subsidized loans
Unsubsidized loans
Subsidized loans don’t accrue any interest if you are enrolled at least half-time in school, during your grace period, and during any deferment periods. Interest will only begin accruing once your repayment begins, saving you significant amounts of money. Unsubsidized loans, on the other hand, do accrue interest from the first disbursement of the loan. This means that interest will accrue during your academic enrollment, grace period, and any deferment periods.
Because we want to be in debt for the least amount of money possible, accept your subsidized federal loans first.
Note: To be eligible for subsidized federal loans, you must demonstrate financial need and meet the income requirements.
Closing Thoughts From the Nest
Be sure to get your FAFSA in as soon as the application opens on October 1st. This will increase your chances of maximizing the amount of federal aid that you will receive.
If you’ve already received your federal student loans and find that it doesn’t quite fill the financial gaps in your tuition, consider borrowing private student loans.
Sparrow can help you compare private student loans that you qualify for across 15+ private lenders. Consider submitting a free application with us today.
On August 24th, President Joe Biden announced his comprehensive student loan relief plan, complete with up to $20,000 in student loan forgiveness per eligible borrower.
Now, as the application is nearing its release, it’s time to prepare. Here’s what you should do before the application comes out to make sure you’re ready.
Stay Updated on Any Changes
Details regarding student loan forgiveness are changing frequently. To ensure you’re up-to-date with the latest information, subscribe to the Department of Education’s email updates.
If and when information changes, you’ll receive an automated email complete with everything you need to know. (Don’t worry. You can pick exactly which newsletters you want to subscribe to, so your inbox won’t wind up packed with emails you don’t care about.)
Prepare Necessary Documentation
When the student loan forgiveness application is released, thousands of borrowers will flock to the site. While the Department of Education has been preparing for this exact moment, there’s a good chance the massive uptick in traffic will cause the site to get overloaded and even crash.
If you’re halfway through your application and the site goes down, you’ll likely lose your progress and need to restart when it comes back up. So, instead of memorizing certain details then having to recall them later, compile the documents you’ll need and have them at-the-ready, right in front of you.
It’s best to also have scanned copies of these documents in case you need to upload them.
Start Saving for a Potential Tax
While the amount forgiven isn’t taxable at the federal level, it may be taxed at the state level depending on where you live. Based on current information, Arkansas, Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin are expected to apply a state income tax to student loan forgiveness.
That said, several states have made an alteration to their tax rules, making discharged debt temporarily exempt from state income tax. So, there is a chance the above states follow suit.
While it’s unclear just how much you could be taxed, experts have estimated anywhere from a couple hundred to a couple thousand dollars. Due to how wide that range is, it’s important to start preparing for a potential tax as soon as you can.
Commit to sending a chunk of money to savings each time you’re paid. That way, covering the payment come tax time won’t be as much of a burden.
States Expected to Tax Student Loan Forgiveness
States Expected to Not Tax Student Loan Forgiveness
States Without Income Tax (thus, no tax on student loan forgiveness)
Arkansas Indiana Minnesota Mississippi North Carolina Wisconsin
Alabama Arizona California Colorado Connecticut Delaware Georgia Hawaii Idaho Illinois Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Missouri Montana Nebraska New Jersey New Mexico New York North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Utah Virginia Vermont West Virginia
Alaska Florida Nevada South Dakota Tennessee Texas Washington Wyoming
New Hampshire does not tax earned wages, so student loan debt forgiveness likely won’t be taxed.
Remember Other Aspects of Biden’s Relief Plan
The focus of President Biden’s student loan relief plan has been on forgiveness, but there are other parts to be aware of, such as the end of the forbearance period.
Forbearance Ending
If forgiveness won’t be wiping out your entire balance, you’ll need to prepare for payments to restart on January 1st, 2023 when the forbearance ends.
To estimate your monthly payment amount, log into your loan servicer’s account. In some accounts, there is an option to view your projected monthly payment for each individual loan. While the number will likely drop due to a portion of your balance being forgiven, it’ll give you a solid estimate for what to expect once the forbearance ends.
This is a good time to look at your budget and make adjustments to your spending to accommodate a loan payment.
Sign Up for AutoPay
It’s been quite a while since borrowers have been required to make payments on their federal student loans. If you’re worried that the change of pace may cause you to miss a payment once the forbearance ends, now is a good time to opt in to autopay. This will automatically withdraw your payments from your account each month, so you never miss a payment.
Make Sure Your Contact Information is Updated
If you’ve recently moved or changed email addresses, log into your account and ensure the contact information is updated. Important information regarding your loans, the forgiveness application, and changes to the program will be sent to the information on file. If the information isn’t current, you could miss out on key details.
Look at Other Forgiveness Opportunities
If you don’t qualify for President Biden’s student loan relief, don’t fret. There are other programs you may be eligible for:
Public Service Loan Forgiveness
Also known as PSLF, this program eases the burden of federal student loan debt for eligible public service workers. If you work in a qualifying role, such as a teacher or law enforcement officer, you may qualify to have your entire loan balance forgiven.
Teacher Loan Forgiveness
If you are a highly-qualified teacher with federal student loan debt, this program is for you. To qualify, you must have taught at a low-income school or educational service agency for at least five consecutive school years.
Nurse Corps Loan Repayment
If you’re a nurse working in a critical shortage facility, you may be eligible to have up to 85% of your nursing school debt forgiven.
Income-Driven Repayment Forgiveness
After making qualifying payments on an IDR plan for 20-25 years, your entire remaining balance can be forgiven. While this option requires a lengthy commitment to receive relief, it is a great option for those committed to remaining on an IDR plan for that length of time.
Beware of Student Loan Forgiveness Scams
While student loan scams aren’t new, they’re increasing in number since the Biden Administration’s plan was announced. To prevent falling prey to a scam, here are a few red flags to look out for:
Language that suggests urgency. You will never be asked to decide quickly when it comes to student loan forgiveness. Plus, most student loan forgiveness programs will require you to have made a certain number of payments. That requires preparation and, therefore, can’t be a decision made in a moment’s notice.
Saying the program ends soon. Federal student loan forgiveness programs have been running, and will continue to run, for many years to come.
Promising immediate loan forgiveness. Loan forgiveness programs all have a variety of criteria you need to meet. Plus, you’ll usually need to apply to even be considered. So, in any case, your loans won’t automatically be forgiven.
Asking for your FSA ID or password. Neither the Department of Educationnor a Federal Student Aid representative will ask for your personal information over the phone.
Requesting a fee to discharge your debt. Legitimate student loan forgiveness programs do not require a fee to participate.
Remember, scammers are smart. Some may even utilize telemarketing services that place their location at Washington, DC to make the call look more reputable. Be wary of any call you receive in relation to student loan forgiveness. Always contact your loan servicer directly if you’re unsure whether something is real or a scam.
Final Thoughts from the Nest
As the application release date approaches, it’s important to start preparing. Make sure to gather all necessary documentation, ensure your contact information is up-to-date, and prepare for the potential loan forgiveness tax.
President Biden’s student loan forgiveness will relieve federal student loan debt for qualifying borrowers. Now, it’s just a matter of figuring out which loans are eligible for cancellation and when student loan forgiveness will materialize on borrowers’ accounts.
While detailed information about student loan forgiveness is yet to be released, here’s what we know about when your loan amounts will be wiped out.
Who Qualifies for President Biden’s Student Loan Forgiveness?
Federal student loan borrowers who make less than $125,000, or $250,000 as a married couple, are eligible for President Biden’s student loan forgiveness.
Pell Grant recipients qualify for $20,000 in loan forgiveness, while non-Pell Grant recipients qualify for $10,000. Loan cancellation will be capped at the borrower’s amount of outstanding debt.
Only federal loans that were suspended from the COVID-19 forbearance in March 2020 qualify for student loan forgiveness. The following loans are eligible for student loan forgiveness:
Direct Loans
FFEL Loans held by the federal government
Perkins loans held by the federal government
Direct, FFEL, Perkins, and HEALs loans in default
To determine whether your loans qualify for student loan forgiveness, log in to your Federal Student Aid account and look for the ‘My Loan Servicers’ tab. If the loan servicer’s name is ‘DEPT OF ED’, the loan is held by the federal government and qualifies for student loan forgiveness.
For borrowers who have commercially held federal student loans, fret not. According to a White House spokesperson, the Education Department “will work with private lenders to ensure that commercially held federal student loan borrowers can also benefit from relief, including privately held FFEL loans, Perkins, and Health Education Assistance Loans that are consolidated into the Direct Loan program.”
(Commercially held federal loans are loans that were issued by private lenders, but were guaranteed by the federal government.)
If you do not meet the income requirements, are not a federal student loan borrower, or do not have an eligible federal loan, you will not qualify for student loan forgiveness. However, there are still other options that you can consider for student loan debt relief.
Which Year’s Income Will Be Used to Evaluate Eligibility?
According to a White House official, your income for either the tax year of 2020 or 2021 must meet the income requirements to receive federal student loan forgiveness. The Department of Education has not yet released information about how to provide proof of or submit any income documentation.
How Long Will it Take to Receive Forgiveness?
The timeline for receiving your student loan forgiveness depends on the borrower information that the U.S. Department of Education has on file.
If Your Income is Already on File
According to the Federal Student Aid (FSA), around 8 million borrowers will receive their loan forgiveness automatically because their income is already on file.
For example, the U.S. Department of Education already has the income data of federal borrowers with income-driven repayment plans. Therefore, these individuals are most likely to receive their loan forgiveness automatically.
If Your Income is Not On File
For federal borrowers whose income is not on file, the Department of Education will release an application in early October to be filled out and submitted. To be notified when the application is open, subscribe to the Department’s email list.
The deadline for this application is December 31st, 2022, however, you should fill it out as soon as you can after it’s released. In fact, experts advise borrowers to fill out and submit the application before November 15th to receive their student loan forgiveness before the COVID-19 payment pause ends on December 31st, 2022.
Full Application Timeline
Early October → Student loan forgiveness application is released.
11/15/2022 → Submit student loan forgiveness application before this date.
12/31/2022 → Application is due. COVID-19 forbearance ends.
FAQ About Student Loan Forgiveness
Will Loans Be Forgiven Before the Payment Pause is Over?
Borrowers are strongly encouraged to submit their student loan forgiveness application before November 15th, 2022 to have their debt canceled before the payment pause ends on December 31st, 2022. If your application is not submitted prior to November 15th, there is a higher chance that your student loan amount will not be forgiven before the end of the forbearance.
Will the Student Loan Forbearance Be Extended Again?
According to the Biden Administration, the student loan forbearancewill not be extended again. This is the final extension, and the payment pause will end on December 31st, 2022.
Will More Student Debt Be Forgiven?
Currently, there is no evidence that President Biden will forgive more student loan debt than what is already outlined.
Closing Thoughts From the Nest
President Biden’s student loan forgiveness is a win for federal borrowers. As the prospect of having your student loan debt wiped out approaches, it is crucial to stay on top of the news and follow every update that the federal government releases.
Under President Biden’s latest student loan relief actions, millions of borrowers can receive a refund of any student loan payments made since the forbearance.
In fact, according to Federal Student Aid (FSA), “[borrowers] can get a refund for any payment (including auto-debit payments) you make during the payment pause (beginning March 13, 2020).”
Now, many federal student loan borrowers are requesting refunds for their payments to maximize their student loan forgiveness eligibility. If you are a borrower who is unsure of whether you qualify for a student loan refund, or if requesting a refund is the right decision for you, keep reading.
Who Can Get a Refund?
Whether you qualify for a refund of student loan payments depends on the loan type you have. Here is a list of which loans do qualify, and which loans don’t.
Loans that Qualify for a Refund
Loans that Do Not Qualify for a Refund
Direct Subsidized Loans
Non-Defaulted FFEL Loans Not Held By The U.S. Department Of Education
Direct Unsubsidized Loans
Federal Perkins Loan Not Held By The U.S. Department Of Education
Parent Plus Loans
Non-Defaulted HEAL Loans
Grad Plus Loans
Private Student Loans
Direct Consolidation Loans
Federal Perkins Loans Held By The U.S. Department Of Education
Federal Family Education Loans (FFELs) Held By The U.S. Department Of Education
Defaulted FFEL Loans Not Held By The U.S. Department Of Education
Defaulted Health Education Assistance Loans (HEAL) Loans
Should You Apply for a Refund?
Whether you should apply for a loan refund depends on your financial situation.
Recently, President Biden released his three-part student loan forgiveness plan that will cancel up to $20k for federal student loan borrowers who make less than $125,000 annually. If you have received a Pell Grant in the past, you are eligible for $20k in debt cancellation. Individuals who have not received a Pell Grant are eligible for $10k in debt cancellation.
Apply for a Refund If…
You are eligible for Biden’s loan forgiveness and you have paid down your debt to an amount less than how much you qualify for in loan forgiveness.
For example, let’s say you are eligible for $10,000 in student loan cancellation. You paid down your balance to $9,000 during the COVID-19 payment suspension. If you request a refund, you will receive $1,000, bringing your balance back up to $10,000. Then, your balance of $10,000 will be wiped out with loan forgiveness.
You are not eligible for Biden’s loan forgiveness.
If you do not qualify for loan forgiveness, you will not benefit from requesting a refund.
You have not paid your debt down to be below the amount of loan forgiveness you qualify for.
If you do qualify for loan forgiveness, but have not paid your loan balance down to be lower than the amount you can have forgiven, you will also not benefit from requesting a refund.
For example, if your initial balance was $30,000 and you paid $5,000 during the forbearance, you will have a remaining balance of $25,000. Regardless of the amount of forgiveness you qualify for, neither will bring your balance to 0. In this case, requesting a refund of the $5,000 you already paid would not make sense.
Note: The Department of Education has yet to release more information about Biden’s student loan forgiveness. Until then, it is uncertain whether a student loan refund could impact your eligibility for student loan forgiveness. In fact, some experts have advised waiting until more information is released, as a refund may impact how much you are able to receive in forgiveness.
It may be wise to wait until additional information is provided before requesting a refund on your student loan payments, especially if you want to benefit from student loan forgiveness.
How to Apply for A Refund
To apply for a refund, you will need the following information:
The contact information for your loan servicer
Your Social Security Number
A list with the number of payments you’ve made since forbearance, the date the payment was processed, and the amount you paid
Your billing address
Bank information
First, you’ll want to call your loan servicer. Once you’re in contact with a representative, ask for a loan refund for payments made during the forbearance.
Specify which loans you want a refund for, and be ready to share any information on your loan payments if necessary. Your loan provider may ask you for your billing address, social security number, and banking information.
While you are on the line, be sure to ask your loan servicer about the estimated timeline for when you will receive a refund on your loans. After providing them with the requested information, you should be good to go. Your loan servicer will send a confirmation email that validates your loan refund request.
How Long Will It Take for the Refund to be Issued?
The loan refund can take anywhere from six to twelve weeks to be processed. Check your loan statements proactively to track the status of your loan refund.
If 12 weeks have passed since you have requested your refund and you have not heard back, contact your loan servicer to follow up.
What to Use the Refund For
Once you’re confident that requesting a refund for student loan payments is a financially beneficial decision for you, consider using the extra cash to better your financial situation in another way.
Pay off High-Interest Debt
Use the extra cash to pay off any high-interest debt you have, such as auto loans, private student loans, your mortgage, or any other form of debt.
To prevent interest from accruing rapidly, put your extra cash towards the principal of the loan (the principal of the loan is the initial amount borrowed, not including the interest that accrued) – especially if your interest rate is in the double digits.
Contribute to Emergency Fund
Over 50% of Americans can’t cover a $1,000 emergency charge with the amount in their savings account.
To be financially prepared in the face of an emergency, add the refunded money into your savings account. If you don’t have a savings account or are looking for a new place to store your money, consider opening a high-yield savings account(HYSA). A high-yield saving account allows you to earn interest on the amount of money that you have in your account without doing anything.
Pay Off Your Overdue Bills
If you have any payments or bills you need to catch up on, now is the time. Use the extra money to relieve your financial debts and cancel any overdue fees.
Closing Thoughts From the Nest
Requesting a refund of student loan payments made since the COVID-19 forbearance is a win for many borrowers, especially in combination with student loan forgiveness.
However, it’s important to note that President Biden’s student loan forgiveness plan is being updated regularly. Experts do not have all the answers yet, and staying up-to-date on any changes that may affect you as a borrower is crucial.
You can subscribe to the Department of Education’s mailing list to receive email updates on any new changes on student loan forgiveness.
On August 24, President Joe Biden announced broad student loan relief actions, forgiving up to $20,000 in federal student loan debt for eligible borrowers. While the much-needed relief has been celebrated by many, it’s left others —especially married couples— somewhat in the dark. Here’s what married couples need to know about student loan forgiveness:
To qualify, there are a variety of eligibility criteria you’ll need to meet, including earning below a specific income limit. However, if you are married and filed taxes jointly, you’ll be subject to different income criteria, which could leave you ineligible for forgiveness. Learn more about the student loan eligibility requirements for married couples:
Eligibility Criteria for Biden’s Student Loan Forgiveness Plan
To qualify for Biden’s student loan relief, you’ll need to meet the following requirements:
(1) You must have federal student loans disbursed on or before June 30, 2022.
Most federal student loans qualify, such as Direct Loans and Parent PLUS Loans. It is currently unclear whether Federal Family Education Loans (FFEL) will qualify.
(2) You must make less than $125,000 per year, if single. Couples who file taxes jointly must earn less than $250,000 per year, combined.
Heads of households who earn less than $250,000 per year are also eligible.
If you meet the above criteria, but did not receive a Pell Grant while in school, you are eligible for $10,000 in student loan forgiveness. If you did receive a Pell Grant, you are eligible for $20,000 in student loan forgiveness.
What Biden’s Student Loan Forgiveness Means for Married Couples
If you and your spouse filed taxes jointly, you’ll need to have made less than $250,000 combined to qualify for student loan forgiveness. If your combined income was above that threshold, neither of you will be eligible.
Your 2020 and 2021 tax returns will be used as proof of income. If you filed jointly in either of those years, and your combined income was above the threshold, you may not be eligible.
However, if you are married but did not file jointly in 2020 or 2021, your eligibility for relief will be evaluated based on your income alone.
Will Both Spouses Be Eligible?
If you filed jointly, both spouses will be eligible in cases where your combined income is less than $250,000 per year. If you are married, but did not file jointly, both spouses will be eligible in cases where your individual income is less than $125,000 per year.
Common Scenarios
Here are a few scenarios to illustrate how this will work:
Scenario 1:
Sarah and John are married and filed a joint tax return in 2021. Together, they make a combined income of $300,000. John earns $200,000 per year, and Sarah earns $100,000 per year. Sarah has federal student loan debt, while John does not.
While Sarah makes below the $125,000 individual income threshold, their combined income makes Sarah ineligible for student loan forgiveness.
Scenario 2:
Kate and Jane are married and filed taxes jointly in 2021. Together, they make a combined income of $280,000. Kate brings in $110,000 per year, while Jane brings in $170,000 per year. Both Kate and Jane have federal student loan debt.
While Kate is below the individual income threshold, because they filed jointly, Kate is ineligible for student loan forgiveness.
Scenario 3:
Luke and Miranda are married and filed taxes jointly in 2020. Together, they earn $80,000 total, with Luke bringing in $35,000 and Miranda bringing in $45,000. Both Luke and Miranda have federal student loan debt.
Because their combined income is below the income threshold for married couples, both Luke and Miranda are eligible for student loan forgiveness.
Scenario 4:
Bryce and Joe are married but did not file a joint return in 2020 or 2021. Bryce earns $110,000 per year, and Joe earns $127,000 per year. Both have federal student loan debt, however, only Bryce is eligible for student loan forgiveness as Joe’s income is above the individual income threshold.
Can I File Separately to Be Eligible for Forgiveness?
Unfortunately, you cannot retroactively file separately after filing jointly. While you can amend prior tax returns to change from married filing separate to married filing joint, you cannot do the opposite.
So, in this case, if you previously filed taxes jointly, you cannot change it. This may include instances of divorce, where you previously filed jointly in 2020 or 2021 with a now ex-spouse. However, it’s best to contact Federal Student Aid representatives directly for more information, as divorce is a special circumstance.
How to Prepare for Biden’s Student Loan Forgiveness
While the application for student loan relief has not yet been released, you can begin the process by collecting the documentation you’ll need to apply, such as:
Proof of income, such as previous tax returns;
Accurate address information;
And, loan records.
You may also want to take a screenshot of your current federal loan balance prior to forgiveness. Then, after the forgiveness is said to have taken place, you can verify the amount to ensure the proper portion was forgiven.
What to Do If You Don’t Qualify for Biden’s Student Loan Relief
While President Biden’s plan, particularly the income level requirements, are intended to help families most in need of relief, it can be frustrating if you don’t qualify.
If the income requirements for married couples leaves you ineligible for student loan forgiveness, there are a few other relief options to consider:
If managing multiple loan payments is challenging, consolidating may help you. Direct Consolidation loans allow you to combine multiple federal loans into one, leading to one interest rate and one payment, as opposed to several. While only available for federal student loans, consolidation can simplify your payments.
Due to the unprecedented nature of Biden’s sweeping student loan relief, many details are still unclear, particularly as it pertains to married couples. However, in leading up to the application release, more information is sure to arrive.
To receive updates on any changes to the program, sign up for the U.S. Department of Education’s email updates.
As an adult, your credit score matters quite a bit. Whether you’re seeking approval for an apartment, a mortgage, or a car loan, your credit score will be utilized in various important life stages. If your student loans seem to be bringing down your score, you may be wondering how to remove student loans from your credit report. Unfortunately, you can’t remove accurate information from your credit report — legally, of course.
That said, there are a few things you can do to remove student loans from your credit report if inaccurate information is present.
Dispute Inaccurate Information
While you can’t remove accurate information from your credit report, you can dispute inaccurate information. For example, if you find one of the following on your credit report, you should dispute it:
A late payment you didn’t incur
A loan that isn’t yours
Inaccurate default status
A loan inaccurately listed in forbearance or deferment
A loan account marked as open that is actually closed
To dispute it, contact your student loan servicer as soon as possible. While there may be a phone number listed online, we recommend filing your dispute in writing. That way, you have the entire interaction documented should the process be inefficient or ineffective.
How to Write Your Dispute Letter
When crafting your dispute letter, ensure you have the following:
Your student loan reference number
Contact information (ie. your phone number and email address)
An in-depth explanation of the issue
Documentation of the issue (ie. proof of the error in a credit report from one of the three major credit bureaus — Experian, TransUnion, or Equifax)
Documentation of the accurate information (ie. proof of on-time payments)
If you are still in school and aren’t required to make loan payments, yet your credit report shows late or missed payments, you may need proof of enrollment to have the information removed from your report. Contact your school’s registrar’s office for proper documentation.
If you find that your lender or loan servicer is uncooperative, you may need to follow up multiple times to get things moving. If you’re still struggling to reach them, file the dispute online with the credit bureau directly.
How Long Will it Take for the Error to Be Fixed?
Typically, it takes around thirty days to investigate a dispute and report findings. However, there are two main reasons the process can take longer: insufficient information was provided or inefficiency of the lender or loan servicer involved.
If you fail to provide sufficient information on the first go-round, the investigating agency may need to reach back out to you to ask for more information. You can avoid this by providing in-depth descriptions of the issue and proper documentation upfront in your initial dispute letter.
If you opt to dispute via the credit bureau, they’ll need to contact your lender or loan servicer to investigate further. If they don’t respond in a timely manner, it could extend the length of the process. This is one reason why disputing the error yourself with the lender or loan servicer directly can be more efficient.
Regardless of how you choose to file the dispute, don’t be afraid to follow up with each party involved throughout the process. Sometimes, a gentle nudge to move the dispute forward can speed it up quite a bit.
Pay Your Loans Off
A student loan is a line of credit. When you close a line of credit, the credit history associated with it goes out the window, too. So, when you pay off your student loans, they will no longer be on your credit report.
While this method isn’t the simplest nor quickest solution, implementing a more effective debt payoff strategy may help you get to it faster.
For example, refinancing your student loans can help you pay off your debt faster. Refinancing means replacing your current student loan(s) with a new loan with a lower interest rate. When you refinance more than one student loan, you can also consolidate them into one loan, meaning one monthly payment.
Here is a list of some of the best refinance rates for student loans:
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Like paying off your student loans, being granted student loan forgiveness closes out your loan account. So, if you have any late or missed payments associated with the account, it’ll be wiped from your credit report once the debt is forgiven.
That said, student loan forgiveness is only an option if you have federal student loans. However, depending on the type of federal student loans you have, you may need to pursue a consolidation loan first to be eligible for forgiveness. Private student loans, on the other hand, are ineligible for student loan forgiveness programs.
How Long Do Student Loans Stay on Your Credit Report?
Late student loan payments will remain on your credit report for seven years. If the loan goes into default as a result, however, the timer won’t go back to zero. The seven year period will be based on the date of the first missed payment, not the last.
Beware of Credit Repair Scams
You may see advertisements, messages, and emails from individuals or services claiming to have the power to fix your credit score. However, the vast majority of these are scams.
Some red flags to look out for include:
Asking you to pay before providing the service. Under the federal Credit Repair Organization Act, it is illegal for credit repair companies to charge you until they’ve provided the services they’ve promised.
Saying they can remove any information, including accurate information from your credit report. You cannot remove accurate information from your credit report.
Using salesy language such as “urgent” or “guaranteed.” Even with a reliable credit repair company, there is no guarantee the error disputed will be resolved.
Refusing to explain your rights. Under the Fair Credit Reporting Act, it is your legal right to dispute credit report errors on your own, free of charge. While you can utilize a credit repair service, you don’t need to hire someone to handle it for you. If an organization says only they can take care of a dispute, do not work with them.
Applying pressure to make a decision about using the service. When you choose to file the dispute is up to you. There is no timeline in which you need to make the decision.
Telling you not to contact credit card companies, lenders, loan servicers, or credit reporting agencies. It is within your right to contact any of these entities with questions regarding your credit.
Do not share any personal information regarding your student loans or your credit with anyone unless you are certain they belong to a reputable credit repair company.
Final Thoughts From the Nest
While you can’t remove just any information from your credit report, you can dispute inaccuracies associated with your student loans. Oftentimes, these mistakes are simply oversights or glitches in the system and can be promptly corrected once your lender or loan servicer is made aware.
If you aren’t sure whether something on your credit report is in fact an error, reach out to your lender or loan servicer anyways. It can’t hurt to inquire and file a dispute, but it could potentially save your score.
President Biden’s recent student loan forgiveness actions are a win for many borrowers. However, as the relief gets closer, many are left wondering whether the discharged debt will be considered taxable income.
This isn’t a new concept. In fact, discharged indebtedness has been classified as taxable income for years. However, the unprecedented nature of broad loan forgiveness may warrant some exceptions to the rules.
If you’re left asking, “Is student loan forgiveness taxable?,” here’s what we know so far.
Will The Student Loan Forgiveness Be Taxed?
Section 9675 of the American Rescue Plan states that student loan forgiveness granted between 2021 and 2025 will not be considered taxable income at the federal level. However, it may be subject to state income tax depending on which state you live in.
States that mirror federal income tax guidelines will likely exclude student debt forgiveness from state income tax. However, other states may maintain their current tax code, making debt forgiveness taxable.
Which States Will Tax the Student Loan Forgiveness?
In the last few weeks, several states have instituted a temporary exemption in their tax rules for discharged debt. Given that other states may follow suit, it isn’t entirely clear which states will ultimately tax student loan forgiveness. However, based on current tax rules, there are predictions:
Arkansas. Under its current tax code, this southern state doesn’t allow tax exemptions for discharged student loan debt. Thus, if you live in Arkansas, your forgiven student loan debt will be subject to state income tax.
Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin arealso expected to tax student loan forgiveness and have not said otherwise (as of yet).
Some states, such as California, previously had rules in place to classify discharged debt as taxable income but are implementing changes. According to a recent Twitter post from Anthony Rendon, California Assembly Speaker for District 63, California is awaiting finalized details from the federal government to better understand if “relief is tax exempt under current California law.” If not, the state will be instituting a temporary change to state law to make it exempt from state income tax.
Massachusetts has followed suit, announcing that student loan forgiveness will not be taxable in the bay state. Pennsylvania and New York have made similar announcements.
States Expected to Tax Student Loan Forgiveness
States Expected to Not Tax Student Loan Forgiveness
States Without Income Tax (thus, no tax on student loan forgiveness)
Arkansas Indiana Minnesota Mississippi North Carolina Wisconsin
Alabama Arizona California Colorado Connecticut Delaware Georgia Hawaii Idaho Illinois Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Missouri Montana Nebraska New Jersey New Mexico New YorkNorth Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Utah Virginia Vermont West Virginia
Alaska Florida Nevada South Dakota Tennessee Texas Washington Wyoming
New Hampshire does not tax earned wages, so student loan debt forgiveness likely won’t be taxed.
How Much Will I Be Taxed?
The exact amount you may be taxed depends on a variety of factors, such as your income and tax bracket, state income tax level, and any exemptions you’re eligible for. Based on some estimates, however, your tax liability could range from a couple hundred to a thousand dollars.
When Will I Be Taxed?
Even if you planned to pay your federal loan debt off over a certain period of time, the debt cancellation will be taxed the year it was forgiven. For example, if you have $10,000 in federal student loan debt and planned to pay it off over a 10-year repayment period, it will still be taxed in 2022 once forgiven.
Given the unexpected nature of this tax, it’s crucial to prepare for what you may owe come tax season.
Is Student Loan Forgiveness Usually Taxed?
Taxing student loan forgiveness isn’t entirely new. In fact, some established debt forgiveness programs, such as Income-Driven Repayment (IDR) Forgiveness, are taxable at the federal level. This is because debt cancellation is considered income, and income is taxable.
Whether it’s taxed at the state level, however, depends on the state itself. For example, some states believe student loan forgiveness should be tax-exempt in certain situations. In fact, many states do not typically tax discharged debt for public servants who received forgiveness through Public Service Loan Forgiveness. However, they may tax discharged student debt in other instances, such as IDR Forgiveness.
Is There a Way to Avoid Being Taxed on Student Loan Forgiveness?
Not quite. When filing your 2022 taxes, you’ll need to report your gross income, which includes the amount of debt you had canceled within the tax year. Then, you will be subject to taxes on that total amount.
Final Thoughts from the Nest
While most states won’t be taxing student loan forgiveness, others are firm in their stance to do so. Others are still in limbo, crafting their official perspective on the issue.
If you are concerned about your potential tax liability due to student loan forgiveness, it’s best to contact a professional tax preparer. However, it’s important to recognize that this information is still new and changing frequently as states announce exemptions, so even the professionals might not have all the answers.
This article was last updated 9/13/2022. Information regarding the tax liability of student loan forgiveness recipients is changing quickly. This information is intended for educational purposes only and should not be taken as tax advice. Please consult your tax advisor for recommendations based on your unique circumstances.
The short answer is… parents should start saving for college as soon as possible.
Nonetheless, figuring out how much to save for college and when to start can be confusing. The answers aren’t always crystal clear. However, saving for college is a massive undertaking that requires a strategic savings plan to reach your goals. If you’re working on your savings plan, you’re in the right place.
Here’s what parents should know about when to start saving for college, including the most important factor: beginning early.
Start Saving Early
The cost of college is rising every year. In fact, education expenses in the US have risen by over 180% since 1980. This makes an early savings plan not only useful but necessary.
Saving early gives you more time to contribute money and take advantage of compound interest — provided you invest the money. If you wait until the last minute to start saving for college, you’ll need to contribute a lot more. Likewise, the earlier you start investing college savings, the more time your money has to grow with interest.
As enticing as it is to set aside money to grow, it’s vital that you are already financially secure.
Get an Emergency Fund in Place
Before looking into the future, you should always have an emergency fund, if possible. An emergency fund is intended for dire situations such as a natural disaster, unexpected job loss, or medical bills. In general, your emergency fund should equate to three to six months’ worth of your salary.
Lower High-Interest Debt
In addition to that, you should prioritize lowering any existing high-interest debts. While saving for college is important, the interest you’ll have to pay on debts might be more than what you can save.
That said, there are a few exceptions. For example, if you only have low-interest debt, it may be better to invest the money for college expenses. However, this takes serious time, planning and requires higher risk tolerances so it may not be suitable for all.
Best Savings Plans for College
The current financial system provides a number of ways to start save for college. There are many instruments that are unique in their own regard, so understanding which to choose can be confusing.
A 529 Plan offers federal and state tax benefits when used for educational expenses. A 529 Plan has restricted investment options. However, it’s a great choice because it can be used as a tax shelter while your money grows. In addition, these plans are considered parent assets, which means you don’t need to report them on the FAFSA.
Mutual Funds
Mutual funds create a diversified portfolio of individual investments —think bonds, stocks, or other securities. Unlike a 529 Plan, investing college savings in a mutual fund provides you with a bit more flexibility in terms of what you can invest in. That said, they are run by portfolio managers, who will usually charge a fee for their service. In addition, mutual funds are subject to annual income tax, and any money transferred to your child is viewed as income on the FAFSA.
Custodial Account
Custodial accounts are brokerage accounts that you open on behalf of your child and then subsequently transfer to them once they reach 18, 21, or 25 years of age. Like mutual funds, the FAFSA considers custodial accounts as student assets, which can reduce your child’s financial aid eligibility.
Savings Bonds
Saving bonds are securities that are backed by the U.S. Government. They are one of the most risk-averse investments and safest options as you are guaranteed to get money back. Due to this guarantee, the rate of return for saving bonds is usually quite low, meaning that in periods of high inflation and higher costs, you may still end up losing money as the value of your dollar diminishes.
Some benefits of these vehicles include being federally tax-deferred and state-tax free. That said, the maximum amount you can invest is $10,000 on your own and $20,000 as a married couple per year.
Roth IRA
With only 37% of the nation’s population using this type of account, Roth IRAs are underutilized but can provide a great investment strategy.
A Roth IRA is an investment account where you can earn tax-free interest on your contributions. While earnings are intended to be withdrawn once you are 59 years old, you can withdraw contributions prior to then with no taxes or penalties. There are no obligations or restrictions to when you withdraw and the FAFSA does not consider them assets. However, there are some downsides like the inability to invest more than $6,000 per year.
Regardless, all these options are great ways to start saving for college and growing your money to help with future college expenses. But what if you’re getting a late start on saving? Perhaps you weren’t able to invest right away? There are still many options available and the same principle applies, start as soon as you can.
What to Do If You’re Getting a Late Start on Saving
If you are starting late on saving for college, it may be smarter to take on less risk as market fluctuations can be a detrimental player to your college savings goal. Perhaps it would be wiser to look into more safe, secure investments or age-based plans.
At the end of the day, saving for college should not put you in financial stress currently or in the future. Preparing a strategy to best manage your money and meet your goals is the best way to enjoy your financial future. Look at all the options available to you, and talk your strategy out with a qualified financial advisor and your loved ones, as these financial decisions have great impact. Once you settle on a plan, don’t stress too much about the short-term and try to focus on the long-term advantages.
The content of this article is not, nor should it be, taken as financial advice. The content of this article is for educational purposes only. For personalized financial advice, please consult a financial or investment advisor.
So, your kid is going to college? That’s great! Yet, as great as it is, you are a little worried. How are you going to afford the college tuition? Or the living expenses? You want to take out a loan. If you have bad credit, this process can be more difficult. However, there are many student loans for parents with bad credit.
Here is everything you need to know about student loans for parents with bad credit.
Look to Parent PLUS Loans First
The first thing you’ll want to look at is a Parent PLUS Loan. Since it’s a federal student loan, it’ll have greater benefits and be easier to qualify for. Also, the maximum loan amount you can get is the full cost of attendance minus financial aid. Federal loan interest rates also won’t change regardless of your credit score.
However, Parent PLUS Loans do tend to have higher interest rates than even some private loans. So, before you sign off on one, compare the loan with the pre-qualified offers you get through Sparrow. That way, you can figure out which loan option is really best for you.
If you decide to get a Parent PLUS Loan, then your next step is meeting the loan eligibility requirements. To qualify for a Parent PLUS Loan, you have to be a parent (biological or adoptive) of a dependent undergraduate student. The student must also be enrolled at least part-time in college.
Additionally, while there is no credit score requirement, you can’t have any adverse credit history. Adverse credit history includes having:
Delinquent or defaulted accounts
A foreclosure or repossession
Bankruptcy discharge
Wage garnishment
Tax lien
Write-off of federal student debt
If you have any of these on your credit report, you may not qualify for a Parent PLUS Loan on your own. However, you can add an endorser to the application to help you qualify. Endorsers work similarly to cosigners. As long as they don’t have any adverse credit history, they should help you qualify.
If you meet all the requirements, apply for the loan by filling out the application online.
Private Student Loan Options
If you do not qualify for a Parent PLUS Loan, you should look into private parent loans. Keep in mind, though, that these usually have stricter requirements. Qualified borrowers have, at least, a steady income and a good credit score. A good credit score means a score in the mid-600s or higher.
While it’s possible to get a loan with poor credit, you will receive much higher interest rates. If you do have a poor credit history, think about getting a cosigner. This will bring down the loan’s interest rate.
When shopping around for private loans, also make sure to prequalify for each lender. Pre-qualification is a way to see what rates lenders can offer you without doing a hard credit check. They do a soft credit check instead. Once you have done that, compare the rates from each lender to help decide which is right for you. You can do this on the Sparrow website.
The Arkansas Student Loan Authority (ASLA) is a state lender that offers educational funding for Arkansas residents. Through their Family Loan, they offer different repayment options, an autopay discount, and strong customer service.
Earnest is a well-known private student loan lender. They offer flexible repayment options and longer grace periods. Residents in Nevada do not qualify for a loan with Earnest.
Fixed APR range: rates start at 4.42%.* Variable APR range: rates start at 5.62%.* Minimum credit score: 650
INvestED is a student loan lender that offers educational funding for Indiana residents and students. They offer affordable financing options and have a variety of repayment plans.
Fixed interest rates range from 4.61% to 7.62%. Variable interest rates range from 7.88% to 12.34%. The minimum credit criteria is 670. See disclosures.
SoFi is a well-known private lender. They offer various repayment options and unique member benefits such as career coaching. If your child is enrolled less than half-time, however, you will not qualify.
Fixed interest rates range from 6.50% to 14.83%. Variable interest rates range from 6.32% to 14.83%. The minimum credit criteria is the mid-600s. See disclosures.
Other College Financing Options
If you are unable to qualify for a parent loan due to your credit score, there are other options to consider:
Consider Scholarships and Grants
One of the first options your child should look into before loans are scholarships and grants. These are great because they provide money to cover educational expenses and don’t have to be paid back. You can find these opportunities through the FAFSA, your child’s college, and looking on scholarship sites.
Another option you have is to cosign your child’s loan. If you are unable to take out a private loan yourself, you can have your child take out a loan with you as a cosigner. That way, you are still helping and contributing to their college costs, but you don’t have to take out a loan on your own.
Have Your Child Borrow the Loan By Themself
In cases where you can’t cosign a loan with them, talk to your child about borrowing the loan on their own. Let them know you’ll be there to guide them throughout this process so they still feel your support.
Work on Raising Your Credit Score
Of course, in the long run, raising your credit score is a move that will benefit you immensely. Start by checking your credit report to see what’s bringing it down and work on those weak points. You’ll also want to make payments on time, pay off old debt, and lower the amount of credit that you use. It takes time but, eventually, you’ll start to see a difference.
You have many options to help you cover your child’s education costs, even if you have bad credit. There are many great student loans for parents with bad credit.
Sparrow can help you find them. By filling out the Sparrow application, you’ll be matched to what parent loans you qualify for from our partnering lenders. You can even compare each student loan option side-by-side so you’re confident in your decision. Our goal is to help you find the best loan for you and your child to help maximize their college experience.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Interest rates shown in this article may include a 0.25% auto-debt interest rate reduction.
On August 24th, 2022, President Biden released his comprehensive, wide-scale plan for student loan forgiveness. This student loan relief package has nearly $4 billion dollars in aid and is the largest student loan forgiveness package to date.
The three-part package was designed to lift the financial burden of student loan debt for millions of Americans, primarily middle-class federal student loan borrowers.
From new changes within the Public Service Loan Forgiveness program, to loan payment refunds, to debt cancellation, there’s quite a lot of information you don’t want to miss.
Keep reading for a complete guide to Biden’s student loan relief.
To have a smooth transition back to loan repayment, the pause on federal student loan repayments has been extended to December 31st, 2022.
Key Takeaways:
Only federal borrowers who have an income less than $125,000 (or a joint income of less than $250,000) are eligible for student loan forgiveness.
Pell Grant recipients are eligible for $20,000 in loan forgiveness.
Non-Pell Grant recipients are eligible for $10,000 in loan forgiveness.
The pause on federal student loan repayment was extended to December 31st, 2022.
Revamping the Public Service Loan Forgiveness Program and Halving Monthly Undergraduate Loan Payments
Under Biden’s three-part student loan relief package, the administration is cutting some monthly undergraduate loan payments in half and also improving the Public Service Loan Forgiveness (PSLF) program.
Temporary Changes to Public Service Loan Forgiveness (PSLF)
If you are a federal borrower who has worked at a nonprofit, in the military, or at a federal, state, tribal, or local government, you may be eligible to receive loan forgiveness.
While Biden’s new plans for the Public Service Loan Forgiveness program are unclear as of now, there are previous, temporary changes that should be accounted for.
Time-limited changes have been made to the Public Service Loan Forgiveness (PSLF) program that will only apply until October 31st, 2022. These changes have temporarily made it easier for borrowers who have worked as public servants to receive loan forgiveness through PSLF.
Previous Rules
New Rules
Only federal Direct Loans qualify for PSLF.
Direct, FFEL, and Perkins Loans qualify for loan forgiveness. Federal loans that are not Direct loans must be consolidated to be eligible.
You must be under a 10-year Standard Plan or an income-driven repayment plan to qualify for PSLF.
Repayment under any repayment plan counts for loan forgiveness.
You must have made on-time payments to qualify for PSLF.
Late and partial payments can qualify for PSLF. Payments before consolidation also qualify.
You must have made 10-years worth of monthly payments to receive loan forgiveness.
You can still apply to PSLF even if you have not made 10-years worth of payments (or 120 monthly payments). You must have worked for a qualifying employer during your repayment period to earn credit for payments made. You will not receive loan forgiveness until you make 120 payments.
You must have worked for a qualifying employer at the time of your PSLF application.
You can still receive forgiveness if you were not employed by a qualifying employer at the time of your PSLF application.
The period of service that you received Teacher Loan Forgiveness for also counts for PSLF.
Despite the temporary changes to the PSLF program, the following still remain the same:
You must have made 10-years worth of monthly payments to qualify for loan forgiveness. While you can still apply to PSLF without having made 10-years worth of monthly payments, you will not receive credit until you meet the quota.
Periods of loan default and in-school deferment do not qualify for PSLF.
You must have been employed by a qualifying employer to be eligible for PSLF.
Note: Because these changes are only temporary, you must submit an application before October 31st to have your student loan canceled under these interim qualifications. While President Biden has proposed additional reform of this program, it is unclear what exactly will be done.
Robert is a full-time employee at an NGO that specializes in providing educational supplies to under-served elementary schools. He’s been working at this NGO for about five years. Robert had to take out federal Direct Loans during his undergraduate study and has been making payments throughout his career. Not all of his payments were on time or in full.
Wanda is an orthopedic surgeon who has been working at the North Carolina Orthopedic Clinic for seven years. She took out federal Perkins loans to pay for her undergraduate education and federal Direct loans to pay for medical school. Wanda has been making payments straight out of medical school and the entirety of her career, which has been roughly ten years of payments.
Should They Apply for PSLF?
Yes, Robert can and should apply for the Public Service Loan Forgiveness program. Under the time-limited changes to the program, Robert qualifies to receive forgiveness for any past payments, even if they were not on time or in full. Because Robert has been making payments for five years, he will need to make five years worth of monthly payments before he can receive loan cancellation.
Yes, Wanda can and should apply for the Public Service Loan Forgiveness program. First, she will have to consolidate her Perkins loans and Direct loans through the Direct consolidation loan program. Then, Wanda can count her ten years of payments for PSLF and receive loan forgiveness.
Halved Monthly Undergraduate Loan Payments
If you are a low-income federal borrower, you may qualify to have your monthly undergraduate loan payments cut in half.
The U.S. Department of Education is proposing a new income-driven repayment plan that caps monthly undergraduate loan payments at 5% of the borrower’s discretionary income. Your discretionary income is your income after any tax deductions or other mandatory charges. So, if you’re a low-income borrower whose discretionary income is $2,500, your monthly loan payment cannot exceed $125 (125 is 5% of $2,500).
Under this new income-driven repayment plan, undergraduate student loan payments will be lowered by more than $1,000 for current low-income borrowers and future borrowers.
Key Takeaways:
The U.S. Department of Education is creating a new, income-driven repayment plan that caps monthly undergraduate loan payments at 5% of the borrower’s discretionary income.
There are new, temporary changes to the Public Service Loan Forgiveness (PSLF) program that make it easier for public servants to receive loan forgiveness through PSLF.
Reducing the Cost of College and Keeping Institutions Accountable
President Biden has signed the American Rescue Plan, a legislation that increases the maximum Pell Grant and provides almost $40 billion to colleges and universities for emergency financial aid.
Furthermore, to keep college costs low and hold institutions accountable for hiking up tuition, the Department of Education has reinstated the enforcement unit in the Federal Student Aid office to do the following:
Publish an annual watch list of educational institutions with the worst debt levels
Propose a new rule that holds programs accountable for leaving their graduates with unpayable debt
Request institutional improvement plans from institutions with concerning student debt outcomes
Key Takeaways:
Biden has signed for the largest increase of Pell Grants in over a decade and for nearly $40 billion in financial aid for colleges and universities.
The U.S. Department of Education has reinstated their enforcement unit to hold colleges accountable for hiking up college costs.
Who is Eligible for Biden’s Student Loan Relief?
Federal borrowers whose individual income is less than $125,000 (for married couples, joint income should be less than $250,000) are eligible for Biden’s student loan cancellation.
→ For Pell Grant recipients: up to $20,000 in debt cancellation.
→ For non-Pell Grant recipients: up to $10,000 in debt cancellation.
Federal borrowers who work/worked as public servants and qualify for the Public Service Loan Forgiveness (PSLF) program are eligible for student loan relief.
How to Apply for Biden’s Student Loan Relief
For federal borrowers who are currently on an income-driven repayment plan, loan forgiveness may happen automatically. This is because the Department of Education already has your income on file.
Others will need to complete an application to certify their income. The U.S. Department of Education has not yet released an application for President Biden’s loan forgiveness program. However, Bharat Ramamurti, the deputy director of the White House National Economic Council, stated that the application will be released in early October. Once the application is made available to the public, it should be submitted by November 15th so that your debt is forgiven before the payment pause ends.
How to Request a Refund of Payments Made During the COVID-19 Pandemic Forbearance
Since March 2020, borrowers have not been required to make federal student loan payments, nor have their loans accrued any interest, due to the federal forbearance. During this time, many borrowers took advantage of these benefits, making substantial payments on their loans, some paying off their balances entirely. However, if borrowers knew their debt would be forgiven, many would have refrained from making such payments.
So, the U.S. Department of Education is allowing borrowers to request a refund for any payments made “during the payment pause (beginning March 13, 2020) [by contacting] your loan servicer to request that your payment be refunded.”
For example, let’s say you had $12,000 in federal student debt when the COVID-19 pandemic forbearance began in March 2020. You paid back $6,000 from that period of time up to now, leaving you with $6,000 in debt. If you contact your loan servicer for a refund, you will receive your $6,000 back. In turn, your student debt balance goes back up to $12,000.
→ If you are a Pell Grant recipient who makes less than $125,000 in a year, you are eligible to receive up to $20,000 in loan forgiveness. You apply for loan forgiveness and your $12,000 in student loan debt is wiped out, leaving you with no debt.
→ If you make less than $125,000 in a year but were/are not a Pell Grant recipient, you are eligible to receive up to $10,000 in loan forgiveness. You apply for loan forgiveness and your $12,000 is cleared by $10,000, leaving you with $2,000 in debt.
To receive a refund for any payments made during the forbearance, contact your loan servicer and request a refund.
When Will My Student Debt Be Forgiven?
Borrowers can expect to see their student loan debt forgiven within four to six weeks of submitting their application. For federal borrowers who are already on an income-driven repayment plan, loan forgiveness may happen automatically depending on the timeline of federal loan relief.
Is Biden’s Student Loan Forgiveness Taxable?
While the Biden administration stated that its loan forgiveness program won’t be considered federal taxable income, this provision does not apply at the state level. It is within the jurisdiction of individual states to decide whether loan forgiveness is taxable income.
In fact, the Tax Foundation identified 6 states that are predicted to count loan forgiveness as taxable income. While the list is updating frequently as states enact temporary tax exemptions, the following are currently said to be taxing it:
Arkansas
Indiana
Minnesota
Mississippi
North Carolina
Wisconsin
Closing Thoughts From the Nest
Biden’s student loan relief package is full of new updates for federal borrowers, primarily public service workers and low-income individuals.
Key Takeaways
Federal borrowers who earn less than $125,000 per year are eligible for student loan forgiveness. Individuals who have received Pell Grants can receive up to $20,000, while individuals who did not receive Pell Grants can receive up to $10,000.
The Department of Education is proposing a new income-driven repayment plan for low-income federal borrowers. The new income-driven repayment plan will cap monthly undergraduate loan payments at 5% of the borrower’s discretionary income.
President Biden has signed the American Rescue Plan, a legislation that increases the maximum Pell Grant and provides almost $40 billion to colleges and universities for emergency financial aid.
There are new changes to the Public Service Loan Forgiveness program that make receiving loan forgiveness easier for public servants.
You can receive a refund for any loan payments made from the beginning of forbearance (March 2020) until now by contacting your loan servicer.
Loan forgiveness may be taxable, depending on the state that you live in.
Applications for loan forgiveness will come out in early October for federal borrowers whose income is not on file. It is recommended that applications are submitted before November 15th, 2022.
Starting the conversation about paying for college isn’t always easy, especially if you anticipate being met with one big eye-roll. While tough to navigate, it’s an important discussion to have.
If you’re not quite sure where to start, here’s a quick guide on how to have the student loan conversation with your child.
Start the Conversation Early
It can be challenging for a teenager to conceptualize just how expensive college can be. So, it may take time for them to fully process and warm up to the idea.
If you can, start the conversation about student loans early. When your child begins to mention college is often an indicator that it’s an appropriate time to start the conversation. However, if you feel as though your child is ready earlier, lean on your own instincts. After all, you know your child best.
Make sure to ease into the topic, approaching it with empathy and understanding. While you may have gone through the college process before, it looks quite different today than it did in the past.
Cover the Important Topics
To prevent the conversation from becoming muddled with extraneous topics, create a mental list (or a physical one!) of what you want to cover. Here are a few of the most important points you may want to go over:
The Cost of College
The cost of attendance has grown rapidly, nearly 213 percent since 1988 to be exact. Knowing that wages haven’t grown at the same pace, affording college looks quite different today than it did in the past.
Allow your child to explore real data on the cost of college —CollegeScorecard is a great place to start. Know that it may be shocking to see such large numbers, so be open to answering questions if your child has any.
The Short-Term and Long-Term Implications of The College You Choose
It’s important to acknowledge that it may be challenging for your child to comprehend just how much some institutions cost. However, there are real implications of such, both in the short-term and the long-term, that they should be aware of.
For example, attending a more expensive institution may require your child to work a part-time job while in school or attend school part-time to afford tuition. If your child isn’t willing to do so, it may be better to explore a more affordable option.
While optimism about post-graduate employment is valuable, it’s important to be realistic about it as well. Before exploring college options, encourage your child to research the expected entry-level salary for the field they intend to pursue. While attending their dream school may sound affordable, comparing their future monthly income to their monthly student loan payment may say otherwise. Getting real about what their future income may look like can help your child make more educated decisions about the financial aid options they choose to pursue —and especially the student loans they borrow.
How Much You Can Contribute
If you plan to contribute toward your child’s education, be upfront and honest about how much you’re able to provide and on what timeline. For example, if you anticipate contributing $5,000 out-of-pocket per year, given in two $2,500 chunks, let your child know. This will provide them with a better understanding of how much they’ll need to obtain in scholarships, grants, and student loans.
Financing Options
83.8% of first-year undergraduate students receive some form of financial aid. So, it’s important that your child understands what each type of financial aid means.
Students should always accept aid in the following order: Scholarships and grants (free money) → Work-study (earned money) → Loans (borrowed money)
While some forms of aid, like student loans, can be explored close to the institution’s enrollment deadline, others will need to be pursued proactively. For example, many scholarship deadlines are well before the academic year.
Make sure your child understands the options available, so they can be proactive about submitting any necessary financial aid applications.
How Student Loans Work
A student loan will likely be the first loan your child borrows. It might even be the first line of credit they open. So, it may be challenging to understand how student loans work.
Ensure your child understands the difference between federal and private student loans. Then, break down the process of borrowing a loan and what paying it back may look like. Discuss topics such as:
Why interest rates matter
How interest may accrue while your child is in school
What repayment may look like
How much their monthly payment may be
What different repayment plans are available to them
How long it may take to repay
This is a good time to utilize a student loan calculator to demonstrate how different loan amounts and interest rates will impact how much your child pays for their education over time.
Make it an Ongoing Conversation
The entire college process is overwhelming. Between campus tours, applications, taking the SAT/ACT, and paying for it, there’s a lot for your child to absorb. So, rather than squishing everything into one conversation, make it an ongoing discussion.
There’s a good chance your child will have questions, but they might not come up all at once. Let your child know that you’re there to answer any questions they may have, at any time.
However, know that you don’t have to have all the answers. It’s perfectly okay to say, “You know, I’m not sure what the answer to that question is. Why don’t we look into it together?” Being honest about what you do and don’t understand can create a comfortable environment where your child feels open to learning about the process with you.
Final Thoughts from the Nest
Talking to your child about how to pay for college can be challenging to navigate –especially when it comes to the student loan side of things. However, starting the conversation early and covering a wide range of topics can help make it easier.
When it comes time to begin the student loan process, know that Sparrow has your back. Our one-stop application allows you to compare private student loan offers from 15+ lenders at one time.
If you’ve borrowed a student loan to fund your college education, you may be curious about the impact it could have on your credit score.
Like other installment loans, student loans can both help and hurt your credit. If you’re diligent about making payments on time, it may give your score a boost. If you’re missing payments left and right, however, your score could take a serious hit.
To prevent any unintended credit mishaps, you should understand how your credit score is calculated and how your score can shift when borrowing a student loan.
Here’s what you need to know about how student loans affect your credit score.
How Your Credit Score is Calculated
To understand how student loans affect your credit score, you should know how your credit score is calculated to begin with. While there are a variety of credit scoring models, FICO and VantageScore are the two most commonly used by lenders. Here’s how each are calculated:
FICO Score Calculations
Payment History (35%): Your payment history takes into account whether you’ve paid past credit accounts on time. If your track record is spotted with missed or late payments, your score will suffer in this category.
Amounts Owed (30%): Amounts owed, also commonly referred to as credit utilization, is the amount of debt you owe in comparison to the total line of credit you have. While having a high total line of available credit isn’t a bad thing, using a large portion of it may indicate to lenders that you’re overextending yourself financially.
Length of Credit History (15%): The longer you’ve been able to effectively manage lines of credit, the better. The length of your credit history is evaluated based on how long your credit accounts have been established, taking into account your oldest and most recent account, plus an average age of all of your accounts.
Credit Mix (10%): An ability to effectively manage a diverse set of credit accounts can be an indicator that you’re financially responsible. So, your FICO score will take into account the mix of installment loans (like student loans), credit cards, mortgage loans, and retail accounts you have.
New Credit (10%): Opening multiple credit accounts in a short period of time raises a red flag to creditors and lenders. In their eyes, it could be a sign of an inability to manage your finances properly, or a desperate need to put expenses on a line of credit. Minimizing the number of new credit accounts you open within any given period of time can help boost your score in this category.
VantageScore 4.0 Calculations
Payment History (41%): Like FICO scores, VantageScore 4.0 places high importance on your payment history, or whether you’ve been able to make on-time payments in the past.
Utilization (20%): Utilization represents how much of your overall available credit you are currently using. The lower this ratio, the better.
Age/Mix of Credit (20%): VantageScore’s “Age/Mix of Credit” category is essentially a mix of FICO’s “Length of Credit History” and “Credit Mix” categories. It evaluates how reliable you may be by using the age of your credit accounts and the mix of credit lines you use as determining factors.
New Credit (11%): VantageScore’s “New Credit” category is the same as FICO’s, except it represents a bit more of your overall score.
Balance (6%): Balance represents how much debt you have in total. In the VantageScore 4.0 model, the larger the balance, the more it will hurt your credit score.
Available Credit (2%): Available credit represents the amount of credit you have available on revolving accounts, such as credit cards. The more available credit you have, the higher you’re likely to score in this category.
Note that VantageScore updates its scoring model from time to time. VantageScore 4.0 is the latest version, released in 2017. However, you may find that previous versions, such as VantageScore 3.0, are still used by some creditors and lenders.
FICO Score
VantageScore 4.0
Payment History (35%)
Payment History (41%)
Amounts Owed (30%)
Utilization (20%)
Length of Credit History (15%)
Age/Mix of Credit (20%)
New Credit (10%)
New Credit (11%)
Credit Mix (10%)
Balance (6%)
Available Credit (2%)
How Student Loans Impact Your Credit Score
Student loans can both help and hurt your credit score. Here are a few ways this can happen:
How Student Loans Can Help Your Credit
Consistently Making Payments: Payment history accounts for a large portion of your credit score. So, consistently making on-time student loan payments can help your score quite a bit.
Adding to Your Credit Mix: Adding an installment loan, like a student loan, to your portfolio of credit accounts makes for a more diverse credit mix. While it isn’t essential to have one of each type of credit, it can give your score a small boost when adding a student loan to the mix.
How Student Loans Can Hurt Your Credit
Missing Payments: Again, payment history is the most important factor in determining your credit score. So, if your payment history is chock full of missed or late payments, your score is bound to take a hit.
Defaulting: Defaulting on any loan can have serious consequences, both for your credit score and your financial stability. In fact, with many student loans, defaulting could lead to wage garnishment, getting your debt sent to collections, or withholding future aid until the debt has been settled. Defaulting will take a serious toll on your payment history which, in turn, can drive your score down rapidly.
Does Paying Off Student Loans Help Your Credit Score?
While paying off student loans is certainly an accomplishment, it may not boost your score in the way you think.
In fact, when you make that final payment on your student loans, the account closes, taking the payment history and age of the account with it. If you’ve missed a few loan payments, this could be helpful. However, in most cases, paying off student loans will reduce the length of your credit history. This could cause you to lose a few points in that category.
While this may hurt your credit score temporarily, it will likely rebound soon after (if everything else remains the same, that is).
Final Thoughts from the Nest
Student loans can affect your credit score both positively and negatively. To maintain your score, make loan payments on time. If you’re unable to do so, reach out to your loan servicer immediately to explore options that may help you. You may be eligible to refinance with one of Sparrow’s 15+ lending partners, switch to a better repayment plan (such as an income-driven repayment plan), or apply for a temporary period of deferment.
College is expensive, but that doesn’t mean you should accept every last bit of financial aid. Now I know, that probably sounds counterintuitive. I mean, who wouldn’t use all the offered financial aid?!
However, there are many instances where financial aid can actually be detrimental rather than helpful, so knowing when to decline certain financial aid options is very important. The general rule is to borrow only what you need for direct educational expenses (things like rent, tuition, books, etc.). Avoid wasting financial aid on non-educational items, as that could lead to greater issues in the long run.
To know whether you should accept the aid offered to you, it’s important to understand the different types of financial aid available to you. Here’s what you should know.
Financial aid can be anything from grants, scholarships, work-study jobs, loans, and even aid from local or state sources. Essentially, financial aid is provided to students to help you focus on what’s important —your education. Using financial aid for other expenses can make for a sticky situation.
Do I Have to Accept All of My Financial Aid?
Absolutely not! In fact, many financial aid experts recommend that you only accept what you really need.
While accepting scholarships and grants is often harmless, you should be careful about how much you accept in student loans. While borrowing money is often necessary for many students, borrowing more than you need can wind up costing you a lot more in the long run. This happens as the cost of borrowing money is compounded by the interest rate of the loan.
Estimating your budget and expenses to determine the amount of money you will need to borrow is the best way to only borrow what is needed.
Accept Aid in This Order
As mentioned before, financial aid comes in various forms: grants, scholarships, work-study jobs, and loans. If you want to save money, however, you should accept aid intentionally and in this order:
Because scholarships and grants are practically free money, you should always try to use those first before looking at other options. One thing to note is that many scholarships and grants have conditions you must meet to either be eligible for or to continue receiving the funds over the course of your education. Thus, although there may not be financial terms like a loan, it is imperative that you understand the criteria for this financial aid option.
A work-study program is quite simple. You work for the money, so you don’t pay it back. This means you will have to spend time both working and studying. While it may be a bit more to juggle, there have been studies that show students who have a part-time job and study are better at managing their time.
Federal student loans and even private student loans should come last. With loans, you will have to pay the money back, plus interest. Depending on the type of student loans, you may receive a subsidized loan meaning interest won’t start accumulating until you leave school. So, if you have the option, choose a subsidized loan before an unsubsidized loan.
With the basics of financial aid covered, let’s look at specific instances where it is favorable to decline certain financial aid.
You Are Paying Out of Pocket
If you intend to pay out of pocket for school, you don’t actually need to accept the loans in your financial aid package. Instead, you should look for more “free money” options, like scholarships and grants.
You Can Find Aid With More Favorable Terms Elsewhere
If you do decide to borrow a loan, you should look for the best lender that is offering the most favorable terms. For example, Parent PLUS Loans often have higher interest rates. Therefore, you may actually be able to find lower interest rates with private loan lenders. In this case, you may want to consider all your options before accepting the PLUS loan.
Now that we’ve gone over when to decline certain financial aid and how to sort through all the different options, let’s go back to the original question. Do you have to accept all financial aid?
No, you don’t have to accept all of the financial aid offered to you. However, it is still very important to note that it is okay to accept all of it. If you believe the financial aid options are favorable to your circumstances, then it is totally fine to accept it. Just make sure you do your research and have all your questions answered before rushing into something.
Knowing when to accept and decline financial aid is very tricky. However, with the right guidance and due diligence, you can optimize your decisions and make the most out of your financial situation.
Don’t be afraid to say no to financial aid, and remember that although some aid may seem like free money, you should always research the terms of everything offered to you. Take your time to find the best options that will put you in a better position, both financially and mentally.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
If you’re studying in California, where 20% of discharge applications come from, student loan discharge programs may be familiar to you. However, the majority of borrowers haven’t heard of them.
While student loan forgiveness programs are more well-known, student loan discharge programs are another great way to have your student debt wiped from existence.
So, while student loan discharge programs are fairly unknown, shining a light on them is important as they could save you thousands of dollars. Let’s take a look at what student loan discharge programs are and the top programs you may qualify for.
What is Student Loan Discharge?
Student loan discharge programs remove your obligation to repay your debt. While similar to student loan forgiveness programs, discharge is typically only granted under extenuating circumstances. Forgiveness programs, on the other hand, are often granted based on your career or service to a particular industry.
For example, you may have your student loan debt forgiven after working in public service for a certain number of years, while your debt would be discharged for something like death or a disability.
Additionally, forgiveness programs are for federal student loans only, while both federal and private student loans are eligible for discharge (pending that you meet the eligibility criteria).
Top Student Loan Discharge Programs You May Qualify For
Closed School Discharge
As the name suggests, closed school discharge is aimed to remove the obligation for students whose school closed while they were still enrolled. To be eligible for a 100 percent discharge, you must meet the following criteria:
You must have been enrolled in the school when it closed, or you were approved for a leave of absence when your school closed;
If your loans were disbursed before July 1, 2020, then your school must have closed within 120 days after you withdrew; or
If your loans were disbursed on or after July 1, 2020, then your school must have closed within 180 days after you withdrew.
If you find yourself in similar circumstances to these criteria, you could be eligible for the Closed School Discharge. In the case that you are eligible, the Secretary will automatically send you an application you can submit to your loan servicer. Or, you can contact your loan servicer directly about the application process.
Borrower Defense to Repayment Discharge
This program is provided to students who have attended schools that have either misled them, or participated in activities that violated certain state laws. For an application to be accepted, you must be able to demonstrate that the school violated state law related to your loan or to the educational services provided. If you believe this criteria meets your situation, you can fill out an application here.
Total and Permanent Disability Discharge
The Total and Permanent Disability Discharge program (TPD) is for anyone who has become totally and permanently disabled. It relieves you from having to repay any federal loans. In order to qualify, you must provide documentation from one of the following sources:
The U.S. Department of Veterans Affairs;
The Social Security Administration; or
A Physician
Many private lenders also offer this discharge, but make sure to contact your lender directly to verify. If you are unable to complete the application on your own, you are able to have a representative apply on your behalf and help throughout the TPD discharge process.
Discharge Due to Death
If a student loan borrower dies during the duration of their student loans, it will be discharged. Likewise, a parent’s PLUS loan will be discharged if your parent dies.
FAQ About Student Loan Discharge
What happens if your student loans are discharged?
According to the Department of Education, a discharge of federal student loans implies that:
You will no longer be obligated to repay the loan,
You will receive a reimbursement for any payments made either voluntarily or through forced collection, and
The discharge will be reported to credit bureaus to delete any adverse credit history associated with the loan.
Essentially, your existing student loan gets deleted from your student loan account.
What is the difference between student loan forgiveness and discharge?
Both student loan forgiveness and discharge programs have similar end results, however they are quite different in the technicalities. Loan discharge programs immediately stop the borrower from having to repay the student loans, whereas a student loan forgiveness program implies that the borrower must repay the debt until their application is approved or until the borrower meets the necessary criteria. Additionally, certain discharges entitle borrowers to receive a refund of previously made payments on the loan.
Are discharged loans removed from your credit report?
Yes. When your loans are successfully discharged, it will be reported to the appropriate credit bureaus to delete any student loan related credit history.
Final Thoughts from the Nest
Now, with this knowledge of discharge programs, you can be confident that you know the general landscape for any relief programs. If you do not qualify for any discharge programs, check your eligibility for student loan forgiveness programs.
It’s the talk of the nation. The Biden Administration announced that it will be forgiving billions of dollars in student loan debt.
While this news is exciting, it’s a little nerve-wracking at the same time. You might wonder if you even qualify for student loan relief based on the requirements. What even are the requirements for this?
So, we’ve gathered everything we know and everything you need to know about Biden’s student loan forgiveness actions. Let’s get into it.
Who Qualifies for Biden’s Student Loan Forgiveness?
To qualify, you must have federal student loans that were disbursed no later than June 30, 2022. Qualifying loans include most federal loans like Direct Loans and Parent PLUS Loans. It’s unknown whether Federal Family Education Loans will also qualify for loan cancellation right now, but they might be able to later on. On the other hand, since this is a federal program, private loans are not eligible.
Additionally, you have to meet the income requirements the government has set forth to be eligible. Single individuals who earn under $125,000 per year are eligible. Couples who file taxes jointly and earn less than $250,000 per year are, too. Finally, heads of households who earn less than $250,000 per year are also eligible. From what we know, the information about your income will not come from the year 2022. The government will look at your income from the years 2020-2021.
Another thing you’ll want to look into is if you’ve ever received a Pell Grant. If you have, then you could get an extra $10,000 forgiven from your loans.
As you can tell from the information above, your eligibility is largely based on your income. Because of that, you’ll want to check your 2020 and 2021 tax returns to see if you meet the income requirement. The government may look at either or both tax returns to determine if you qualify. Make sure to save copies of your tax returns in case you need proof of income for the application.
To apply, you’ll need to do so online. Currently, the application is not available, but it will be by early October. The federal government advises borrowers to apply by November 15 to receive relief before the forbearance period ends on December 31.
Remember that the President extended the pause on loan payments for the final time. Borrowers will be expected to start making payments again on January 1, 2023.
How Will I Know if I Had a Pell Grant?
You may wonder if you’re eligible for the additional forgiveness if you previously received a Pell Grant. The good news here is as long as you received one at some point, you could have extra money forgiven. It won’t matter if you only had the grant for one year, got only a partial grant, or when in your college career you received it. As long as you have been or are a recipient, you should be good.
Don’t worry, if you forgot whether you received a Pell Grant in the past, you aren’t alone. If you’ve had or have a Pell Grant, it will already be on file and come up in your FAFSA account. Once you log onto your FAFSA account, it should show up on your dashboard under “My Aid”.
The section “My Aid” breaks down all the aid you’ve gotten for school. If you click on more details, you’ll get a more detailed breakdown of the loans and grants you’ve received. Your Pell Grant should show up there.
You’ll also want to save any documentation related to your Pell Grant like your financial aid award letters. That way, if you need it in the application process, you’ll already have it on hand.
Get Notified About Student Debt Relief Updates
As this was recently announced, there are still more details that are yet to come. To stay on top of student debt relief updates, sign up for email updates from the Department of Education. You can also check back on the FAFSA website for more information as it’s released.
Final Thoughts from the Nest
There is still a lot to learn about the program. But, from what we do know, this can help you find relief from your student loan debt. Be sure to sign up for the updates to stay on top of everything and be notified when the application goes live. In the meantime, gather all the documents that you need so you’re prepared for the application.
If you have private student loans, you may be bummed because you aren’t eligible for this. While those loans may not be eligible for this program, you can still save money on them by refinancing. By completing the Sparrow application, we’ll match you to the refinance loan options you best qualify for from our 15+ partnering lenders.
Congratulations on your child’s admission to college! The journey isn’t quite over yet – now, it’s time to explore the options you have for paying for the education.
Between federal student loans and private student loans, the decision can be difficult to make. Each loan type caters to different individuals, so it’s important to understand all your options.
So, in the debate of Parent PLUS loans vs. private student loans, which is the better option to finance your child’s education? In this article, we’ll cover everything that you need to know.
Have a decent credit history. (Unlike most federal student loans, Parent PLUS loans do require a credit check.)
How Much Can You Borrow in Parent PLUS Loans?
You can borrow up to the cost of attendance minus any financial aid that your student receives, such as scholarships, grants, etc. For example, if your child’s cost of attendance is $50,000 and they receive $30,000 in financial aid, you can borrow up to $20,000 ($50,000-$30,000).
Note: You do not need to accept the full amount of money that you are offered through the Parent PLUS loan; you can borrow only as much as you need. For example, in the instance described above, if you were offered the entire $20,000 but plan to contribute $5,000 out of pocket, you can choose to only accept $15,000 of the Parent PLUS loan.
What Credit Score Do You Need for a Parent PLUS Loan?
While there isn’t a minimum credit score requirement for a Parent PLUS loan, you cannot have an adverse credit history.
You will undergo a credit inquiry to assure that your credit score does not have the following reports within the past two years:
A collection or charge-off
One or more debts that are 90+ days overdue and total more than $2,085
You must not have any of the following on your credit report within the past five years:
A loan default
A discharge of debts via bankruptcy
A foreclosure
A repossession
A tax lien
Any wage garnishment
A write-off of federal student aid debt
If your credit score is not strong enough to qualify for a Parent PLUS loan, consider adding an endorser to the loan. An endorser is similar to a cosigner – an individual who agrees to take responsibility for the loan if you, the borrower, miss any payments or default on the loan.
If your endorser has a strong credit history/score, your chances of being approved for the Parent PLUS loan can be higher.
What is the Interest Rate on Parent PLUS Loans?
For Parent PLUS loans that are disbursed on or after July 1st, 2022 and before July 1st, 2023, the fixed interest rate is 7.54%.
Can Parent PLUS Loans Be Forgiven?
Parent PLUS loans can be forgiven if specific requirements are met. However, because student loan forgiveness policies are constantly being updated by the Biden administration, be sure to keep an eye out for any changes.
Here are three federal loan forgiveness plans that Parent PLUS loans may qualify for:
Income-Contingent Repayment Forgiveness
The Income-Contingent Repayment plan allows you to make monthly payments that are calculated based on your income. After a 25-year repayment term, or repaying the debt for 25 years, any remaining debt is forgiven.
Made those payments on a qualifying repayment plan;
Did so while working full-time for a qualifying employer.
Public service workers include teachers, firefighters, policemen, first-responders, doctors, and nurses.
Qualifying Employer Examples
Non-Qualifying Employer Examples
Federal, state, local, or tribal government organizationsU.S. military Non-profit organizations AmeriCorps or Peace Corps volunteers
Labor unionsPartisan political organizationsFor-profit organizations
Note: Even though Parent PLUS loans are used towards your student’s education, you (the borrower), and not the student, must work in public service to qualify for PSLF.
Federal Agency Employment Forgiveness Programs
If you are an employee of a federal agency, you may be eligible for Federal Agency Employment Forgiveness programs. You must be considered as a “highly-qualified” worker, and the federal agency that you are employed at determines whether or not you are eligible for this assistance.
Loan forgiveness is also contingent on a service agreement that contracts you to work three more years at the federal agency that you are employed at.
This can be extremely optimal for borrowers who are employed at federal agencies – you will be able to take out federal student loans for your child and have them forgiven if you meet the qualifications. Speak with your employer to see what federal forgiveness options you qualify for.
Note: Schedule C employees and members of Congress do not qualify for this program.
Private Student Loans
What is a Private Student Loan?
Private student loans are offered by private organizations, such as banks, online lenders, and credit unions. Because these organizations are autonomous, they set their own repayment terms, interest rates, and other lending logistics.
Who is Eligible for a Private Student Loan?
The general baseline requirements to acquire a private student loan are the following:
You must be a U.S. citizen or a qualifying non-citizen.
Your student must be enrolled in an eligible educational program.
However, with most private student loans, your eligibility to borrow is strongly contingent on your credit score and credit history. Private lenders are like investors: they want to make sure that you are a safe investment that will have returns (meaning that they will get their money back + any interest that accrues).
For this reason, a low credit score can harm your chances of qualifying for a competitive private student loan, or a private student loan at all. In this case, you may be able to strengthen your reliability as a borrower with a cosigner or by waiting until your credit score is stronger.
How Much Can You Borrow in Private Student Loans?
Unlike federal student loans, private student loans have limits on how much you can borrow. Loan amounts can range from $10,000 to upwards of $500,000. You will be required to submit documentation of your student’s cost of attendance, as you can’t borrow more than the amount it costs to attend.
What Credit Score Do You Need for a Private Student Loan?
You must have good to excellent credit to qualify for a competitive private student loan. Generally, the minimum credit score requirement is a FICO score of 670. However, there are lenders that work with borrowers who have low credit scores.
You must also have a clean track record of repaying your debt. This means having no late loan payments, loan defaults, foreclosures, discharge of debts, etc.
Keep in mind that when applying for loans, private lenders will conduct a hard credit check to verify your credit score and history. Hard inquiries will cause your credit score to decrease temporarily.
Note: Loan applications submitted within 30 days of each other are recognized by FICO as “rate shopping” and will be counted as one hard inquiry instead of several. So, if you plan to submit more than one loan application, make sure to do so within a 30-day period.
What to Do If You Have Bad Credit
If you do not have a strong credit score, and thus are unable to qualify, here are some options to consider:
Consider adding a cosigner to the loan to strengthen your eligibility as a borrower. A cosigner is an individual who agrees to be added to the loan, taking responsibility for it if you are unable to. Cosigners are contractually obligated to make up any missed payments, or the entire loan, if you fail to pay it.
Wait and apply to the private loan when your credit score is stronger. If you lower your debt-to-income ratio, you may be able to raise your credit score. You can lower your debt-to-income ratio by picking up a side hustle, making larger payments on other outstanding debt, or decreasing your expenses.
Look into outcome-based student loans. Outcome-based student loans do not verify your eligibility based on credit, but instead vouch for your future potential to pay back the loan.
Note: There are a variety of private lenders who work with parents with low credit scores.
If you want to check which private student loans you are eligible for without a hard inquiry and no minimum credit score, consider using Sparrow. Sparrow offers a free, two-minute application that allows you to compare loans across 15+ private lenders.
What is the Interest Rate on Private Student Loans?
The interest rate on private student loans are contingent on a variety of factors including the lender, your credit score, and your credit history. Interest rates for private student loans are generally higher than those for federal student loans.
The average interest rates for private student loans were between 2.95% – 13.95% for fixed interest rates, while interest rates varied between 1.13% – 12.99% for variable interest rates.
Can Private Student Loans Be Forgiven?
No, private student loans cannot be forgiven because they are issued by independent lenders. Only federal student loans are eligible for loan forgiveness.
Parent PLUS Loans vs. Private Loans: How Are They Different?
Now that we’ve discussed the nuances of Parent PLUS loans and private loans individually, let’s compare them side by side.
Yes, certain federal loans qualify for loan forgiveness.
No, private loans do not qualify for loan forgiveness.
Cosigner Options
Parent PLUS loans have the option to add an endorser to the loan.
Yes, most private loans allow cosigners to be added to the loan.
Credit Checks
Yes.
Yes.
Credit Score Requirements
You must not have an adverse credit score/history and must be in decent standing.
You must have a strong credit score to be eligible for competitive private loans.
Parent PLUS Loans vs. Private Loans: Which is Better?
Between Parent PLUS loans and private loans, one option is not necessarily “better” than the other. In terms of the better option for you, you’ll have to evaluate yourself as the borrower.
If you plan to pursue any loan forgiveness programs, you may prefer a Parent PLUS loan over a private parent loan. If you are more concerned with finding a competitive interest rate, you may find that a private student loan suits you better.
Questions to Ask Yourself for Parent PLUS Loans
Questions to Ask Yourself for Private Student Loans
Do you plan to pursue any student loan forgiveness programs (Public Service Loan Forgiveness, etc.)?
Are you confident in your ability to repay the maximum loan repayment amount?
Are flexible repayment terms a priority for you as a borrower?
Do you have a strong credit score? If not, do you know someone who has a strong credit score and is willing to be your cosigner?
Do you prefer fixed interest rates as opposed to variable interest rates?
Can you qualify for a competitive interest rate with your credit score?
If you answer more yeses to one column over the other, that option may be the most feasible one for you. Again, be sure to evaluate your priorities and circumstances as a borrower to determine which is better for you.
Closing Thoughts From the Nest
Before applying for a student loan, be sure to thoroughly do your research on each loan so that you are choosing the most optimal option for your circumstances. Both Parent PLUS loans and private loans have their individual benefits and drawbacks, so assessing your needs as a borrower is crucial.
If you opt for a private student loan, Sparrow is here to help. Submit a quick, free application with us today to compare your options across 15+ private lenders.
Making that last debt payment can feel liberating. The balance finally hits zero, and a weight is lifted off your shoulders. While an incredible accomplishment, you may notice a drop in your credit score, leaving you to feel quite defeated. It’s normal to wonder, “Why has my credit score dropped after paying my student loan? Isn’t that a responsible thing to do?” It does sound a bit backwards, huh?
However, it makes more sense when you understand how your credit score is calculated. Here’s why your credit score might drop after paying off debt.
How Your Credit Score is Determined
Your FICO credit score is calculated using five different factors: payment history, amounts owed, length of credit history, credit mix, and new credit. Each factor is weighed differently when calculating your score.
Payment History (35%)
To evaluate how risky lending to you might be, lenders will look at how you’ve handled credit in the past. If you have a spotless record, you’ll likely do well in this category. If your credit history is checkered with late or missed payments, however, you may lose some points here.
Amounts Owed (30%)
Having outstanding balances doesn’t necessarily make you a risky borrower to lend to. However, using a high percentage of your total credit limit is an indicator that you may be overextending yourself financially.
For example, if you have a total of $20,000 of available credit, and you’re using $19,000 of that, you may appear to be struggling financially. On the other hand, if your total available credit was $50,000, owing $19,000 wouldn’t be so bad.
In a lender’s eyes, having a high outstanding balance in comparison to your total credit limit puts you at a higher risk of defaulting on any one of your loans. Thus, a high credit utilization ratio will impact your credit score.
(Note: “Amounts Owed” is often referred to as credit utilization.)
Length of Credit History (15%)
Generally speaking, the longer your credit accounts have been open, the better your score may look in this category. Simply put, a long history of effectively managing your credit shows lenders you’re capable of handling credit responsibly.
Credit Mix (10%)
FICO scores also take into account your credit mix, or the variety of credit accounts you have (ie. credit cards, student loans, mortgage loans, retail accounts, etc.). While you don’t need to have an account open in each category, having a mix of credit accounts shows lenders you’re able to manage multiple lines of credit responsibly.
If you do have a mix of credit accounts and manage them effectively, it can give your score a boost.
New Credit (10%)
Opening several new lines of credit in a short period of time can be an indicator that you’re struggling financially. Thus, opening too many new lines of credit can hurt your score.
Why Your Score Drops After Paying Off Debt
While paying off debt is certainly something to be proud of, it may not reflect positively when it comes to your credit score. Here’s why:
It Can Change Your Credit Utilization Ratio
Let’s say you have three credit cards, each with a $10,000 limit. They’re set up as follows:
As a result, you’d have a credit utilization ratio of 40% (12,000 total outstanding balance / 30,000 total credit limit).
Now, let’s say you decide to pay off and close Card C. Your new credit utilization ratio would be 55% (11,000 total outstanding balance / 20,000 total credit limit).
By closing Card C, the credit limit associated with it is no longer factored into your credit utilization ratio. Thus, the new ratio of your outstanding balance to your total credit limit actually ends up being higher than it was before.
In some cases, closing an account can lead to a higher credit utilization ratio, as it changes the amounts owed in comparison to the total credit limit. This, in turn, will negatively impact your score.
It Shortens the Length of Credit History
When you close a line of credit, the credit history associated with it goes out the window. In the case of revolving credit, such as a credit card, this happens when you close a card. With student loans, this happens when you pay off the balance.
A few months after you make that final payment on your student loans, it will no longer be an active line of credit. The credit history associated with it, whether positive or negative, will be removed. Depending on how long you’ve had the account open in comparison to your other lines of credit, it could shorten your credit history.
For example, let’s say these are the three lines of credit you currently have:
Student Loan A: Borrowed 15 years ago Student Loan B: Borrowed 11 years ago Credit Card: Opened 10 years ago
In this scenario, the average age of your accounts is 12 years (15 + 11 + 10 / 3). If you paid off Student Loan A, the average age of your accounts would decrease to 10.5 years (11 + 10 / 2).
The credit history you had from Student Loan A gets wiped from your record, and your credit history is calculated based on the other lines of credit you have active.
It Could Change Your Credit Mix
If you have both revolving credit (like credit cards) and an installment loan (like a student loan), paying off your student loans will shift your credit mix. This could negatively impact your FICO score.
Will Biden’s Student Loan Forgiveness Impact Your Credit Score?
While President Biden’s student debt forgiveness will provide relief to millions of borrowers, it may wind up hurting your credit score temporarily for the reasons discussed above. And while the impact to your score pales in comparison to the relief provided, it’s important to understand why and how your score may drop so you know what to expect.
How Long It’ll Take for Your Score to Recover
If your credit score drops after paying off debt, don’t fret. While quite the bummer, it typically takes around 1-2 months for your score to bounce back (if everything else remains the same).
In the meantime, consider other ways to increase your credit score. Continue to use other lines of credit responsibly, and check on your score periodically to see if it increases as expected.
Final Thoughts from the Nest
While frustrating to see your credit score drop after paying off your student loans, it’s normal. Continue to practice healthy financial habits, and your score should bounce back in no time.
If, after a few months, your score is still the same, consider examining your full credit report to check for errors that may be preventing your score from recovering.
Since 1980, the cost of a college education has nearly tripled, even after adjusting for inflation. Yet, federal aid hasn’t kept up.
So, during his presidential campaign, Joe Biden promised to cancel $10,000 of federal student loan debt per borrower.
In August, he followed through with his promise, announcing up to $20,000 in forgiveness for eligible borrowers. While his plan will provide relief to millions, there are some borrowers that do not qualify.
Whether you don’t qualify due to your income or the type of loans you have, there are other student loan forgiveness programs available that you should consider.
Who Qualifies for Biden’s Student Loan Forgiveness?
Before completely writing off your eligibility, let’s review who qualifies for President Biden’s student loan forgiveness. To qualify, you must:
Have federal student loans
Make less than $125,000 per year, or less than $250,000 per year if married
If you received Pell Grants while in college, and meet the above criteria, you will receive $20,000 in student debt forgiveness. If you did not receive Pell Grants while in college, but meet the above criteria, you will receive $10,000 in student debt forgiveness.
Private student loans are not eligible for student loan forgiveness.
What to Do if You Don’t Qualify for Student Loan Forgiveness
If you don’t qualify for President Biden’s student loan forgiveness, there are other options you should consider.
Other Student Loan Forgiveness Programs
If you’re still itching for your student debt to be wiped out, or at least a portion of it, we don’t blame you. Consider other student loan forgiveness programs, such as the following:
Public Service Loan Forgiveness
Public Service Loan Forgiveness, or PSLF, is a government program intended to ease the burden of student loan debt for eligible public service workers. To qualify, you’ll need to have made 120 on-time, qualifying monthly payments on a Direct loan, on a qualifying repayment plan, while working for a qualifying employer.
Qualifying roles include, but are not limited to:
Teachers, staff members, and administrators at public schools
Law enforcement officers at the federal, state, or local level
Social workers at public service agencies
General employees at federal, state, or local agencies
Military servicemen
Public health professionals such as nurses, doctors, or administrators
Employees at 501(c)(3) organizations
Full-time volunteers at AmeriCorps or PeaceCorps organizations
If you do qualify, your remaining loan balance will be forgiven.
Teacher Loan Forgiveness
Teacher Loan Forgiveness is a federal program providing teachers with debt relief. To qualify, you must be a highly-qualified teacher that taught at a low-income school or educational service agency for at least five consecutive school years.
The amount forgiven depends on the subject you teach:
Full-time, secondary-level science or math teachers: Up to $17,500
Special education teachers: Up to $17,500
Other subjects: Up to $5,000
Nurse Corps Loan Repayment
Nurses working in critical shortage facilities may be eligible for forgiveness through the Nurse Corps Loan Repayment program. To qualify, you’ll need to:
Have attended a qualifying U.S. nursing school
Be either a registered nurse (RN), nurse faculty (NF), or advanced practice registered nurse (APRN)
Work full-time in a critical shortage facility or accredited nursing program
If you qualify, up to 85% of your nursing school debt can be forgiven.
Income-Driven Repayment Loan Forgiveness
Income-driven repayment (IDR) is a federal loan repayment option that bases your monthly loan payment on your income, rather than basing it on your remaining balance. If you make qualifying payments on an IDR plan for 20-25 years, your remaining loan balance can be forgiven.
Federal Direct Consolidation
If you’re struggling to manage several loan payments at once, consolidating may help you.
Federal Direct Consolidation loans allow you to combine multiple federal loans into one. Then, you’re given a new interest rate equal to the average of your initial interest rates, rounded to the nearest eighth of a percent.
While consolidating won’t save you on interest, it could provide you with access to more repayment options, such as a different repayment plan or a longer repayment period.
In some instances, consolidating may be necessary to qualify for certain forgiveness programs. If you have questions about how consolidating may impact your forgiveness opportunities, contact your loan servicer directly.
Private Student Loan Refinancing
If you don’t qualify for student loan forgiveness because you have private student loans, refinancing to a lower interest rate or a shorter repayment period may be your best bet.
A lower interest rate can reduce your monthly payment, as well as how much you pay over the life of the loan. A shorter repayment period will increase your monthly payment amount, but you’ll save on interest in the long run.
To qualify for a competitive refinance loan, you’ll need a stable income and a decent credit score. To explore your options for refinancing, complete the Sparrow application.
Final Thoughts from the Nest
If you’re confident you don’t qualify for President Biden’s student debt relief, don’t worry — there are other options you may qualify for. Start by verifying your eligibility for other student loan forgiveness programs. Then, decide whether consolidating or refinancing makes sense for you. If you’re unsure which route to take, contact your loan servicer for personalized recommendations.
After being accepted into college, it’s important to see what options you have for financing the cost of your education. While scholarships, grants, and federal work-study aid should always be accepted first, you may wind up considering student loans as well. Though the process may seem daunting, we’ve simplified it for you with a step-by-step guide. Keep reading to learn how to apply for student loans.
There are two main types of student loans on the market: federal student loans and private student loans.
Federal student loans are offered by the federal government, while private student loans are offered by private organizations, businesses, and other autonomous entities.
Below is a list of some of the best student loan options. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
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Generally, it is recommended that you borrow federal student loans before private student loans. This is because federal student loans have lower interest rates, more flexible repayment options, loan forgiveness, and stronger borrower protection plans, as opposed to private student loans.
What to Do Before You Apply for Student Loans
Picking up debt is a large responsibility. Before applying for student loans, be sure to exhaust all other possible financial aid options for students.
Student loans need to be paid back in full, along with any interest that accumulates during the life of the loan. This means that you pay for more than what you’ve borrowed, and failure to do so can negatively affect your financial standing.
This is why it is crucial to acquire as much unborrowed money as you can to defray the cost of tuition. There are four ways that you can pay for your educational costs that do not require you to borrow money: scholarships, grants, and work-study.
Scholarships
Scholarships are a form of financial aid that is free and does not need to be paid back. They are offered based on, but not limited to, academic merit, financial need, athletics, your field of study, and any extracurricular achievements.
Scholarships are offered all year round by countless organizations, businesses, states, schools, counties, districts — you name it.
To apply for scholarships, you will generally need the following materials:
An essay answering a prompt that is decided by the organization offering the scholarship
Grants are another form of financial aid that is free and doesn’t need to be paid back. Unlike scholarships, grants are offered on a need-based basis only. This means that you must demonstrate financial need to qualify for a grant.
Generally, grants are offered by the federal government, state governments, institutions, businesses, organizations, etc.
You can find grants with an easy search of the web or through the following search engines:
Work-study is a federal student aid program that provides undergraduate and graduate students with the opportunity to have a part-time job on campus that helps fund their education. It’s important to note that receiving work-study does not guarantee you a job at your institution, but rather, it provides you with the opportunity to obtain one in which funding has been set aside to pay for.
You will see whether or not you received work-study aid on your financial aid package after submitting your FAFSA, along with the amount of aid you are eligible to receive. Unlike scholarships and grants, you will need to work in exchange for the work-study funds you are eligible for.
How to Apply for Federal Student Loans
As highlighted earlier, federal student loans should be your first option if you are looking to borrow student loans. Federal student loans typically have lower interest rates, stronger borrower protections, and more flexible repayment options.
Here’s how to apply for a federal student loan in three easy steps.
Step 1: Submit the FAFSA
The Free Application for Federal Student Aid (FAFSA) is an application that you must submit to receive financial aid from the federal government, your school, and in some cases, scholarships and grants.
The U.S. Department of Education uses your information on the FAFSA to calculate how much federal financial aid you are eligible for. In turn, colleges use this information to calculate your financial aid package. Some scholarships and grants require you to submit your FAFSA results to verify that you are in the eligible financial standing to be awarded.
The FAFSA opens on October 1st and closes on June 30th. It is strongly recommended that you submit your FAFSA as close to the opening date as possible because some financial aid is served on a first-come, first-served basis.
What Information Do I Need to Submit the FAFSA?
You need the following materials (most of which will need to come from your parents) before you submit the FAFSA:
Your Social Security Number (never go off memory!)
Your parent’s/parents’ Social Security Numbers
Tax Information
Tax Returns
IRS W-2
Parent(s) tax information
Family income
Records of untaxed income
Child support
Veteran benefits
Information on any financial assets you have
Cash in your checking and/or savings account
Investments like stocks and bonds
Business assets
Mortgages
If you are completing the FAFSA without the support of your parents, or as an independent, don’t worry. There are other ways to complete the form.
Step 2: Evaluate Your Financial Aid Offer
Your financial aid offers will start trickling in after you receive word from the schools you’ve been accepted to. It’s time to evaluate your financial aid offers and determine which is the best one for you.
Start by creating a spreadsheet with the following four columns:
School Name
Cost of Attendance → The total estimated cost of attending the school, including tuition, housing, meal plans, etc.
Free Aid → Any scholarships and grants you’ve received, whether from the institution itself or external sources/organizations.
Net Price Without Loans → The difference between the cost of attendance and the free aid you’ve received. This is how much you would need to pay out of pocket or borrow in student loans.
School
Cost of Attendance
Free Aid
Net Price without Loans
University A
$73,103
$46,051
$27,052
University B
$67,392
$23,249
$44,143
University C
$54,205
$18,674
$35,531
Creating a method to compare your aid offers is crucial as the actual cost to attend may be quite different from the initial cost of attendance after factoring in free aid. For example, in the above table, you can see how University A has the highest sticker price. Yet, with free aid, it winds up being the least expensive option.
Step 3: Accept the Loans
After identifying the school and financial aid offer that is best fit for you, go ahead and accept the financial aid package. Each school will have its own unique process for accepting financial aid. However, most will provide you with a login to an online portal in which you can click “accept” on the aid you’d like to receive.
Remember: Always accept your offer in the following order: scholarships/grants → work study → loans.
How to Apply for Private Student Loans
As a refresher, experts recommend that you exhaust your federal financial aid options before turning to private student loans. Generally, private student loans have higher interest rates, limited borrower protection plans, and less flexible repayment options.
Additionally, it’s often difficult for first-time borrowers (especially students) who have a limited credit history to qualify for a loan with good terms to begin with.
So, private loans should only be utilized to fill in the gaps that financial aid and federal loans do not cover. If you do opt to borrow one, here are the steps you should follow:
Step 1: Gather the Necessary Information
When applying for private loans, the information you will need will be similar to what is required for the FAFSA.
Your Social Security Number
The cosigner’s Social Security Number (You may not need this if you are not borrowing with a cosigner.)
Tax Information
Tax Returns
IRS W-2
Cosigner’s tax information
Family Income
Proof that you need additional aid (This is usually a form or a letter than can be obtained from your school’s financial aid office.)
Information on any financial assets you have, such as:
Cash in your checking and/or savings account
Investments like stocks and bonds
Business assets
Mortgages
A list of schools you are interested in attending
A list of any grants or scholarships you’ve received and their amounts
Step 2: Know How Much You Need to Borrow
It’s time to calculate how much money you need to borrow. Refer back to your financial aid package. If you did not receive any scholarships or grants, determine what you can contribute out of pocket. Subtract that, plus what you received in federal student loans, from the overall cost of attendance. Doing so will show you how much you need to borrow in private student loans to cover the cost.
Private student loans can cover the entire cost of your tuition, but it is recommended to minimize the amount of money you borrow so you can defray the amount of interest that you accrue.
If you need assistance calculating the exact amount of money that you need to pay, contact your school’s financial aid office for clarification. It’s better to be safe than sorry.
Step 3: Complete the Sparrow Application
Sparrow wants to help you find the perfect lender to finance your educational costs. Our platform helps borrowers just like you find and compare private student loans across 15+ premier student loan lenders. You can also compare how different cosigners affect the loan to determine which option is best for you.
The Sparrow application is free and will not affect your credit score. When you’re ready to begin the private student loan process, complete the Sparrow application.
You can also reach out to your school’s financial aid office for assistance with finding a private student loan lender. You can ask your institution for a list of preferred lenders or speak with a financial aid worker whose job is to assist you with any financial matters.
Step 4: Compare Student Loan Offers
When you’re comparing student loans, here are some key factors that you should look out for:
Cosigner
Do you need a cosigner to qualify for the loan with you? Do you have a cosigner who is willing to sign the loan with you?
Does the loan have a cosigner release policy, and if so, what is it?
Interest Rate
What is the interest rate of the loan?
Do you have a variable interest rate (an interest rate that changes based on the economy) or a fixed interest rate (a set interest rate that stays the same)?
Does the loan offer a grace period (a period of time where you do not need to make loan payments) after you leave school, or will you be making payments during the school year?
Loan Origination
Does the loan have an origination fee (a fee that you need to pay to “create” the loan?)
Borrower Protection
Does the loan offer loan forbearance and deferment?
Consider your loan priorities as you sift through options: do you prefer a loan with a short repayment plan and a low interest rate, or a loan with cosigner release terms? Is loan forbearance or deferment a must-have, or do you think you can manage without it?
Speak with your parents, your school’s financial aid office, and adults that you trust so you can make the best decision for yourself. You should be thoroughly aware of all the loan terms and have a plan for repaying the loan.
Think long-term and consider where you’ll be one year, five years, or ten years ahead with the loan.
Step 5: Select the One You Like the Best and Submit A Formal Application
After you’ve identified the private student loan that best fits your needs, submit a formal application for the loan.
If you are submitting multiple formal applications for private student loans, submit your applications within 30 days of each other. By doing this, you will not incur a hard inquiry for each loan that you apply for. Rather, it will be viewed as “rate shopping,” and you will only receive the impact of one hard inquiry.
If you are approved for the loan, the loan amount will be disbursed directly to your school.
Frequently Asked Questions About Applying for Student Loans
Do all students qualify for student loans?
No, not all students qualify for student loans. Both federal and private loans have a baseline of requirements that borrowers must meet to be eligible to apply for the loan, such as attending an accredited university, meeting the age requirement, being a U.S. citizen in certain cases, etc.
Even if you do meet the baseline requirements, this does not mean that you qualify for all federal and private loans. With private student loans, most students do not qualify on their own and usually require a cosigner to help strengthen their loan application for private student loans.
Be sure to use Sparrow to check whether you qualify before submitting a formal application and incurring a hard credit check.
How long does it take for a student loan to be approved?
It can take anywhere from a few weeks to a few months for a student loan to be approved. The time needed to approve a loan depends on the lender.
When do you need to apply for student loans?
The Free Application for Federal Student Loan (FAFSA) opens on October 1st and closes on June 30th. You must submit the FAFSA to be eligible for federal financial aid, including student loans, grants, work-study, and scholarships. Submit your FAFSA as close to the opening date as possible.
After accepting all federal financial aid, you should apply for private student loans as early as possible. It often takes several weeks for a loan to be approved. You will want to be approved for the loan and receive the loan amount before the funds are due on your school so that you don’t rack up any late payment fees.
Do student loans go to your bank account?
No. Once approved, the loan amount is disbursed directly to your institution. Student loans do not go to your bank account.
Can you be denied a student loan?
Yes, you can be denied both federal student loans and private student loans.
You can be denied for federal student loans based on financial eligibility requirements, having defaulted on a previous federal loan, incarceration, and other reasons. Address the reason why you were denied, and apply again the following year.
For private student loans, you usually are denied for a low credit score, a weak credit history, or an insufficient cosigner. Consider applying again after raising your credit score and/or with a cosigner with a stronger credit score.
Closing Thoughts From the Nest
Applying for student loans can be a long process, so get started as early as you can. Remember to maximize scholarships, grants, work-study, and federal financial aid as much as you can before applying for any private student loans.
If you need any assistance finding private student loans, consider using Sparrow’s online search tool to compare loan offers from 15+ lenders.
Managing many student loan payments at once can be very difficult. That’s why student loan consolidation sounds so enticing. You can streamline your payments into one and make it easier on yourself. It sounds like the perfect solution. However, it’s essential to think about student loan consolidation pros and cons.
Before you start the application process, you should learn about the pros and cons of student loan consolidation so you can make the best decision possible. Lucky for you, this article is your guide to all things consolidation. Let’s get into it.
What is Student Loan Consolidation?
Student loan consolidation is the process of combining all your federal student loans into one. This is done through a Direct Consolidation Loan that you’ll apply for. A Direct Consolidation Loan is a form of Direct Loan offered by the government.
If you noticed that this sounds similar to student loan refinancing, you wouldn’t be the only one. Many people see consolidation and refinancing as the same thing. The reality, though, is that they’re pretty different. Here are a few differences.
You can only consolidate federal student loans. Meanwhile, you can refinance both federal and private student loans.
While an advantage of refinancing is the possibility of a lower interest rate, you probably won’t get that with consolidation. When you consolidate your loans, they will average all of your loan interest rates together and then round up to the nearest ⅛ percentage. This means it will most likely stay the same or go up.
When you consolidate, you’ll retain access to all of your federal benefits. Some loans, like the Federal Perkins Loans, need to be consolidated to access those benefits. Meanwhile, refinancing your federal loans would cause you to lose them.
Pros of Consolidating Student Loans
Simplifies Managing Your Debt
One advantage of student loan consolidation is it simplifies your debt payment. If you have multiple student loans, you understand how hard it can be to pay each one on time. By consolidating, you’ll only have one student loan instead of several. That way, you only worry about making a single payment per month.
Can Extend Your Repayment Term
When you consolidate, there is the possibility of getting an extended repayment plan. This extended plan can provide you the extra needed time to be able to pay off the loan. Plus, with an extended repayment, usually comes a lower monthly payment.
Can Lower Your Monthly Payment
As we mentioned, you might be able to lower your monthly payment when you consolidate. Typically, this will only happen if you get a longer loan term. This is because you’ll have more time to pay off the same amount of money, so you’ll pay less monthly.
For example, paying a $100 loan off in two months means making $50 monthly payments. If you extend the loan term to five months, then you’ll only pay $20 monthly. It’s the same concept with getting a longer loan term.
Cons of Consolidating Student Loans
You Could End Up Paying More
Unlike refinancing, you most likely won’t get an interest rate reduction through student loan consolidation. Your interest rate will either stay the same or go up. If you do get a higher interest rate, it would add to the overall cost of the loan and raise your monthly payments. So, you might have to pay more if you consolidate.
If You Consolidate Privately, You’ll Lose Federal Loan Benefits
When you consolidate privately, you will lose your federal benefits. This includes benefits like income-based repayment plans and loan forgiveness. So, you’ll want to think seriously about whether you’ll need these benefits or not. If you think you will, don’t consolidate privately.
You Could Pay More in Interest
As stated, when you consolidate, you could get a longer loan term. Although a longer term can be great, it does mean that you will pay more in the long run. Why? Because there will be more time for interest to build, and that interest will add to the overall cost.
For example, say you have a $30,000 loan with a 5% interest rate on a standard repayment plan of 10 years. Over those 10 years, you’ll pay an extra $8,184 in interest for a total of $38,184. If your loan term got extended to 20 years, then you’ll pay an extra $17,517 in interest for a total of $47,517.
FAQ About Consolidating Student Loans
Will consolidating my student loans hurt my credit?
No, Direct Consolidation Loans don’t have any kind of credit score requirement or even do a credit check. So, you don’t have to worry about anything popping up on your credit report. Your score will remain the same.
If you opt to refinance and consolidate privately, you will need to pass a credit check to qualify. This may temporarily hurt your credit score.
Does consolidating student loans lower your interest rate?
No, it does not. Your interest rate will most likely stay the same or go up. When determining your interest rate, the government takes the weighted average of all your loans’ interest rates and rounds it up.
Student loan consolidation and refinancing through a private lender, however, will likely get you a lower interest rate.
Is it better to consolidate or refinance student loans?
It depends on your situation since each has its pros and cons. Consolidating helps you better manage your debt, but you could end up spending more money. Refinancing can help you save a lot of money and manage your debt, but you would lose federal benefits. It’s really up to you and what your priorities are.
To help you make the decision, here’s a list of the top 4 refinance rates. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
It’s a big decision to make, and student loan consolidation has its pros and cons. Be sure to take the time to think about it and figure out what’s best for you. That way, no matter what happens, at least you know you made the most well-informed decision.
If you choose to take a different route instead, like refinancing, use Sparrow to help you compare refinance rates across multiple lenders. The Sparrow application will match you with what you best qualify for from our partnering lenders. A lot of them offer great refinancing options. Plus, you’ll be able to refinance your federal and private loans together. To get started, fill out the Sparrow application.
If you’re a student loan borrower, you’ve probably heard the term “student loan servicer” before. But what exactly is a student loan servicer, and why does it matter?
In this blog post, we’ll dive deeper into everything you need to know about student loan servicers, including how to find out who your servicer is, what services they offer, and how to navigate the sometimes-complicated world of loan repayment. Whether you’re a recent grad or a seasoned borrower, understanding your student loan servicer is a key step toward financial freedom.
What is a Student Loan Servicer?
In short, a student loan servicer is the middleman between you and the lender that you borrowed from. Servicers collect your loan payments, keep track of your account, and offer support for a range of repayment options, including loan forgiveness and payment postponement.
Over 92.7% of all student debt is originated by the federal government, making the US government the largest student loan lender. Regardless of the type of loan, all federal student loans are serviced by loan servicers. Loan servicers are also responsible for publicizing and ensuring all borrowers know of the possible programs and services they are eligible for. This includes items like different repayment plans, forbearance and deferment, or even forgiveness completely.
Although lenders do have the duty to make sure you are aware of the potential programs that could save you thousands of dollars, they do not have power to alter your payment structure nor your terms. As intermediaries, they act on your behalf to convey and prove your case to the lender in hopes of qualifying for certain relief programs.
How to Find Your Student Loan Servicer
Before finding who your student loan servicer is, you will need to find out if you have a federal or private student loan. Once you figure that out, you can use certain databases like the National Student Loan Data System (NSLDS) andlog in with your FSA ID. This system searches for federal student loan servicers. Once you’re in, you’ll see a comprehensive summary of all your federal student loans, including the types of loans you have, the amounts and outstanding balances of each loan, your interest rates, and who your loan servicer is.
Although, there have been some changes in the private student loan servicing industry, meaning your existing servicer may be transferred. For example, if your previous loan servicer was Navient, they are now transferring all loans toAidvantage, a new servicer that is part ofMaximus.
If you haveprivate student loans, you can take a look at your credit reports or loan statements to find your loan servicer.
How to Contact Your Student Loan Servicer
There are many different loan servicers, some of which only deal with private and/or federal loans. In most cases your loan servicer will be one of the following:
Most of the time, federal loan servicers can’t be changed, and if they are changed, it’s not because of a request but rather something to do with the loan itself. However, there are a couple ways you could have your loan servicer changed. The most common way this is done is through refinancing your existing loans. To learn more about refinancing, what it is, and if you should potentially refinance, read our in-depth explanation of student loan refinancing.
What Should I Do if My Student Loan Servicer Isn’t Helping?
Unfortunately, there have been many legal battles where loan servicers have been found guilty of purposely being detrimental to students. Navient, in this specific case, was found guilty of purposely not recommending or even making certain income-driven repayment plans known to borrowers, but rather advising them into forbearance. Fortunately, after this huge legal battle, Navient was forced to settle over $1.7 Billion in student loans. This lawsuit forced other servicers, mostly private, to change their guidelines and actually ensure that they were working for the borrowers, in their best interest.
To summarize, student loan servicing is a completely different entity than student loan lenders. Operating as a middleman between the lender and the borrower, they manage and perform administrative duties surrounding the loan. Depending on your loan status, whether it is private or federally originated, you will find different servicers that are there to help you.
According to an Education Data report, the average student loan debt is around $39,351 per borrower. As a result, it can be hard to make the average student loan monthly payment. If you’re currently experiencing this and are trying to figure out how you can cut costs, you’re in the right place.
Lucky for you, you can lower your monthly payments. How? Here is everything you need to know about monthly payments and how to lower them.
What is the Average Student Loan Monthly Payment?
According to the above report, the overall average student loan monthly payment is $460. This can change, however, depending on a variety of factors, such as degree type. Typically, the higher the degree, the more money you’ll owe. Yet, even within a degree, the average monthly payment can vary. Take a look at the table below to better understand.
Low Payment
Average Payment
High Payment
Associate’s Degree
$281
$333
$384
Bachelor’s Degree
$354
$448
$541
Master’s Degree
$350
$695
$1,039
Graduate Degree
$575
$1,210
$1,844
Professional Degree
$521
$1,537
$2,553
The reason these numbers vary is due to additional factors like salary and debt owed. Typically, people with larger salaries can afford to pay more. Similarly, the more debt you owe, the higher your repayment cost will be.
That’s why it’s important to understand these numbers. You can better understand how your financial situation influences your monthly payments. However, these factors (such as your degree type, salary, and debt owed) aren’t the only things impacting your payments.
How Your Interest Rate Impacts Your Monthly Payments
Interest rates determine the overall cost of borrowing a loan. They’re usually described as a percentage of the loan principal.
Interest rates can be pretty impactful. Education Data reports that about 67% of borrowers’ total cost of repayment is interest. It’s important, then, to get as low an interest rate as you can to keep those costs down.
For example, let’s say you took out a $30,000 loan with a 5% interest rate. You’re on a payment plan with a repayment period of 20 years. If you make only minimum monthly payments for the entire life of the loan, you’ll pay $47,517 with monthly payments of $198. But, look at what happens if we lower that interest rate to 4% and keep all other factors the same. Now, you’d pay $43,631 with a monthly payment of $182.
Loan 1
Loan 2
Balance
$30,000
$30,000
Interest Rate
5%
4%
Repayment Period
20 years
20 years
Monthly Payment
$198
$182
Total Cost
$45,517
$43,631
Notice how much money the lower interest rate saves you despite having the same repayment period and payment plan. Just that one percent decrease would save you $16/month, $192/ year, and around $2,000 over the course of the loan. As you can see, understanding your interest rate is extremely important. Especially on larger loan balances, or with higher interest rates, it can be the key to lowering your monthly payment significantly.
How to Lower Your Monthly Payment
Now that we better understand your monthly payments, let’s get into how you can lower them.
Refinance
By refinancing your student loan, you’re letting a private lender pay off your current loans. They’ll then give you a new private loan to cover what you owe them. You can get better terms on this new loan such as a lower interest rate. Thus, securing these new terms can lower your monthly payment and help you save money.
To qualify for refinancing, you’ll need to have a good credit score and steady income. Individual lenders may also have additional requirements you need to meet. Be sure to ask them about those before applying.
Rather than searching for refinance lenders one-by-one, we recommend starting the process with an automated student loan refinance search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Here is a list of the top refinance rates:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
If you have multiple federal student loans, consolidating them can be a good idea. You’ll do this through a Direct Consolidation Loan. When you get a Direct Consolidation Loan, you’re combining all your federal loans into one. You’ll then only have one monthly payment to make as opposed to a few payments a month. Additionally, consolidating certain loans, like the Perkins Loan, makes them eligible for loan forgiveness.
It’s important to note that consolidating may not get you better terms like a lower interest rate. Still, it can simplify your monthly payments which, in turn, lowers how much you’ll pay per month.
To qualify, you must have loans in repayment or the 6-month grace period. If you’re currently still attending college, you cannot consolidate your loans yet.
Switch Repayment Plans
A more budget-friendly plan can lower your monthly payments. Federal borrowers, for example, have access to income-driven repayment (IDR) plans. These plans base your payments on your discretionary income. The idea is that by basing the payments on your annual income, it’ll help keep them more affordable for you.
Meanwhile, private loan borrowers can talk to their lenders to see if they offer similar plans. While these plans may not have as many benefits as an IDR plan, they can still save you money each month. Reach out to your lender if you have questions.
Pursue a Job with Debt Payoff Benefits
Imagine working for a company that offers to pay you extra money to put toward your student loans. It sounds like a dream, but it isn’t. Companies are already starting to offer debt payoff benefits, and many more are planning to add them in the future. That extra money they pay you means less money that you’ll have to pay for your monthly payments out of pocket.
Final Thoughts from the Nest
Your monthly student loan payment might be one of your biggest expenses. So, it’s worth knowing this information to help you better understand it and, hopefully, lower it. If you decide to lower your payment through refinancing, look no further than Sparrow.
Sparrow offers an application that will match you to what you best qualify for from our 15+ partnering lenders, many of which provide competitive refinancing offers. From there, you can compare the different lenders you’re interested in before making a final decision. Fill out the Sparrow application today to get one step closer to lowering your monthly payments.
When paying for college, a few thousand here and there might not seem like much. But overtime, it adds up quickly. And, with more expensive programs and advanced degrees, it’s hard to dodge the colossal tuition bills.
If you’re staring at a student loan balance of over $200,000, you might be feeling overwhelmed, and rightfully so. It may be challenging to conceptualize how one could possibly attack such a mountain of student loan debt.
The good news is this: It’s entirely possible, and we’re here to help you break it down. Here’s how to pay off $200,000 in student loans.
Student loan forgiveness programs can wipe out all, or some, of your student loan debt. That, combined with the very specific criteria of some programs, makes it a necessary starting point.
Oftentimes, student loan borrowers are unaware of such programs and their requirements, only learning about them when they are further along in their debt payoff journey. For example, the Public Service Loan Forgiveness program requires recipients to have made 120 qualifying monthly payments on an income-driven repayment plan. It is not uncommon for borrowers to have made payments for years without recognizing that they don’t count toward forgiveness as they weren’t on the proper repayment plan.
Thus, it’s important to consider these programs as soon as possible in your debt payoff journey. Making yourself aware of the options available can help you begin the process of meeting the necessary criteria before making non-qualifying payments.
Consider Refinancing Your Student Loans
If you have high-interest loans, refinancing should be your next step. Refinancing, in a simple sense, is the process of swapping your current loan(s) for one with a better interest rate or terms.
If affording your monthly payments is your main concern, refinancing to a longer repayment term will be helpful. By doing so, your monthly payments will decrease. Be aware, however, that a longer repayment period typically leads to paying more in interest over the life of the loan.
If you’d simply like to get out of debt faster and pay less over the life of the loan, refinancing to a lower interest rate and/or a shorter repayment period will be a great route. Knocking down your interest rate, even just a few percentage points, can save you thousands over the life of the loan.
You can refinance all types of student loans, including both federal and private student loans, regardless of whether they were for medical school, law school, or a simple undergraduate degree. However, you’ll need a strong credit score and stable income to qualify.
If your financial situation isn’t up to par in those areas, consider adding a creditworthy cosigner to the loan. If adding a cosigner isn’t an option, consider working with a lender that has low credit score requirements.
Make Sure You’re Debt Payoff Plan is Strong
While throwing any and all cash on your student debt is a great start, having a more well-thought-out debt payoff strategy will likely generate better results. Here are a few ways to strengthen your approach:
Use the Avalanche Method
While there are a variety of debt payoff strategies, the Avalanche Method will save you the most money over the life of the loan. With this method, you will make minimum monthly payments on all loans. Then, make monthly surplus payments on the loan with the highest interest rate until it is paid off.
Once that loan is gone, take the amount you previously allocated toward it, and start directing it toward the next highest interest rate loan until that loan is gone, too. Continue this process until all loans are paid off.
Make Biweekly Payments
Student loan interest typically compounds daily. So, by the time you’ve made it to your monthly payment, interest has accrued for nearly 30 days.
To get ahead of the interest, and make more of your payment go toward the principal, take the amount you’d contribute each month and divide it into two payments. Then, make that half payment every other week, instead of once per month. While a small change, it can reduce how much you pay over time quite significantly, especially when done with high-balance loans.
Make Surplus Payments
If you happen to get a raise, a bonus at work, or a hefty tax refund, consider throwing it at your student debt. While tempting to spend that cash on more exciting purchases, putting it toward your debt may be more rewarding in the long run.
Cut Back Expenses Where You Can
Digging yourself out of $200,000 in student loan debt will take some discipline. If you don’t already utilize a budget to guide your spending, now is the time to make one.
A budget will allow you to track your income and expenses, giving you a better idea of where you can cut back. For example, if you happen to spend $200 per month on coffee, consider cutting that in half and directing the remainder to your debt.
Negotiate a Raise or Pick Up a Side Hustle
If cutting back on expenses isn’t possible, consider increasing your income through negotiating a raise or picking up a side hustle. While it may only lead to a few thousand dollars per year, it can make a serious dent in your debt.
For example, let’s say that your increased income leads to an additional $500 per month. On a $200,000 loan balance with a 4.5% interest rate and a 10-year repayment term, that $500 monthly surplus payment would save you over 2 years of repayment and $11,300 over the life of the loan.
Find a Job with Debt Payoff Benefits
Just as some employers provide healthcare benefits or a 401k match, some provide debt payoff benefits as well. While it may seem too good to be true — I mean, an employer paying off your debt is pretty sweet — it might be more common than you think. In fact, around 17% of employers offer student debt assistance, and another 31% plan to offer it in the future.
If you’re in the market for a new role, consider searching for one with debt payoff benefits. Companies like Aetna, Chegg, Fidelity Investments, Google, Hulu, and Lockheed Martin all offer competitive debt payoff benefits, some providing up to $6,000 per year.
FAQ About Paying Off a Lot of Student Debt
How long will it take me to pay off my student loans?
It depends on the amount of debt you have, your interest rate, your repayment period, and your debt payoff strategy. To find the exact timeline for your specific situation, use a debt payoff calculator.
How much student debt is too much?
There is no numerical threshold that is widely recognized as “too much” student debt.
For example, the average dental student graduates with nearly $300,000 in student loan debt. However, with dentist salaries often in the $150,000-$200,000 range, it may not be an unreasonable amount of debt for that industry.
That amount of debt, however, for an entry-level civil engineer with a starting salary of roughly $60,000 may be overwhelming. What is considered “too much” debt is entirely subjective.
Is it better to have savings or pay off student loans?
Before dipping into savings to pay off student loans, be sure to have a solid emergency fund worth 3 to 6 months of expenses.
If you’ve already refinanced your student debt once, you know just how much it can save you. For example, borrowers that use Sparrow to refinance save, on average, $17,000 over the life of their loan.
With that in mind, you may be curious if you can refinance more than once. And if so, how many times can you do it? Here’s what you need to know.
Can You Refinance Student Loans Twice?
You can refinance your student loan debt as many times as you’d like. While common to do it once, you may be able to save even more by refinancing again.
For example, let’s say you started with a $30,000 student loan balance at a 6.8% interest rate with a 10-year repayment term. You refinance when you’re fresh out of college to a loan with the same balance and repayment term, but a 4.25% interest rate instead. Your new loan will save you $38 per month, or around $4,551 over the life of the loan.
Now, let’s say you opted to refinance again one year into paying off that loan. Your balance is now $26,029.05, and there are 9 years left in your repayment term. You refinance to a new loan with a 3.5% interest rate and a 5-year repayment term. While your monthly payment would increase, you would save another $2,958 over the life of your loan.
Initial Loan
1st Refinance, immediately after college
2nd Refinance, 1 year after making payments on the first refinance loan
Starting Balance
$30,000
$30,000
$26,029.05
Interest Rate
6.8%
4.25%
3.5%
Repayment Term
10 years
10 years
5 years
Monthly Payment
$345
$307
$474
Total Paid Over the Life of the Loan
$41,429
$36,878
$28,411
By the time you refinance a second time, you will have already paid $3,684 toward your loan ($307 monthly payment x 12 months). However, including that amount, you will only pay $32,095 total after refinancing twice. Compared with your initial loan terms, you will save $9,334 over the life of the loan.
When to Consider Refinancing Multiple Times
While refinancing more than once can make for considerable savings, it’s important to consider a variety of factors before doing so. Here are a few instances in which it does make sense to refinance multiple times:
If the savings will be significant. Refinancing is intended to make repaying your debt more manageable or less expensive. If you can save a decent chunk of cash by refinancing again, it likely makes sense to do so. However, consider whether the savings is worth going through the refinancing process again.
If your credit score has increased. If your credit score has improved since the last time you refinanced, you will likely qualify for better terms or a more attractive interest rate. If it has not, however, it may be challenging to qualify for a better offer than what you currently have.
If the origination fees are either low or nonexistent. While the majority of student loan lenders don’t have origination fees, some do. If the origination fee is so high that it equals, or outweighs, what you will save by refinancing, it may not make sense to do so. However, if the origination fees are low, or if there is no origination fee at all, refinancing again will likely save you money.
If you want to release a cosigner. If your current loan has a cosigner, and does not allow for cosigner release, you may want to refinance again to release them from their cosigner obligations.
Is It a Bad Idea to Refinance Multiple Times?
Refinancing your student loans multiple times isn’t a bad idea if you are in fact receiving a better interest rate or terms.
Submitting a formal loan application will result in a hard credit check, however, which will temporarily hurt your credit score. If your credit score isn’t in a good place, refinancing again may not be in your best interest.
How Long Do You Have to Wait to Refinance Again?
Legally, there is no limit to the number of times you can refinance within a certain period of time. So, theoretically, you could refinance a million times if you wanted to.
However, most refinance lenders cap the number of times you can refinance with them. For example, some may limit you to one refinance per month or per quarter.
What to Consider Before Refinancing Your Student Loans
Before refinancing your student loans, consider the following:
The type of loan you have. If you have federal student loans, be sure to weigh the pros and cons of refinancing them prior to doing so. If you do, you will lose access to all federal loan benefits such as income-driven repayment plans and federal loan forgiveness.
Your interest rate. While you can score a lower interest rate by refinancing, you may have already hit the lowest possible rate you can get. To see if it’s even possible to qualify for a lower rate, complete the Sparrow application. This will allow you to compare prequalified rates side-by-side, giving you insight into what you may qualify for.
Think about your current financial situation. Refinancing to a shorter repayment term will likely cause your monthly payment to increase. Make sure you’re able to afford that payment prior to refinancing again.
The credit impact. Submitting a formal loan application will result in a hard credit inquiry, which will temporarily hurt your credit score. While your credit score will recover from the hit over time, it’s important to make sure refinancing makes sense before clicking “submit” on a formal loan application. Minimize the number of applications you submit, or do so within the recommended FICO and VantageScore timeframes so the inquiries are recognized as rate-shopping.
The overall economy. Interest rates are impacted by macroeconomic factors, such as the market. If the market is in good shape, you may qualify for a better interest rate. If the market is not, however, it may be better to postpone refinancing until it is.
If your loan is within a grace period or forbearance. Refinancing while your student loan is within a grace period or a forbearance, such as the federal forbearance, will cause loan payments to begin. If your loan is within either of these periods, it’s best to hold off on refinancing.
FAQ About Student Loan Refinancing
How soon is too soon to refinance a student loan?
You can refinance your student debt as early as you’d like. There is no specific timeframe in which refinancing is considered “too early.”
How often is too often to refinance student loans?
You can refinance your student loans as often as you’d like. However, you may reach a point in which you can no longer qualify for a better interest rate or terms, simply because you’ve already landed the most advantageous option available.
Does refinancing your student loans hurt your credit?
Refinancing your student loans will cause a hard credit inquiry which will temporarily impact your credit score.
Final Thoughts from the Nest
Refinancing your student loans more than once can save you some serious cash over time. Before deciding if it’s right for you, see what you prequalify for with Sparrow. Then, compare your current loan with your new loan offers to see how much you can save.
Choosing to refinance your student loan can be a difficult decision. You must consider your loan type, interest rate, and income. The decision is not easy, so here’s what you need to know before moving forward with it:
What is Student Loan Refinancing?
When you refinance your student loans, you’re allowing the lender pay off your current loans. You’ll then get a new private loan to pay your new lender back. This new loan often comes with better terms than your first loan (such as a lower interest rate or monthly payment).
Reasons to Refinance Your Student Loans
Lower monthly payments: Refinancing lets you alter your payment plan. Accordingly, you can choose to extend the repayment term and lower monthly payment.
Pay off loans faster: If you’re in a better financial position and now want to pay off your loans faster, refinancing can let you shorten the payment period. Although this may result in higher monthly payments, it can save you a significant amount in the long run
Lower interest rates: If you believe you now qualify for a lower interest rate than before, refinancing can help you save thousands of dollars over the loan’s lifetime. Factors such as improved credit score, more stable income, or better macroeconomic conditions can help you secure better rates for your new loan.
Simplified payments: Refinancing lets you group all payments into one (instead of owing multiple monthly payments to various different lenders).
Reasons NOT to Refinance Your Student Loans
Refinancing may not be the best choice in certain situations:
Loss of Federal Loan Benefits: Federal student loans provide benefits and protections not available with private loans. These include student loan forgiveness, income-driven repayment plans, and the suspension of payments and interest accrual. Refinancing results in the loss of these benefits. If you plan to utilize these benefits, it’s best to hold off on refinancing.
Bad Loan Timing: If you are near the end of repaying an existing loan, refinancing may be a bad decision. Doing so would subject you to new terms and longer repayment periods.
How to Find the Best Student Loan Refinance Option
Finding the right refinancing option should be a simple. Use Sparrow to find the best student loan refinance option for you. Sparrow shows you the most important information and simplifies the entire process.
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Graduating college is the beginning of a new chapter in your life. You may be moving out of your parents’ house, landing an exciting new job, or heading to graduate school. Regardless, managing your finances post-graduation is crucial in navigating your new adult life. To help keep your finances in order, consider making a college graduate budget.
A budget is a financial tool designed to help you manage your income and expenses so you can stay on track to reaching your financial goals. Here’s how to create a budget as a college graduate.
How to Create a Budget After Graduating College
Step 1: Get Real About Your Income
Life post-graduation will likely come with a full-time job, often earning you more than the standard part-time college gig. While exciting to have more income to work with, it’s important to understand how much you’ll actually have to spend on a regular basis.
Remember that your salary is the amount you earn before taxes, or your gross income. Your salary also doesn’t factor in other potential deductions, such as your 401k contribution or employer-sponsored health insurance.
For example, let’s say you make $60,000 per year. You decide to contribute 10% of your gross income to your 401k, or around $500 per month. If you live in Missouri, for example, you’d take home $39,911.93 after contributing to your 401k and after tax. This averages out to around $3,325 per month.
Step 2: Determine Your Fixed Expenses
There are a variety of fixed expenses you may incur post-graduation, such as:
Living Expenses/Rent
Utilities
Groceries
Student Loan Payments
Insurance
Transportation/Car Payment
Phone Bill
Pet Expenses
Fixed expenses are those that remain the same each month. Oftentimes, but not always, they are necessary expenses, as well.
Depending on your lifestyle, your fixed expenses may differ from the list above. For example, if you are living at home rent-free with your parents, your fixed expenses may be:
Student Loan Payments: $250
Transportation Costs: $100
Therapy Appointments: $200
Gym Membership: $40
Your fixed expenses will create the baseline for your budget, coming before factoring in any “wants.”
Now, subtract your fixed monthly expenses from your monthly income. What you have left over will be what you can contribute to your savings goals and nonessential spending.
For example, if you earn $3,325 per month, and have fixed monthly expenses totaling $590, you’d be left with $2,375 for discretionary spending.
Step 4: Determine Your Savings Goals
Before spending your remaining income, map out your savings goals and prioritize contributing toward them. Remember, you may have larger expenses coming up in this phase of life, such as:
A down payment on a home
Moving out/moving to a new city
Furnishing a new home
Buying a car
A wedding
Having children
Set a realistic timeline for each financial goal you have. Then, figure out how much you need to contribute toward each savings goal per month to achieve it. Subtract those figures from your remaining income after factoring in fixed expenses.
Step 5: Think: After Graduating College, What Does a Full Life Look Like to Me?
As a college graduate, for a budget to be successful, it has to support a life you truly enjoy living. While you’ll likely have several necessary expenses to put in your budget, such as rent or student loan payments, it’s important to prioritize “wants” as well.
Think to yourself: What does a full life look like to me? What do I really value that is worth spending money on?
Getting clear on what you enjoy spending on allows you to budget appropriately so you can effectively balance both “needs” and “wants.” It can also help you dodge the pressure to keep up with those around you, or spend on items or experiences you don’t value. For example, if you don’t value spending money on happy hour after work, but your coworkers do, it’s okay to order a less expensive beverage or skip out on the excursion altogether.
Step 6: Look at Your Spending from Previous Months
To determine how much wiggle room you have to spend on “wants,” look at your spending habits in previous months. Find the average of what you’ve spent in different categories, and use that information to set guidelines for your budget after graduating college.
For example, let’s say you spent $200 on eating out in March, $300 in April, and $150 in May. On average, then, you spend around $216 per month on eating out. If that amount feels reasonable to you, use it to set your limit for that budget category.
This is also a great time to see where you can cut back. If you find yourself overspending in certain categories, be realistic about what that means for your overall budget. For example, if spending $500 per month on entertainment means delaying reaching your financial goals, it may be worthwhile to scale back your spending in that category.
Step 7: Map Out All Your Budget Categories
Once you know what your fixed expenses are, how much you need to contribute to your savings goals, and what you’d like to spend the remainder on, you can set your budget categories.
As a college graduate, some common budget categories are:
Rent
Gas
Insurance
Public Transportation
Student Loan Payments
Car Payment
Entertainment
Groceries
Restaurants
Shopping
Subscriptions
Gym Membership
Self Care
Medical Expenses
Donations/Charity
Pick whichever categories are relevant to you and your lifestyle. Then, assign a spending limit to each category, ensuring that all expenses, including savings goals, add up to your total monthly income.
With an income of $3,235 per month, your budget may look something like:
Budget Category
Amount Allotted
Spent
Left Over
Rent
$1,500
Transportation
$100
Student Loan Payments
$250
Therapy Appointments
$200
Gym Membership
$40
Emergency Savings
$500
Restaurants
$220
Entertainment
$300
Groceries
$125
Credit Card Payment
$90
Total
$3,325
As the month goes, periodically examine your spending. For example, if after one week into the month, you’ve spent $100 of what you budgeted for groceries, you may need to cut back in other categories for the remainder of the month to ensure you can cover grocery expenses going forward.
Likewise, total up your overall spending at the end of the month. This will allow you to see where you may have underspent, allowing you to direct the remaining amount to another expense such as your savings goals.
Bonus Step: Automate Your Budget
If managing your budget manually sounds tedious, consider using a budgeting platform such as YNAB or Mint. Both platforms will allow you to set budget categories, then sync your account with your bank. Then, your expenses will automatically be tracked and categorized, simplifying the process quite a bit.
Managing your finances can be complicated, especially if it’s your first time giving it a go. So, as you begin utilizing your budget, remember to be gentle with yourself.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The content displayed on this page is intended for educational purposes only and should not be taken as financial advice. Please consult a professional for personalized financial advice.
Making student loan payments with a credit card may be tempting, especially if you don’t have the cash to do so — or if you want to earn extra rewards on your card. That said, it isn’t always possible, nor is it recommended in most cases.
Before attempting to pay your student loans with a credit card, carefully consider the pros and cons. In many instances, other options will likely be a safer route.
Can You Pay Your Student Loans with a Credit Card?
Simply put, lenders incur a fee when a borrower pays via credit card, so it isn’t ideal to offer it as an option. While federal loan servicers do not accept credit card payments, some private lenders do. However, it’s typically only allowed in special circumstances, such as when a borrower has been unable to make payments.
Can You Transfer Student Loans to a Credit Card?
Some credit card companies offer 0% APR balance transfers. With this offer, borrowers can transfer their remaining student loan loan balance to a credit card and receive 0% APR for a period of time.
While it may seem appealing, you’ll likely incur a fee on the transferred balance. Interest will also begin to accrue once the offer period expires, which could lead to intense interest charges.
Pros and Cons to Paying Your Student Loans with a Credit Card
Before opting to make a payment with, or transfer a balance to, your credit card, consider the pros and cons of each.
Making Payments with a Credit Card
If your lender allows it, making payments on a credit card could save you from missing a payment. However, you should consider the downsides of doing so as well.
Pros
Cons
It could prevent you from missing a payment.
Credit card interest rates are often far higher than student loan interest rates. So, while you may avoid a missed payment, interest that accrues on your new credit card balance will likely cost you more than if you incurred a late fee on your student loan.
If you are using a third-party service, such as Plastiq, to facilitate the loan payment, you will likely incur a transaction fee.
Transferring Your Loan Balance to a Credit Card
A 0% APR offer may sound enticing, but there are downsides to this method as well.
Pros
Cons
You may be able to save on interest costs during the 0% APR period.
The interest-free period will be short-lived. After the offer ends, your balance will begin to accrue interest at the normal interest rate of the card. Knowing that the average student loan interest rate is 5.8%, and the average credit card interest rate is 17.98%, it makes significantly more sense to not transfer your loans to a credit card, unless you believe you can pay them off entirely during the 0% APR offer period.
Student loans have more protections, such as deferment and forbearance, than credit cards. If you transfer your loan balance to a credit card, you will lose access to those benefits.
Other Ways to Get Assistance With Loan Payments
If you are unable to keep up with your student loan payments, but using a credit card isn’t an option, consider these alternatives:
Opt In to an Income-Driven Repayment Plan
If you have federal loans, consider opting in to an income-driven repayment (IDR) plan. IDR plans base your monthly payments on your discretionary income, or what you earn after taxes and necessary expenses. Depending on your income, this may reduce your monthly payment amount significantly.
There are a variety of IDR plans available for federal student loan borrowers, each basing your monthly payment on a different percentage of your discretionary income.
Income-Based Repayment (IBR)
10-15% of your discretionary income
Pay As You Earn (PAYE)
10% of your discretionary income
Revised Pay as You Earn (REPAYE)
10% of your discretionary income
Income-Contingent Repayment (ICR)
20% of your discretionary income OR what you would pay monthly on a 12-year fixed repayment plan, whichever is lesser
Each IDR plan has its own eligibility criteria. To see which plans you qualify for, reach out to your federal loan servicer directly.
Apply for Deferment or Forbearance
Both federal and private student loans offer generous protections for borrowers experiencing financial hardship, such as deferment and forbearance. Both options will allow you to temporarily pause payments, which can give you a break to get your finances in order.
To see which options your lender provides, reach out to them directly.
Refinancing
Student loan refinancing, in a simple sense, is the process of swapping your current loan for one with a better interest rate or terms. In this instance, refinancing to secure a longer repayment term will be most optimal as it will likely reduce your monthly payments.
That said, a longer repayment term will typically cost you more over the life of the loan. Plus, if you opt to refinance federal student loans, you will lose access to certain benefits such as income-driven repayment plans and student loan forgiveness opportunities.
If you do choose to refinance, consider some of these top lenders:
If you’d like to combine your federal student loans, but don’t want to lose their protections and benefits by going through a private lender, consider consolidation. While similar to refinancing in that you can combine multiple loans into one, consolidation won’t score you a lower interest rate. However, it will lead to an extended repayment term, which will reduce your monthly payment.
Consolidating will allow you to maintain access to federal loan benefits, however, a longer repayment period will likely cost you more over the life of the loan.
Final Thoughts from the Nest
While making student loan payments on a credit card may be tempting, it often isn’t an advantageous decision. A stronger course of action includes contacting your loan servicer for support, considering income-driven repayment options, or refinancing your debt.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
As students, exploring student loan options can be tricky. Understanding and knowing all the types of loans, both federal and private, can be overwhelming. That’s before knowing the intricacies of each loan type, eligibility requirement, and even loan structure.
Let’s look at one of the most popular types of student loan, the Federal Stafford Loan.
What is a Federal Stafford Loan?
Stafford Loans are a subset of federal student loans that can either be subsidized or unsubsidized. Rather than borrowing from a private for-profit institution, students borrow directly from the U.S. Department of Education.
These loans are also more commonly referred to as Direct Loans as they come directly from the government and are a common way to help pay for college. Approximately 30% of undergraduate students borrow from the federal government, however, the total amount of debt borrowed in federal student loans represents over 90% of the total U.S. student debt. Of that 90%, over 50% of student loan debt is in Stafford Loans. This further breaks down as 18.6% in subsidized Stafford loans and 34.2% in unsubsidized Stafford Loans.
Before moving further, let’s quickly discuss the difference between subsidized and unsubsidized Stafford Loans.
Subsidized vs. Unsubsidized
Subsidized Stafford Loans are offered to undergraduate students that demonstrate financial need. For this type of loan, the federal government is responsible for paying any interest while you are in school or during a period in which you aren’t required to make payments.
On the other hand, unsubsidized Stafford Loans are offered to both undergraduate and graduate students and don’t have any requirement to demonstrate financial need. With this type of loan, students are responsible for paying any and all interest while it accrues.
While this is a quick summary, a more detailed article explaining the difference between them can be found here.
Who is Eligible for a Federal Stafford Loan?
As Stafford Loans are administered by the U.S. Department of Education, they are among the most accessible to obtain. This is because Stafford loans don’t have an eligibility requirement that assesses your creditworthiness or ability to repay them.
With that being said, it is very easy to become unaware of the amount of money you borrow, and ultimately end up repaying with significantly more interest. Be sure to borrow only what you need to cover your tuition costs and not any other discretionary spending.
Although Federal Stafford Loans don’t have the same eligibility requirements like those that come from a private lender, there are certain criteria that a student must meet to qualify for the Direct Loan. These are:
Enrollment Status: Be enrolled at least half-time in an eligible degree or certificate program
Have a valid Social Security Number, with certain exceptions
Show you are qualified to obtain a college or career school education. This can be shown through:
Having a high school diploma or equivalent
Enrolling in an eligible career pathway program
Not in default on any existing federal student loans (You must file the Free Application for Federal Student Aid (FAFSA®) form)
Meet general eligibility requirements for federal student aid
What Are the Interest Rates on Federal Stafford Loans?
The current federal Stafford Loan interest rate is based on the borrower type and loan type. Currently, for undergraduate students that borrow through either a subsidized or unsubsidized Stafford Loan, they will receive a 4.99% interest rate. As graduate and professional students don’t have access to subsidized loans, the unsubsidized loans are accompanied by a 6.54% interest rate.
Note that all federal loans have a fixed interest rate. These figures are representative of any loans that are first disbursed on or after July 1, 2022, and before July 1, 2023.
How Much Can I Borrow with Federal Stafford Loans?
Although Stafford Loans are provided by the U.S. Department of Education, the amount of money you are given through this program is determined by your school. They also decide if you are eligible for a subsidized loan or unsubsidized loan.
In addition, Federal Stafford Loans have a “ceiling” on the amount of loan that can be provided. This amount varies based on what year of schooling you are in and whether you are a dependent or independent student. The following chart shows the exact amounts based on your specific situation.
Federal Stafford Loans can be forgiven through certain forgiveness programs. These programs are often dependent on your profession or loan type. Generally, professions that serve the wider community are eligible for student loan forgiveness programs. Examples of these professions include teachers, nurses, and any members of the military.
What’s Next
Now, with the understanding of what a Federal Stafford Loan is, you can make a comprehensive, educated decision about the student loan you apply for. While applying and searching for student loans may still appear to be complex, using Sparrow will make your search much easier. Sparrow consolidates personalized loan offers from several lenders and displays all the required information that you need to make an informed decision.
If you’re concerned about your student loan debt affecting your chances of buying a home, you’re not alone. In fact, over a quarter of student debt holders say their debt has impacted their decision or their ability to purchase a home. Here’s what you need to know about buying a house with $100k student loan debt:
The good news: around 40% of first-time homebuyers have student loan debt. So, while it may make qualifying for a mortgage loan a bit more challenging, buying a house with student loan debt is completely possible.
Can I Buy a House with Student Loan Debt?
When people say, “buying a house with student loan debt is hard,” what they’re often referring to is the mortgage loan process. Like private student loans, you must be a creditworthy borrower to secure a mortgage loan with a competitive interest rate.
Unfortunately, student debt can impact how creditworthy you appear to a lender. That said, there are several things you can do to appear more creditworthy, and thus improve your chances of getting approved for a mortgage loan.
Work on Improving Your Credit Score
One of the most important factors in securing a mortgage loan is your credit score. Simply put, lenders want to be confident you’re a trustworthy borrower prior to lending to you. So, by examining your credit score, they can typically get an idea of whether or not you are.
Luckily for you, student loan debt typically won’t drag down your credit score too much, unless you’ve been missing payments.
If there are other aspects of your financial background that arebringing your credit score down, however, taking the time to improve it can help you qualify for a competitive rate.
Pay all your bills on time. Payment history makes up roughly 35% of your credit score. So, as you can imagine, late payments can take a serious toll on your score. Therefore, if you’re struggling to pay your credit card bill on time, consider opting in to automatic payments. Rather than making your payments manually, your credit card company will pull the payment directly from your checking account. This will ensure payments are always made on time.
Limit new credit accounts. Applying for a new line of credit will result in a hard inquiry, which will temporarily hurt your credit score. Therefore, if you plan on applying for a mortgage loan in the near future, hold off on applying for any other new lines of credit.
Keep old credit card accounts open. Credit history is another important factor in determining your credit score. Each time you open a new line of credit, it adds to the length of your credit history. If you have a credit card you opened a while ago that you no longer use, keep it open. Closing it will shorten the length of your credit history which, in turn, can reduce your overall credit score.
Check your credit report. Several credit card companies, banks, and other financial institutions offer free credit reports. If yours don’t, consider using the Annual Credit Report to get a free copy of yours. By viewing your full credit report, you can check for unknown errors, fraud, or potential identity theft that could be impacting your score.
Lower Your Debt-to-Income Ratio
When mortgage lenders evaluate you as a potential borrower, they’ll examine your debt-to-income ratio (DTI). Your debt-to-income ratio compares how much you owe to how much you earn each month. Your DTI is used to assess your ability to make a mortgage payment on top of other debts.
There are two types of debt-to-income ratios to be aware of: front-end ratio and back end-ratio.
A front-end ratio is all of your housing expenses divided by your pre-tax income. When applying for a mortgage loan, lenders will consider your future monthly mortgage payment, including expenses such as property taxes and homeowners insurance, to calculate your housing expenses.
For example, if you make $8,000 pre-tax per month, and your future housing expenses are $3,000 per month, your front-end debt-to-income ratio would be 37.5%.
[3000 ÷ 8000 = 0.375 → 37.5%]
A back-end ratio is all of your monthly debt payments divided by your pre-tax income. In addition to the monthly housing-related expenses, a back-end debt-to-income ratio will factor in debt payments such as student loans, credit cards, and auto loans.
For example, if you make $8,000 pre-tax per month, and your future housing expenses are $3,000 per month, but you have an additional $250 student loan payment and $400 auto loan payment, your back-end debt-to-income ratio would be 45.6%.
[3650 ÷ 8000 = 0.456 → 45.6%]
When applying for a mortgage loan, lenders will pay closer attention to your back-end ratio as it provides a more holistic view of monthly expenses.
What Debt-to-Income Ratio is Needed to Buy a House?
Many mortgage lenders follow what is referred to as the “28/36 rule,” also called the “28/36 qualifying ratio.” The rule suggests that you should spend no more than 28% of your monthly gross income on housing expenses, and no more than 36% on all of your debt expenses, including debt like student loans and credit cards.
That means your front-end ratio should be no more than 28%, and your back-end ratio should be no more than 36%. However, some mortgage lenders work with borrowers with higher DTIs. In fact, Rocket Mortgage recommends aiming for a DTI of 50% or less to qualify for a conventional mortgage loan. That said, the lower your DTI, the better.
Tips to Lower Your Debt-to-Income Ratio
If you have a high student loan balance relative to your income, or vice versa, consider increasing your income or refinancing your student loan.
Use Sparrow to help you find the best refinance rates. The Sparrow application shows you personalized rates from our 17+ partnering lenders. You can then compare refinance rates side-by-side, helping you narrow down your options to see which is best for you.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
By increasing your income, say, through taking on a side hustle or asking for a raise, you can reduce your overall debt-to-income ratio.
In this example, increasing your income by just $1,000 per month would lower your front-end ratio by around 4 percentage points and your back-end ratio by around 5 percentage points.
Before
AfterIncreasing Your Monthly Income
Monthly Pre-Tax Income
$8,000
$9,000
Monthly Housing Expenses
$3,000
$3,000
Total Monthly Debt Expenses
$650
$650
Front-End Ratio
37.5%
33%
Back-End Ratio
45.6%
40.5%
If increasing your income isn’t possible at this time, consider refinancing your student loan debt. Refinancing to a longer repayment period will decrease your monthly payment. Accordingly, it will lower your total monthly debt payments. In doing so, your debt-to-income ratio will drop.
For example, let’s say you were able to decrease your $250 monthly student loan payment to $100, making your overall monthly debt expenses $500 instead of $650. Even with the same income, your back-end DTI would drop around 2 percentage points.
Now, if you are able to increase your income and reduce your monthly debt payments, you may see a greater drop in your DTI. In this example, you would drop nearly 7 percentage points by increasing your income by $1,000 per month and reducing your debt payments by $150 per month.
After Only Refinancing
After Refinancing and Increasing Income
Monthly Pre-Tax Income
$8,000
$9,000
Monthly Housing Expenses
$3,000
$3,000
Total Monthly Debt Expenses
$500
$500
Front-End Ratio
37.5%
33%
Back-End Ratio
43.75%
38.8%
It’s important to note that lenders care far more about your debt-to-income ratio than they do your total debt expenses. So, even if you have $100k in student loan debt, if your overall DTI is still within the ideal range, you’re in the green.
See What You Prequalify For
Prequalifying with a mortgage lender can help you see what you may qualify for, and thus, where you need to make adjustments to qualify for your desired mortgage loan. For example, if you’re only approved for a fraction of the amount you expected to qualify for, you can ask the lender how you could improve your application to prequalify for higher.
When seeking a preapproval for a home, remember to consider the following:
Lenders will evaluate your entire short-term financial history. If questioned, you will need to be able to explain where all of your income has come from.
If you’re self-employed, your income will be under greater scrutiny. Accordingly, you may need to provide additional documents for income verification.
Once you have a preapproval, sellers are also more likely to take you seriously as a potential homebuyer. This can increase the likelihood of your offers being accepted.
Explore Down Payment Assistance Options
If your student debt is preventing you from having enough to save for a down payment, consider down payment assistance programs. These programs will help you cover the cost of your down payment if you are a first-time homebuyer.
There are a few types of down payment assistance programs to look out for:
Grants. Grants are considered a gift, meaning you never have to pay it back. (Yup! Free money.)
Forgivable loans. Similar to some federal student loan forgiveness programs, some mortgage loans are forgivable after remaining in the home for a set number of years.
Matched savings programs. Some banks, government agencies, and community organizations offer matched savings programs, allowing buyers to have their down payment savings matched. For example, if a buyer deposited $10,000 into an account, the partnering organization would add another $10,000 in to match it. Then, you can use that $20,000 toward your down payment.
Consider Your Budget
Before adding a mortgage loan into the mix, make sure you have a deep understanding of your current expenses. If you aren’t already tracking your spending, consider doing so.
You may find that you spend unnecessarily in certain areas. Therefore, by cutting those areas back even just a little bit, you could find more money to put toward paying off your debt or toward a down payment.
Be Willing to Make Compromises
If buying a house despite having student loan debt is a top priority for you, consider holding off on other “wants” for a bit. For example, rather than upgrading your cell phone, hold onto your current phone for another year, and direct what you would’ve spent on a phone toward paying off your student loan debt.
Likewise, if you don’t qualify for as much of a mortgage loan as you expected due to your debt, consider lowering your expectations for your first home. While a move-in ready home in the perfect location may be ideal, it may not be in budget. Be open to compromising on certain elements of the home to find something you like that also suits your current financial situation.
Final Thoughts from the Nest
Buying a house with student loan debt is entirely possible. However, there may be additional hurdles to overcome along the way, especially if you have a high loan balance in comparison to your income.
Be sure to calculate your debt-to-income ratio prior to beginning the homebuying process. The earlier you understand your broader financial situation, the longer you’ll have to make adjustments before applying for a mortgage loan.
If you do opt to refinance your student loan debt as a tactic for reducing your monthly debt expenses, use Sparrow. By completing the Sparrow application, you’ll be able to see what refinance loans you qualify for and at what rates. Then, you can compare your loan options side-by-side to be sure you’re picking the best one.
With college attendance costs going up, Parent PLUS Loans are a great way for you to help your children attend an affordable school. However, the downside is these loans can become difficult to pay back over time. What can you do then? Transfer the Parent PLUS Loan to the student. But, how can you do that?
Here is everything you need to know about how to transfer your Parent PLUS Loans to a student.
Can a Parent PLUS Loan Be Transferred to the Student?
Yes, your Parent PLUS Loan can be transferred to your child. The best way is to refinance the loan with a private lender under your child’s name. Not all lenders offer the option to refinance Parent PLUS Loans in another borrower’s name, so check with the lender beforehand to see if this is available for you.
If your child can’t qualify for the refinance loan themselves, they can refinance with you as a cosigner. You’ll want to make sure the lender offers cosigner release options, however, if you want to be released from the loan in the future.
When to Transfer a Parent PLUS Loan to the Student
Before you transfer the loan, you have to make sure that both you and your child are in a position to do so. Here are some signs that you’re ready to transfer your Parent PLUS Loan.
If the Monthly Payments are Unaffordable
If you’re struggling to make monthly payments, it may be time to transfer the loan. If you decide to transfer, your refinanced loan might have a lower monthly payment. On the other hand, if your child takes over the loan completely, you’ll have no monthly payment. Thus, transferring the loan could free up money to pursue other financial goals and give you more freedom in your budget.
If Your Child is Ready to Handle the Debt
You’ll want to talk to your child to see if they can take on the extra student loan debt. One way to determine this is to look at their debt-to-income ratio. If your child has a steady income that covers their expenses and the debt payments, then they’re ready to take over the loan.
If You Don’t Plan on Pursuing Parent PLUS Loan Forgiveness
When you refinance a federal student loan, you lose your federal benefits. This includes loan forgiveness. Unless you don’t plan on using loan forgiveness benefits, it may not be a smart idea to refinance. Talk to your loan servicer about this for more information.
Before you can start the process, talk to your child about transferring the loan to their name. Remember that this is no simple matter. They’re taking on a huge financial and legal responsibility. So, make sure you’re both on the same page before you begin.
Like we said earlier, you can transfer the loan by refinancing it to the student’s name. When you refinance, you’re letting a new lender pay off your current loans, and you’ll take out a new loan to pay them back. On this new loan, you can score better terms such as a lower interest rate or a different repayment term.
To get started, you first have to make sure you qualify. Most lenders have a credit score and income requirement you need to meet. Generally speaking, your credit score must be at least in the mid to high 600s to fulfill the credit requirement. Each lender may also have additional requirements specific to them. Talk to the lenders you’re interested in to see what else you have to do to qualify.
Next, you’ll want to shop around for loans to see what you prequalify for so you can compare the loan options available to you and their rates. Prequalifying is not the same as officially applying. In prequalification, lenders will do a soft credit check to see what rates they can offer you. This soft credit pull won’t affect your credit score.
Researching and applying for prequalification can take a lot of time if you’re doing it manually, but using Sparrow can speed up the process. With the Sparrow application, you’ll be matched with what refinance loans you best qualify for from our 15+ partnering lenders. You can then check out real rates, policies, and other features the lenders offer. You’ll even be able to compare them right on the website. From there, you can make your final decision.
Complete the Formal Loan Application
Once you’ve decided on a lender, go to their website so you can fill out and submit their official application. You will need to provide personal information and documents during the application process. Talk to the lender beforehand about what you need so you have these at the ready while you’re applying.
Best Lenders to Transfer Parent PLUS Loans to a Student
Finding the right refinance rate for your parent PLUS loans should be easy. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan refinance search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
SoFi is one of the largest student loan refinancing companies in the industry. They offer exclusive member benefits like career coaching, job search assistance, and wealth management among other things.
Fixed APR range: 4.49% to 8.99% Variable APR range: 4.49% to 8.99% Minimum Credit Score: Does not disclose
Transferring a Parent PLUS Loan to your child is a big decision, but it can help you immensely. Begin today by filling out the Sparrow application. Let us help you find a great lender so you can make the best decision for you and your family.
Sparrow wants to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
*Rates updated as of 06/01/23. Interest rates shown may include a 0.25% autopay discount. Rates are subject to change. To view Nelnet Bank’s disclosures, visit here. To view SoFi’s disclosures, visit here.
In the United States, 48 million borrowers owe a cumulative total of $1.75 trillion in student loan debt. As we can see, while student loans can cover a significant portion of educational costs, it means that you’ll owe a significant portion as well.
If you plan to take out student loans to pay for the cost of education, you’ll want to prepare for the new responsibilities you’ll have as a borrower.
Here’s what you need to know about how student loans work.
Student loans are a type of loan that specifically covers educational costs like tuition, school books, supplies, as well as room and board. There are two types of student loans that you can borrow: federal student loans and private student loans. Undergraduate students, graduate students, professional students, and even parents of students can take out student loans.
To qualify, however, you must enroll in an accredited institution.
Types of Student Loans
It is recommended that students give preference to federal loans over private student loans because they are generally more affordable and borrower-friendly. However, most students need to take out a blend of both to cover the entire cost of tuition.
Federal student loans and private student loans have many differences that borrowers should be mindful of.
Federal Student Loans
Federal student loans are offered by the federal government. There are three types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
Direct Subsidized Loan
The Direct Subsidized Loan is for undergraduate students who demonstrate financial need.
The federal government pays the interest on the loan while you are in school, during your grace period, and also during any deferment periods.
Direct Unsubsidized Loan
The Direct Unsubsidized Loan is available for undergraduate, graduate, and professional students from all financial standings.
Unlike the Direct Subsidized Loan, the federal government does not pay for the interest during school, your grace period, or any deferment periods. Interest accrues throughout the entire life of the loan.
Direct PLUS Loan
Within the Direct PLUS Loan exists the Parent PLUS Loan and the Grad PLUS Loan.
The Parent PLUS Loan is available to parents of undergraduate students, and the Grad PLUS Loan is available to graduate and professional students. Interest accrues throughout the entire life of all Direct PLUS Loans.
To borrow a federal student loan, you must submit your Free Application for Federal Student Aid (FAFSA). The FAFSA opens every year on October 1st and closes on June 30th.
You do not need a cosigner or a minimum credit score for federal student loans, except for the Direct PLUS Loan.
Federal student loans also come with a handful of borrower protections, such as:
Loan deferment: pausing payments on your loan without any interest accrual
Loan forbearance: pausing payments on your loan with interest accrual
Loan forgiveness: forgiving your loan balance so that you no longer are in debt
Private Student Loans
Unlike federal student loans, which are provided by one entity, private student loans come from an array of lenders. Thus, each lender will set their own loan terms, interest rates, borrower qualifications, and everything in between.
Private student lenders are more selective with who they lend and offer competitive loan terms to. Because college students usually do not have sufficient enough credit histories and scores to be deemed trustworthy borrowers, private student lenders usually do one of the following:
Require a cosigner, or someone who agrees to take responsibility for the loan if the borrower fails to.
Give out less favorable loan terms, such as higher interest rates or shorter repayment plans to raise the stakes to keep students from defaulting.
Generally, private student loans do not offer any borrower protection plans like loan forbearance, deferment, or forgiveness unless you have special circumstances like disability, military service, etc. Additionally, seeking any needed assistance is the responsibility of the borrower.
Federal Student Loans vs Private Student Loans
Loan Type
Federal Student Loans
Private Student Loans
Borrower Requirements
The Direct Subsidized Loan is only for undergraduates with financial need; Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.
No financial need is required; anyone can apply.
Cosigner Needed?
No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.
In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates
Interest rates tend to be lower than the interest rates of private student loans and are always fixed, meaning that they do not change.
Interest rates tend to be higher for students because of their lack of a strong credit history; may vary with a cosigner. Interest rates can be fixed (meaning that they do not change) or variable (meaning that they change based on the economic market).
Borrower Protection Plans
The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.
Depends on the lender, but selections are often limited.
Credit Score Requirements
Typically, federal loans do not look at credit scores except the Direct PLUS Loans.
Most private lenders will be looking for students & cosigners with strong credit histories and scores.
Borrowing Limits
For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year.
For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period where you do not pay to make regular loan payments after graduation, after dropping out, or enrolling less than half-time. Interest accrues during the grace period for the Direct Unsubsidized Loans and not for the Direct Subsidized Loans.
The federal government offers eight different types of repayment options: the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, Pay As You Earn Repayment Plan (PAYE), Revised Pay As You Earn Repayment Plan (REPAYE), Income-Based Repayment Plan (IBR), Income-Sensitive Repayment Plan (ISR), and the Income-Contingent Repayment Plan (ICRP).
Private student loans tend to have fewer repayment options in comparison to federal student loans.
How Much Can You Borrow in Student Loans?
Your borrowing limit depends on the type of student loan that you take out.
Federal Student Loans
For federal loans, your borrowing limit depends on your year in school, dependency status, and your Estimated Family Contribution (EFC), which is calculated through your FAFSA application. The maximum borrowing limits, however, are as follows:
Direct Subsidized Loan
Dependent Undergraduate: $3,500 – $7,500 per year ($31,000 aggregate loan limit)
Independent Undergraduate: $3,500 – $12,500 per year ($57,500 aggregate loan limit)
Direct Unsubsidized Loan
Dependent Undergraduate: $5,500 – $7,500 per year ($31,000 in total)
Independent Undergraduate: $9,500 – $12,500 per year ($57,500 in total)
Graduate/Professional Student Limit: $20,500 per year ($138,500 in total)
Direct PLUS Loan
Covers the difference between the cost of attendance and any received financial assistance.
Private Student Loans
For private loans, the lender you work with determines how much you can borrow. Most private lenders cover the entire cost of attendance, though others have a cap of up to $500,000.
When You Borrow a Student Loan, Where Does the Money Actually Go?
When you borrow a student loan, the money is disbursed to your school directly. The lender handles the process of getting the money to your school, and any remaining funds are distributed to you based on your school’s policy.
When Do I Need to Pay Back My Student Loans?
When you begin paying back your student loans depends on the type of student loan you borrowed and the repayment plan that you choose.
Federal Student Loan Repayment
For all federal student loans, you will have a grace period where you do not have to make payments on your student loan. The grace period begins after leaving school or graduating and ends after six months.
It’s important to note that interest accrues during the grace period for Direct PLUS Loans and Direct Unsubsidized Loans, however, but not for Direct Subsidized Loans.
After this grace period is over, your loan payments will start. Depending on loan type, you may have a choice between one of the eight repayment options offered for federal student loans:
Standard Repayment Plan
Payments are made at a fixed amount for up to 10 years.
All federal student loan borrowers are eligible for this plan.
Graduated Repayment Plan
Payments are lower at first and increase every two years so that the loan is paid off within 10 years.
All federal student loan borrowers are eligible for this plan.
Extended Repayment Plan
Payments can be fixed (set amount) or graduated (increasing amounts per every two years) and are made for up to 25 years.
Only Direct Loan borrowers with more than $30,000 in debt are eligible for this plan.
Pay As You Earn Repayment Plan (PAYE)
Payments will be 10% of your discretionary income and will be recalculated based on annually updated family and income information.
To qualify for a PAYE repayment plan, borrowers must have borrowed a loan after October 1st, 2007 and received a disbursement on or after October 1st, 2011.
Revised Pay As You Earn Repayment Plan (REPAYE)
Payments will be 10% of your discretionary income and will be recalculated based on annually updated family and income information. Any amount that has not been paid off 20 years after your undergraduate study or 25 years after your graduate or professional study will be forgiven.
Any Direct Loan borrowers with certain loans are eligible for this plan.
Income-Based Repayment Plan (IBR)
Payments will be 10-15% of your discretionary income and will be recalculated based on annually updated family and income information. Any amount that has not been paid off after 20 years or 25 years will be forgiven.
Borrowers must have high debt in comparison to their income.
Income-Sensitive Repayment Plan (ISR)
Your monthly payment will be based off of your annual income and will remain as such for up to 15 years.
Borrowers must have FFEL Program loans to qualify for an ISR repayment plan.
Income-Contingent Repayment Plan (ICRP)
Your monthly payment will be either 20% of your discretionary income or the amount that you pay on a 12-year repayment plan adjusted to your income.
Any Direct Loan borrower with specific loans are eligible for this plan.
Private Student Loan Repayment
With private student loans, there are four common repayment plans across the industry:
Immediate Repayment
You begin making loan payments as soon as the loan is disbursed, meaning you begin making payments while you are in school.
Interest-Only Repayment
You begin making interest loan payments, or paying for only the interest of the loan, as soon as the loan is disbursed.
Partial Repayment
You begin making partial loan payments, or paying for only a portion of the interest that is accrued for the loan, as soon as the loan is disbursed.
Deferred Repayment
Similar to the grace period that is offered by federal student loans, you do not start making loan payments until six months after leaving school.
Closing Thoughts From the Nest
Student loans may not be the world’s most fascinating or enjoyable topic in the world, so we commend you for taking the time to do your research. Informing yourself as a borrower is key to managing your finances without being bogged down by student loan debt.
If you want to see which private student loans you qualify for, consider using Sparrow’s free online tool. If you submit an application with us today, you can compare all of your private loan options across 15+ lenders.
Refinancing your student loan can be an excellent way to save money and improve your finances. By refinancing, you can take advantage of your improved credit score, higher income, and other positive financial changes to secure a better interest rate or more favorable terms.
However, it’s important to note that refinancing your student loans can also have a temporary negative impact on your credit score. We’ll explore why this happens, whether the benefits of refinancing outweigh the costs, and what you can do to minimize the impact on your credit score.
How Student Loan Refinancing Works
Student loan refinancing is the process of swapping your current student loan(s) for one with a lower interest rate or better terms, like a shorter repayment term or better monthly payments. Refinancing can occur with both federal and private student loans whereas the federal loan consolidation program only considers federal loans.
Does Refinancing Hurt Your Credit?
When you apply for a student loan refinance, you will have to go through a process which involves a hard credit inquiry. Generally, credit inquiries occur when there is a legally permitted request to see your credit report from either a company or person. This check could adversely affect your overall credit score, as the more checks that happen, the higher probability a credit bureau would think that you may be “over-extending.”
The key difference with credit inquiries are the version of check they are. A credit inquiry can either be a hard or soft credit check. Soft inquiries don’t impact your credit score, are done by creditors to provide “pre-approved” offers, and can be done without your consent. Contrary to that, hard inquiries do impact your score, are done by creditors and lenders when you apply for a credit or loan, and require written consent.
Although the impact varies drastically for everyone, rarely is it significant.
To further understand how refinancing your student loans will impact your credit, it’s important to understand how your credit score is determined in the first place. Here are the factors that contribute to your credit rating:
Payment history
Amounts owed
Credit history length
Credit mix
New credit
Let’s examine the 3 most influential factors in regards to a FICO credit score.
Payment History
According to FICO, your credit score consists of 35% payment history, ranking this as the most important factor in the score. This means that even while refinancing, you should ensure that your income can support any payments that need to be made so you don’t end up with an inconsistent payment history which would affect your credit score.
If, for any reason, there is an outstanding unpaid balance for more than 30 days, it will get dinged in your credit report and will stay on the report for several years. Fundamentally however, paying your loans or credit cards on time is a strict practice that should be adhered to whenever possible. This will improve your credit score and will allow you to better manage your financial situation.
Amount Owed
This element refers to the total amount of money owed and is the second largest component of a credit score, exactly 30%. One thing many borrowers get confused about is that when refinancing, your total amount of money owed does not change.
Credit History
Your credit history is about 15% of your FICO score, and it speaks to how long you have been using credit as well as the average age of all your credit accounts. This is why it is important to start using credit early, to build a solid foundation. Also, some key things to remember are that whenever you open a new line of credit, that counts as a “0” age, which reduces your overall average age for existing credit.
How to Minimize the Credit Impact of Refinancing
Despite the fact that student loan refinancing will impact your credit score, there are ways to minimize the impact.
First, pay close attention to the application quantity and timing. When you are looking around for loan options, many lenders will allow you to see what you qualify for without incurring a hard credit check, which would impact your credit rating. This means that you should only send off formal applications to lenders where you believe there is a great chance that you will end up using their product. At the end of the day, the more formal applications you submit, the more hard credit checks occur, and the more your credit can degrade
Additionally, you should be aware of the different timing rules with FICO and Vantage credit scores. While applying to loans, if done in a certain time period, multiple applications may not harm your score. For FICO, this period is 30 days, and for Vantage, it is 2 weeks.
The next two tips are quite straightforward. Continue making payments on your existing student loans before the refinance, and make payments for your refinance loan on time. Many students often forget to pay their student loan payments on time as they are in the process of having it refinanced. Even during this process, it is vital you stick with your schedule and pay off the loan, otherwise you will have an impact on your credit history. The same applies for the refinanced loan. Be sure you know the exact terms of the loan and adhere to the schedule for the payments, ensuring never to miss a payment.
Using Sparrow
Finally, you could use Sparrow! When using Sparrow to compare student loan refinancing offers, your credit score won’t be impacted. Sparrow aggregates all the available options in one centralized location where you will be able to see the details of each loan. Then, you can decide which one to submit a formal application with. This reduces the number of applications necessary and thus protects your credit score!
Is Refinancing a Student Loan Worth It?
Knowing when to refinance is tricky. Additionally, many borrowers can’t, or shouldn’t, refinance their student loans. Passing the credit check and showing stable income are generally known criteria that are used to determine eligibility. Without them, you may need a cosigner to qualify. If you are already halfway through repaying your loans, refinancing may only prolong the duration of the term, albeit with lower monthly payments.
A checklist that you could use to figure out if refinancing is worth it can be found here. Essentially, you should refinance your student loans if you are in a better financial position now than when you originally got the student loans or if you have a private student loan. Also, if the current economic conditions are favorable — this happens when the Federal Reserve cuts interest rates — then it may be beneficial to refinance to obtain a student loan with a lower interest rate.
Final Thoughts from the Nest
After understanding the complexities of student loan refinancing and if it is worth the potential impact on your credit rating, it’s important to know that everyone will be in a different situation. Contextualize and understand if your personal landscape will benefit from a refinance. And lastly, be sure to know the best rates that are out there and compare from several lenders. Using tools like Sparrow will speed up this process and make it much easier to navigate.
Late last year, the Department of Education released findings that highlighted the growing trend in which loans are prolonging. In fact, the average time it takes for a student to repay their student loans is now 20 years.
As a student, you should be aware of the current circumstances and understand what the averages are to avoid any long-term difficulties. Although this finding did showcase the ever-increasing trend, there are some key points to note before making a quick judgment call.
Firstly, loan repaymentcan differ widely, and I mean immensely. Many conditions must be taken into account like the principal amount borrowed, interest rates, what type of degree you plan on pursuing and most importantly, what type of loan you end up choosing (federal or private).
How Long It Takes to Pay Off Student Loans
By Degree Type
As mentioned, the different degree types will affect your loan repayment timeline, but with a concrete plan and the knowledge, you will be able to pay your debts in a timely manner.
Associate’s Degree
On average, associate’s degrees take the shortest amount of time to repay, ranging from just over 4 years to just over 7 years depending on the loan type. Federal loans take the shortest amount of time to repay, and private student loans take the longest.
Moreover, associate’s degree graduates have an average annual salary of $46,100, and more than 90% of students pursuing this type of degree take out student loans.
Bachelor’s Degree
Next, looking at a bachelor’s degree, it takes, on average, 5 years and 7 months to repay student loans if attending a public institution. If the student is attending a private non-profit institution, it would take just under 7 years, and with a private for-profit institution, it would take just over 9 years.
Additionally, compared to the $46,100 average annual salary for associate’s degree holders, a bachelor’s degree holder will take home nearly $65,000.
Graduate Degree
Students and professionals pursuing graduate-level degrees, on average, borrow more than undergraduate students. On average, a master’s degree will take 9 years to repay if you were to attend a public institution versus 13 years from a private non-profit and 18 years from a private for-profit college. This vast discrepancy between the timelines in loan repayment showcases the importance of choosing where and how your loan is formed.
Despite the higher debt, master degree holders earn typically about $78,000 annually, and it only goes up from there.
Post-Graduate Degree
For the post-graduate student, this type of education and degree is mostly about furthering themselves in a very niche, specific concentration, and with that comes a significantly increased repayment time on average.
For example, a student pursuing their doctoral degree will take roughly 13 and a half years to repay their student debt from both a public and private non-profit college, whereas a private for-profit institution loan on average takes over 38 years to complete.
Finally, let’s take a look at more specialized degrees, those being medical and law school repayment timelines.
Law Degree
A recent study showed that the average law school debt is over 4 times the average bachelor’s degree holder’s debt. Totaling $160,000 and with an average starting salary of $55,200, law degrees are tremendously expensive due to the intensive nature of the education as well as how niche they are.
Repayment for law degrees drastically vary based on the domain a lawyer chooses to pursue — public or private. On average, a lawyer working in the public sector will take 26 years to repay their loans if they use 20% of their income. For lawyers in the private sector, it will take just over 16 years if they were to use 20% of their income.
One caveat for this is that the U.S. Consumer Finance Protection Bureau (CFPB) reports that the ideal amount to spend on student loan repayment is 10% of your income. If a lawyer working in the public field were to follow this, it would not be possible for them to repay their loans, and for a lawyer in the private field, it would take 50 years!
Medical Degree
For students pursuing a medical degree, the average student loan debt is even higher than law school at over $240,000. Depending on your lifestyle choices and frugality, you may be able to pay off a medical degree in 5 years or less if you were to live well below your means. Another popular option is to apply for Public Service Loan Forgiveness. This program, run by the US Department of Education allows participants to reduce the total cost of their education, but forces them to make payments for 10 years before the remaining debt is forgiven.
By Loan Type
As mentioned above, repayment of student loans varies drastically depending on certain factors, one of them being the type of loan it is. This could be either a federal loan or a private student loan.
Federal Student Loans
Breaking this down further, federal loans can include standard repayment plans, graduated repayment plans and extended repayment plans.
Standard repayment plans are typically fixed monthly payments for a set number of years. Graduated plans are structured in a fashion where payments are on the lower end of the scale, and increase over time. For fast-progression degrees like graduate degrees, this is most common. Extended repayment plans are essentially fixed or graduated payments with the only caveat being that it is a 25-year term.
Aside from these loan structures, there are also five different types of income-driven repayment plans. The monthly payment amount for these plans are based upon your income. Payments are generated based upon a percentage decided and with that, payments are made.
Private Student Loans
Despite the vast amount of federal loans available, private loans still serve a demographic, and understanding private loan structures is critical as it can shave off years of repayment and debt.
Private student loans originate from either non-profit institutions, generally academic, or for-profit institutions like banks or other financial institutions. As private loans are, well private, they can vary immensely from loan to loan and depending on your personal circumstances.
For example, as of August 2022, Sparrow’s lending partners offered interest rates as low as 1.13%, although rates that low are typically reserved for those with the best credit score rating. The estimated average is roughly 6%-7%.
How Long It Will Take You to Pay Off Your Student Loans
Repayment timelines are highly dependent on your exact loan terms and conditions. While understanding the average debt payoff timeline is helpful, your individual timeline may differ based on your repayment period and monthly payments. One quick tip is to use a student loan calculator that can calculate your payoff date based on your loan balance, interest rate, and repayment term.
What’s Next
As with anything this impactful, student loans must take time and thoughtful consideration before diving into the deep-end and making a mistake. Using Sparrow as a loan comparison tool that aggregates loans from different lenders will let you know the intricacies of the loan, and with that, you can figure out more details regarding repayment structures.
Regardless, loan repayment varies for everyone. For someone pursuing their doctoral degree, it may not be of tremendous concern to repay the loan immediately or take on higher payments. But, as everyone is in different circumstances, the conditions of your repayment will be unique. Ultimately, know that after analyzing the data, you can make an informed decision about choosing your student loan!
Do you love to fly, see the world, and travel for free? If yes, being a pilot might be the job for you, and it might be the perfect time to become one.
According to the U.S. Bureau of Labor Statistics, the job outlook for pilots is promising. Commercial pilot jobs and airline employment expect a 13% job growth rate through 2030, which is higher than average. Plus, in 2021, the median pay for airline and commercial pilots was $134,630.
Typically, you will need a bachelor’s degree, certifications from the Federal Aviation Administration, flight training, as well as flight experience and hours to become a certified airline or commercial pilot.
In this article, we’ll tell you how to become a pilot and fund your career.
How to Become A Pilot in Six Steps
As with any other job, you will need to put in work, time, and money to become a pilot. It is possible to work as a commercial pilot or a regional airline pilot without a four-year undergraduate degree. However, most major airlines require their pilots to have four-year degrees, preferably in aviation, aeronautical science, or aerospace engineering.
After pursuing your bachelor’s degree, here are six simplified steps to become a pilot.
Step One: Pick a Flight School
There are 1,000+ pilot schools in the United States that you can pick from. Before beginning your search, determine your aviation goals and plans.
Do you want to become a pilot, or fly for leisure? What is your budget, and how much time do you have?
After having an idea for your aviation plan, begin looking into flight schools. You’ll want to ask the following questions when choosing a flight school:
How is the cost of flight school structured? Does the school offer any financial aid?
Have former students of the flight school established successful careers as pilots? Where are they now?
What kind of training, mentoring, and career support services does the flight school provide?
Does the flight school have a good reputation? Is it accredited?
Is it a Part 61 (flexible, customized, often pricier flight school) or a Part 141 (rigid, structured, cost-effective flight school)? Does it align with your goals and wants?
Is the flight school far or close to home? Does location matter?
Step Two: Apply for the Necessary FAA Certificates
To become a pilot, you must apply and be approved for certificates offered by the Federal Aviation Administration (FAA).
Medical Certificate
You must meet basic health requirements to become a pilot. You’ll need to undergo a physical examination by a certified doctor and submit the documentation to the Federal Aviation Administration.
There are three types of medical examinations that you can undergo: the first-class medical examination, the second-class medical examination, and the third-class medical examination.
First-class medical examination
For future airline pilots; the highest level of examination available that ensures all medical requirements are met as a pilot.
Second-class medical examination
For commercial pilots.
Third-class medical examination
For students who want to obtain a student pilot license.
Student Pilot Certificate
After obtaining your medical certificate, you’ll be able to apply for your student pilot certificate through the Federal Aviation Administration’s Integrated Airman Certification and Rating Application.
You will need this certification in order to fly by yourself during your training, and it’s a step towards obtaining full licensure as a pilot.
Step Three: Start Flight Training
Start taking flight training lessons at the pilot school of your choice. You need a minimum of 250 hours of flying to earn your license, and your flight hours can be logged through your flight school, flight instructor, etc.
Step Four: Pass the FAA Private Pilot Knowledge Test
To be able to take the Private Pilot Knowledge Exam, you will need an endorsement from your instructor that proves you’ve had the appropriate training and study to take the exam.
Step Five: Pass the Private Pilot Practical Exam
The private pilot practical exam, also known as the “check ride,” is the final evaluation that you must pass to receive your licensure as a private pilot.
The exam consists of two parts: an oral exam and a flight evaluation. Once you pass the check ride, you will receive your license as a private pilot.
FAQs About Becoming a Pilot
How Long Does it Take to Become a Pilot?
It takes anywhere from two to three months to earn your private pilot license and become a pilot.
However, it will take you longer to become a commercial or airline pilot. You’ll have many flight hours to fulfill, tests to take, and certifications to receive beyond your basic training.
After earning a student license and private license, you’ll have to obtain your instrument rating, commercial pilot license, flight instructor license, multi-engine rating, and airline transport pilot license (ATPL). To qualify for an airline transport pilot license, you must be a minimum of 23 years old, have at least 1,500 flying hours, have a first-class medical certificate, and fulfill other requirements.
How Much Do Pilots Earn?
In 2022, the average salary for an airline pilot was $144,101, but it can range anywhere from $56,000 to $700,000 in the United States. Much of a pilot’s salary depends on years of experience, location, employer, and other factors.
How Much Does it Cost to Become a Pilot?
According to the ATP Flight School, it costs $91,995 to become a pilot without any previous experience. For individuals with a private pilot certificate, becoming a pilot costs around $71,995.
For private pilot schools, the cost of tuition usually ranges from $60,000-$80,000. However, the cost of pilot school differs from program to program, so be sure to thoroughly do your research so that you’re getting the most bang for your buck.
How to Pay for Pilot Education Programs
To cover the cost of pilot education programs, many aspiring pilots turn to private student lenders rather than paying out of pocket.
As a student attending a non-traditional program, you will need a lender that works with career training schools, including pilot schools. Consider the following lenders, all of which work with career training schools:
Becoming a pilot requires a significant investment in time, money, and effort. At Sparrow, we want to help you find the best option available for you to afford the cost of pilot school. If you submit a free application with Sparrow, you can compare private lenders that work with career training programs to find the best student loan for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The average student loan debt for college graduates is around $37,000, though the average student loan debt for engineers varies based on the type of engineering that you study.
If you plan to pursue a degree in engineering, it’s important to look ahead into the post-graduation future. To do so, consider factors like the average student loan debt for engineers, the starting salary for your specific engineering job, and how you plan to repay your debt.
What is the Average Student Loan Debt for Engineers?
The following table showcases the average student loan debt for engineers based on the specific engineering field that they studied, compiled by the Education Data Initiative.
Type of Engineering
Type of Degree
Average Student Loan Debt
Mechanics, Robotics, and Automation Engineering
Associate’s Degree
$6,500
Civil Engineering Technologies
Associate’s Degree
$15,250
Engineering Science
Associate’s Degree
$10,500
General Engineering
Bachelor’s Degree
$24,999
Biochemical Engineering
Bachelor’s Degree
$24,709
Civil Engineering
Bachelor’s Degree
$24,035
Aerospace, Aeronautical, and Astronautical Engineering
Bachelor’s Degree
$23,875
Chemical Engineering
Bachelor’s Degree
$23,106
Mechanical Engineering
Bachelor’s Degree
$23,000
Computer Engineering
Master’s Degree
$38,967
General Engineering
Master’s Degree
$30,663
Civil Engineering
Master’s Degree
$27,931
Mechanical Engineering
Master’s Degree
$23,302
How Long Does it Take Engineers to Pay Off Student Loans?
While the amount of time it takes engineers to pay off their student loans differs from engineer to engineer, here’s what you should know:
If you only make minimum monthly payments on your loan, it will take the entire repayment term to pay off the loan. However, if you make surplus payments, or pay more than the amount of your minimum payments, you can pay off your loan a lot faster.
For example, let’s say that a chemical engineering student took out a student loan of $25,000 with an interest rate of 4% and a 20-year repayment term. Then, if they only made the minimum monthly payment, it would take the student the entire 20-year repayment term to pay it off in full. By making monthly surplus payments of $300, however, the student would pay off their loan completely in around 6 years.
Likewise, let’s say that the student took out a loan of $28,000 with an interest rate of 6% and a repayment term of 15 years. Then, if they only made the minimum monthly payment, it would take the student the entire 15-year repayment term to pay it off in full. However, by making monthly surplus payments of $500, the loan would be paid off in 4 years.
Accordingly, the amount of time that it takes for engineers to pay off their student loans varies based on the interest rate of their loan, their monthly surplus payment amount, and the loan total.
How long it takes you to repay your student loan debt as an engineer is often dependent on your salary. Generally, the higher the salary is, the easier it will be to pay off student loan debt.
For mechanical engineers, the average student loan debt is $23,000 while the average starting salary is $64,682. For civil engineers, however, the average student loan debt is $24,035 while the average starting salary is $59,892.
Use the following table in combination with the table above to compare your expected student loan debt and future salary.
Type of Engineering
Mean-Entry Level Salary
Mean Annual Salary
Top 10% of Salaries
Aerospace Engineering
$86,034
$122,270
$168,370
Biomedical Engineering
$63,575
$101,020
$154,750
Chemical Engineering
$68,797
$121,840
$187,430
Civil Engineering
$59,892
$95,490
$133,320
Computer Engineering (Hardware Engineers)
$75,953
$136,230
$208,000
Construction Management
$59,259
$108,210
$163,800
Electrical Engineering
$68,819
$107,890
$162,930
Environmental Engineering
$58,808
$100,220
$153,200
Geological and Mining Engineering
$69,879
$100,450
$162,720
Geospatial Science and Technology
$58,562
$73,510
$103,450
Industrial Engineering
$70,496
$95,200
$129,620
Mechanical Engineering
$64,682
$97,000
$136,210
Mechatronics/Robotics Engineering
$80,735
$86,000
$127,000
Surveying Engineering
$78,810
$68,880
$101,240
How to Refinance Your Engineer Student Loan Debt
If you are an engineer who has already taken out multiple student loans to cover the cost of education, consider refinancing your student loan debt.
Refinancing is when you take out a new loan to pay off all, or one of, your current loans. You then receive a new loan with a new interest rate, loan term, and repayment plan.
The best student loan refinance lender will ultimately be the one that works best for you. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. Specifically, with the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Refinancing your student loan debt allows you to save more money in the long run; a lower interest rate and shorter repayment term can help you save thousands of dollars.
For example, let’s say that you have a student loan for $15,250 with a 7% interest rate and a 10-year repayment term. The minimum monthly payment for the loan is $177, but you’ve been making surplus payments of $300 per month. Accordingly, by paying $300 per month, you would pay off the entire loan in 3 years ($17,091 in total including interest).
However, let’s say you apply to refinance instead. Then, let’s say your new loan offers you a 4% interest rate, starting at the same balance and with the same repayment term of 10 years. Now, with the same $300 monthly surplus payments, you can pay off the entire loan in 3 years, but it would only cost you $16,293 total.
In this example, by refinancing your loan, you save $793 and a few months of making payments.
If you want to refinance your student loans, you’ll want to have a strong credit score and history, as well as a steady income. Note that you can refinance multiple private student loans, and you may have the option to combine, or consolidate them into one depending on the lender.
If you are an engineer who is shopping around for a private student loan or looking to refinance your student loans, submit a free application with Sparrow. We help you compare loans that you qualify for across 17+ lending partners so you can find the best loan on the market for you.
As a student applying to college, you should be aware of the options that you have for applying, such as Early Action, Early Decision, and Regular Decision. Knowing how you want to apply to college can save you a lot of time and assure that you are making the best decision for yourself. Although you may be wondering, what’s the difference between early action vs early decision?
Early Action and Early Decision are commonly confused methods of applying to college because of the similarities in the programs. However, there are key differences between Early Action and Early Decision that every student applying to college should know.
Early Action vs Early Decision: What’s the Difference?
For both Early Action (EA) and Early Decision (ED), you apply to the college of your choice by an earlier deadline and, in turn, find out if you were accepted, rejected, or waitlisted earlier.
The key difference between applying Early Action vs Early Decision is that Early Decision is a binding decision, meaning you must attend the school if you are accepted and withdraw any other submitted applications. Early Action, on the other hand, is a non-binding decision.
As outlined above, applying Early Action means that you submit your college application to the school of your choice at an earlier deadline and receive your admissions results sooner. You can apply Early Action to as many schools as you want, as long as the schools offer Early Action.
Early Action is a non-binding agreement, meaning that you are not obligated to accept the admission offers of the schools that you get into via Early Action.
Pros of Early Action
Cons of Early Action
You hear back whether or not you were accepted into schools sooner, meaning you may be able to end the college application process sooner.
Any new test scores, awards, honors, extracurricular activities, etc. will not be included in your application after submission.
It is a non-binding decision.
Your chances of being accepted through Early Action are smaller than being accepted through Early Decision. This is because ED demonstrates serious commitment to the school and protects the school’s yield rate (amount of students who accept their admissions offer) because the decision is binding. Furthermore, ED applicants generally are more competitive applicants in terms of test scores, GPA, and extracurricular activities.
Your application can be deferred if you are not accepted through Early Action. This means that even if you apply through Early Action, your application will be reconsidered along with the Regular Decision application pool.
You can see your financial aid packages earlier and negotiate with more time.
Popular Schools that Offer Early Action:
Early Action is offered by a wide variety of schools. Here are a few popular schools that offer it:
Northeastern University
Princeton University (single-choice Early Action, meaning that you cannot apply early to any other school though the decision is non-binding)
Early Decision is a binding agreement, meaning that if you are accepted into the school you applied to ED, you are obligated to attend the school and withdraw any other applications. Just like Early Action, you apply Early Decision in an earlier timeframe and receive your acceptance decisions sooner.
You may only apply Early Decision to one school.
Pros of Early Decision
Cons of Early Decision
Your chances of acceptance are significantly higher than if you apply Early Action or Regular Decision, especially for selective universities.
You are obligated to enroll in the school.
If accepted, you are finished with the college application process earlier and already know what school you are attending.
You may be missing out on more competitive financial aid packages.
Your application can be deferred, or pushed to the Regular Decision applicant pool, giving you another chance at admission.
If accepted, you receive your financial aid package sooner and have more time to negotiate.
Popular Schools that Offer Early Decision
Early Decision is offered at many schools including, but not limited to:
Columbia University
Washington University
Boston University
Brown University
Cornell University
Things to Ask Yourself When Applying Early Decision
Again, applying Early Decision is binding, so it’s important to think over the decision thoroughly before moving forward. Before applying Early Decision, ask yourself the following questions:
Does the school offer the option to apply Early Decision?
Is this school your top, dream school that you would attend even if you were accepted anywhere else?
Are you eligible to receive an affordable financial aid package? Does the school offer scholarships that can help you defray the cost of tuition?
Is the location of this school somewhere you can spend the next four years of your life?
Have you thoroughly researched this school in terms of geography, social scene, academics, extracurriculars, etc.?
Between Early Action vs Early Decision, there is no option that is necessarily “better,” but there may be an option that is more suitable for you. Early Action is more suited for students who don’t have a definite “dream school” in mind and want to keep their options open. Early Decision is for students who have a dream school that they would like to attend, without any reservations or hesitations.
However, before you decide between applying Early Action and Early Decision, you’ll want to assess whether or not applying early is a strategic, feasible option for you.
If you want to apply early, you’ll want to have the following things:
Sufficient time to write a killer application that highlights the best qualities about yourself through your Personal Statement essay, school-specific essays, extracurricular activities, etc. If the Early Action/Decision deadline seems too soon for you to put together a competitive application, consider applying Regular Decision.
Test Scores/GPA that match or exceed the average stats of the school that you want to apply early for. You’ll want to be a competitive applicant if you are applying early, particularly for Early Decision. If you are taking the SAT/ACT after the deadline for Early Action/Decision or want to boost your GPA before submitting your transcript, consider applying Regular Decision.
I Want to Apply Early to College. What Do I Do Next?
Now that you’ve determined whether or not you want to apply early to college, it’s time to decide whether or not you should apply Early Action vs Early Decision for the colleges on your college list.
You should only apply Early Decision to a school you are 100% confident of being happy with attending. If there is no school that you feel this way about, apply Early Action. Keep in mind that you can apply Early Action and Early Decision – however, if you are accepted into the school that you applied Early Decision for, any other acceptances will have to be rejected.
We hope that this article has helped you learn the difference between Early Action vs Early Decision and guided your decisions when applying to college.
As general advice, be sure to keep track of every college application deadline that you have and whether you are applying early or on the regular timeline. Staying organized and on top of your work is the key to success!
Once you’ve applied, you should start thinking about how to pay for college. To get the process started, compare student loan rates with Sparrow today. By completing the Sparrow application, you’ll be able to see which student loans you qualify for and at what rates. Then, you can compare your loan options side-by-side to be sure you’re picking the best one.
Federal student loans are a favorable option when it comes to paying for the cost of education. This is because federal student loans offer flexible repayment terms, borrower protection measures, and loan forgiveness options. Most federal student loans also do not require credit checks or cosigners to be qualified for a loan.
If you’re a college student looking to take out federal student loans to pay for the cost of education, keep reading. In this article, we’ll cover everything that you need to know about federal student loans.
A federal student loan is a student loan that is offered by the U.S. Department of Education. Federal student loans can be taken out by both students who can demonstrate financial need and students who cannot.
To receive a federal student loan, you need to submit your Free Application for Federal Student Aid (FAFSA). The FAFSA opens every year on October 1st and is due on June 30th of the following year. Once you submit your FAFSA, the schools that you applied to will send you a financial aid package that details which federal student loans you qualify for and how much you can borrow.
Must be an undergraduate student who can demonstrate financial need.
4.99% – You will not be charged for interest during school attendance (as long as you’re enrolled for at least half-time), grace period, and during any deferment periods.
$3,500 – $5,500 per year
May be referred to as Stafford Loans or Direct Stafford Loans. Subsidized means that the government will pay the interest on your loan while you are in school, during your grace period, and during any deferment periods. No credit check.
Direct Unsubsidized Loans
Must be an undergraduate, graduate, or professional student. No financial need is required; open to all students who meet academic qualifications.
4.99% for undergraduate students – Interest will accrue during school attendance, grace period, and any deferment period. 6.54% for graduate and professional students – Interest will accrue during school attendance, grace period, and any deferment period.
Dependent Undergraduate: $5,500-$7,500 per year ($31,000 in total) Independent Undergraduate: $9,500 – $12,500 per year ($57,500 in total) Graduate/Professional Student Limit: $20,500 per year ($138,500 in total)
May be referred to as Stafford Loans or Direct Stafford Loans. Unsubsidized means that the government will not pay the interest on your loan, and interest will accrue throughout the entire loan. No credit check.
Direct PLUS Loans
There are two types of Direct PLUS Loans: Grad PLUS Loans: Must be a graduate or professional student who has maxed out Direct Unsubsidized Loan borrowing limits. Parent PLUS Loans: Must be a parent of an undergraduate student.
7.54%
Net cost (cost of attendance MINUS any financial aid received)
A credit check will be conducted to verify whether you qualify for the Direct PLUS Loan. To qualify, you must not have an adverse credit history.
Direct Consolidation Loans
The Direct Loan Consolidation program is offered by the federal government and allows you to combine all of your federal loans into a single loan. The new loan will have a fixed interest rate that is based on the average of the interest rates of your current loans.
Pros of Student Loan Consolidation
Longest loan repayment term offered: You can receive a loan repayment term that is up to 30 years long, which is longer than most private loans can give you. This means that your monthly payments will be smaller and you won’t have to repay your loan hastily.
One single loan payment: If you consolidate all of your federal loans, you only have to make one payment per month as opposed to making each payment individually. This makes payments easier to make.
No credit check: You do not need to have a strong credit history to consolidate your federal student loans.
Some federal benefits: Some consolidated student loans can qualify for Public Service Loan Forgiveness or income-driven repayment.
Cons of Student Loan Consolidation
You cannot use a Direct Consolidation Loan to combine private loans. Only loans taken out from the U.S. Department of Education can be consolidated through a Direct Consolidation Loan. Note that private loans can be consolidated through refinancing with your individual private lender.
May have a higher interest rate: The interest rate on a Direct Consolidation Loan will be the average of the interest rates you currently have. As a result, your new interest rate may be higher than some of the individual interest rates you had previously.
May lose certain federal benefits: Loan consolidation may take away from federal benefits, such as discounts on interest rates, student loan cancellation options, or credit for any payments before consolidation.
What’s the Difference Between Loan Consolidation and Loan Refinancing?
You can only consolidate federal student loans through the Direct Consolidation Loan program that is offered by the federal government. Doing so allows you to combine multiple federal student loans into one, and the new loan’s interest rate is the average of your previous loans’ interest rates.
However, it is possible to consolidate your federal student loans and private student loans via private loan refinancing. Loan refinancing is when you take out a new private loan to pay off the total debt of all of your loans combined. You receive completely new loan terms, such as a new interest rate and repayment plan. However, these loan terms are determined on your credit score, income, and credit history.
Direct Subsidized Loans
Direct Subsidized Loans are for undergraduate students who can demonstrate financial need. In order to prove your financial need to the U.S. Department of Education, you will need to fill out your Free Application for Federal Student Aid (FAFSA).
You do not need a cosigner or a credit check to receive a Direct Subsidized Loan.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are for undergraduate, graduate, and professional students. You do not need to demonstrate financial need to apply to receive a Direct Unsubsidized Loan; this loan is for students with all financial standings.
Borrowing Limits for Direct Subsidized and Unsubsidized Loans for Dependent and Independent Students
While there are limits to how much you can borrow in subsidized and unsubsidized federal loans, there are also combined limits based on your dependency status and year in school.
Direct PLUS Loans are federal student loans that graduate students, professional students, and parents can take out.
These loans do not have a limit, meaning that you can borrow up to the net cost of your education, or the cost of education minus any financial aid.
To qualify for a Direct PLUS Loan, you must not have adverse credit history and will have to receive a credit check. You may need “an endorser,” or a cosigner, with a strong credit history to qualify for the loan if you have a weak credit score.
Direct PLUS Loans have fixed interest rates (meaning that they do not change) that can be higher than the interest rates offered by private student loans. Furthermore, Direct PLUS Loans may have higher origination fees than private student loans, sometimes making private student loans a more feasible option for parents, graduate students, and professional students.
Federal Student Loans vs. Private Student Loans
Federal student loans are offered by the U.S. Department of Education, while private student loans are offered by individual companies.
When you’re debating between private and federal student loans, experts recommend taking advantage of federal student loans first because they generally offer lower interest rates, more flexible repayment terms, and more borrower protection measures.
Here are the key differences between federal student loans and private student loans.
Loan Type
Federal Student Loans
Private Student Loans
Borrower Requirements
The Direct Subsidized Loan is only for undergraduates with financial need; Direct Unsubsidized Loans, Grad PLUS Loans, and Parent PLUS Loans are for undergraduates, graduate students, professional students, and parents of all financial backgrounds.
No financial need is required; anyone can apply.
Cosigner Needed?
No for the Direct Subsidized Loan and Direct Unsubsidized Loans; yes for Direct PLUS Loans.
In most cases, yes. Most students do not have long enough credit histories to qualify for a competitive private student loan or a private student loan at all.
Interest Rates
Interest rates tend to be lower than the interest rates of private student loans and are always fixed, meaning that they do not change.
Interest rates tend to be higher for students because of their lack of a strong credit history; may vary with a cosigner. Interest rates can be fixed (meaning that they do not change) or variable (meaning that they change based on the market).
Borrower Protection Plans
The federal government offers loan deferment, loan forbearance, and loan forgiveness to qualifying federal student loans.
Depends on the lender, but selections are often limited.
Credit Score Requirements
Typically, federal loans do not look at credit scores except the Direct PLUS Loans.
Most private lenders will be looking for students & cosigners with strong credit histories and scores.
Borrowing Limits
For undergraduates: between $5,500-$12,500 maximum with the Direct Subsidized and Direct Unsubsidized Loan per academic year. For parents: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan. For graduate/professional students: Varies on the cost of attendance and financial aid award received for the Direct PLUS Loan.
High borrowing limit, up to 100% of the cost of attendance.
Repayment Plans
Direct Subsidized Loans and Direct Unsubsidized Loans have a six-month grace period where you do not pay to make regular loan payments after graduation, after dropping out, or enrolling less than half-time. Interest accrues during the grace period for the Direct Unsubsidized Loans and not for the Direct Subsidized Loans. The federal government offers seven different types of repayment options: the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan, Pay As You Earn Repayment Plan (PAYE), Revised Pay As You Earn Repayment Plan (REPAYE), Income-Based Repayment Plan (IBR), Income-Sensitive Repayment Plan (ISR), and the Income-Contingent Repayment Plan (ICRP).
Private student loans tend to have fewer repayment options in comparison to federal student loans.
Closing Thoughts From the Nest
If federal student loans don’t seem like the best option for you, and you want to see which private loans you might qualify for, use Sparrow’s free online tool. If you submit the Sparrow application, you can compare private student loans and interest rates from more than 15+ different lenders to ensure that you’re getting the best rate on the market.
As a parent, it’s your job to make sure your kids are okay. That’s why back when they needed help with money for college, you gladly took out loans. But, the loans are getting harder to manage so you’re thinking about refinancing. You wonder: How can I refinance my parent PLUS loans? Can I refinance my child’s student loans?
When you refinance a loan, you’re allowing a lender to pay off your current loan. They’ll then give you a new loan, oftentimes with better loan terms, to pay them back. Better terms like lower interest rates can save you a lot of money in the long run. Take a look at the table below to see what we mean.
Original Loan
New Loan A
New Loan B
Loan Amount
$30,000
$30,000
$30,000
Interest Rate
7%
3%
3%
Repayment Term
10 years
10 years
5 years
Total Interest
$11,799.05
$4,761.87
$2,343.64
Notice how the total interest paid keeps going down. New Loan A has a lower interest rate and saves you around $7,000. New Loan B has a lower interest rate and a shorter repayment term. This not only lowers the interest even more but also helps you pay off the loan faster. As you can see, refinancing can translate into big savings. That’s why it can be a great move for you.
How to Refinance Parent PLUS Loans
Decide if Refinancing Is Right for You
Before you begin the process of refinancing, you need to make sure that refinancing is right for you. Consider the types of loans you have. Are they private or federal loans? Think about your financial goals. Will refinancing now help you meet them? Finally, make sure you’re in a position where you’ll get better loan terms. It’s not worth it if you get similar or worse terms than before.
Compare Parent Loan Refinance Rates
Use Sparrow to help you find the best parent PLUS loan refinance rates. The Sparrow application matches you with what you qualify for from our 17+ partnering lenders. You can then compare refinance rates side-by-side, helping you narrow down your options to see which is best for you.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
When it comes to choosing a refinance lender, think about what you want in your new loan. Do you want a shorter term? Who offers the best student loan refinance interest rate? Do they offer any benefits? These are just some questions you should ask yourself to figure out which lender you want to work with.
Complete a Formal Application With the Lender
Once you’re ready, fill out and submit a formal application with the lender. You’ll also have to submit additional documents with your application. These include:
Loan statements
Proof of income/employment
Proof of residency
Proof that your child graduated and from what school
Can I Refinance Private Parent Loans?
Yes, you can refinance private parent loans. As long as you can get better loan terms, there are few downsides to refinancing your private loans. To qualify, you’ll need at least a good credit score and a stable income. A typical credit score that qualifies is at least in the high 600s, and the higher that score is, the better. Each lender will also have additional requirements that you must meet, so be sure to check on that.
Can I Refinance Parent PLUS Loans?
Yes, you can refinance your Parent PLUS Loans. It’s not much different from refinancing private student loans, so all of the information above still applies. However, when you refinance a federal student loan, you’ll lose out on federal benefits. This includes benefits like income-driven repayment plans and possible loan forgiveness. For this reason, you’ll want to weigh the pros and cons to decide whether refinancing is worth it to you.
Can I Refinance a Student Loan as the Cosigner?
While refinancing may take you off as a cosigner, you cannot refinance the loan. As a cosigner, you’re there more to vouch for the primary borrower. Even though you also take on responsibility for the loan, only the primary borrower is fully in charge of it. So, only they can start the refinancing process.
If you’re not looking to be a cosigner anymore, some lenders offer cosigner release options. Lenders will release cosigners after borrowers have made a number of on-time payments. Have your child check with their lender to see if they offer this.
Benefits of Refinancing Parent Loans
Regardless of your loan situation, refinancing your parent loans has great benefits. For one, you can save a lot of money on your loans. The earlier table showed how that was true. Yet, that isn’t the only benefit.
If you have multiple private student loans, you have the option to consolidate them when you refinance. That way, instead of making many monthly payments, you’ll only make one. Refinancing can also transfer the loan to your child. This will help them build a credit history and release you from the debt.
Final Thoughts from the Nest
Refinancing can be a challenging process, but it pays off in the end. It can be good for both you and your child. When you’re ready to start the process, use Sparrow to help you. All you have to do is fill out the application, which won’t take long. Fill out the application now, and let us support you so you can focus on the other goals you have.
The average borrower takes 20 years to repay their student loan debt, costing them around $26,000 in interest alone. While it may be tempting to throw all your extra cash toward your student debt to relieve that burden faster, sacrificing investing for retirement to do so may not be the best approach. That said, the decision to pay off student loans or invest isn’t that simple.
If you’re frozen with indecision, here are a few things to consider.
Should I Pay Off Student Loans or Invest?
As with any personal finance decision, deciding whether to pay off student loans or invest is personal. Which route is more advantageous for you will depend on your unique situation.
Generally speaking, however, there are a few main factors to consider:
What Interest Rates Your Student Loans Have
It’s important to consider the interest rate on your student loan(s) in comparison to what you believe the stock market will return. For example, the average student loan interest rate, across all types of student loans, is 5.8%. However, the average return of the S&P 500 is around 10%.
Most investing experts agree that the earlier you invest, the better. This is because of the power of compounding interest: the longer you allow your investments to grow, the greater return you will receive. But by the same token, the longer you take to pay off your student loan debt, the more interest will accrue.
If you have a low-interest student loan, investing may generate a greater return than the amount of interest that accrues on your student loan. However, if you have a high-interest student loan, the interest costs may far outweigh the 10% return from investing.
Federal student loans have the potential to be forgiven. Each student loan forgiveness program will have its own unique set of requirements. Nonetheless, many will require you to make a specific number of minimum monthly payments to qualify. After making the required payments, your remaining student loan balance will be forgiven.
Given that your debt will be forgiven upon making just the minimum payments, there is little benefit to making surplus payments. In this case, investing would make more sense than directing a surplus payment toward your student debt.
Private student loans, on the other hand, don’t have the potential to be forgiven. So, depending on your interest rate and loan balance, surplus payments may make more sense in comparison to investing.
If your student loan debt is causing you an unmanageable amount of angst, it may make more sense to focus your attention on throwing all your spare cash toward it. Even if you recognize that the returns from investing will far outweigh the cost of your student loan interest, it’s okay to prioritize your mental health and pay off your student loan debt first.
When to Prioritize Paying Off Student Loans Over Investing
As a guideline, there are a few circumstances in which paying off your student loans before investing makes more sense:
If your student loan interest rate is over 6-7% and you have a high loan balance. The larger your loan balance, the more interest you’re likely to accrue. For example, if you owe $10,000 at a 6% interest rate, you would pay $17,194 total over the course of a 20-year repayment term. However, if you owe $100,000 at a 6% interest rate, you would pay $171,943 total over the course of a 20-year repayment term. Notice how the higher outstanding loan balance results in significantly higher interest costs.
If you are concerned about being unable to pay your student loan payments in the future. If you opt to prioritize investing, but later experience an inability to make your student loan payments, it may be a scramble to come up with the cash. While you can withdraw money from your investment account, you will likely face a penalty to do so.
If you predict a circumstance that will impact your ability to make your student loan payments in the future, it may make more sense to prioritize paying them off before investing. Directing surplus payments toward your student debt will lower your minimum monthly payment, which may make your future payments more manageable.
If your student loan debt is negatively impacting your mental health. If paying off your student loans will provide you with an immense amount of peace, paying them off before investing may make the most sense.
If you simply don’t want to have any outstanding debt on your record. Paying off your student loans would not only remove the outstanding debt from your record, but it could improve your credit score as your debt-to-income ratio shifts.
When to Prioritize Investing Over Paying Off Student Loans
Here are a few instances in which investing before paying off your student loans makes more sense:
If your student loan interest rate is less than 5% andyou expect to return the average 10% on your investments. Even with interest costs, the average rate of return on investments will likely outperform most low-interest student loans.
If your employer offers a 401k match and you are fully vested, meaning you are entitled to the full amount in your 401k including your employer’s match. If you currently contribute to a 401k with an employer match, you may be required to work for the company for a specific amount of time to be entitled to 100% of that employer match. If you decide to leave the company prior to being fully vested, you may only be entitled to a portion of your employer’s contributions.
If you believe the return on your investments will far outweigh the cost of the student loan. In some instances, investing will far outperform the interest costs associated with making minimum monthly payments on your student loans. In those instances, it may make more sense to focus on investing over paying off your student loans.
Do the Math to See Which Option is Better
If you still aren’t leaning towards one option over the other, do the math to give yourself a concrete answer. Mathematically, one option will outperform the other, which can give you a clearer picture of what to do.
Let’s say you’re in an “either/or” situation — you either want to put an extra $500 on your student loan each month or invest it. Here’s how this would play out based on the average student loan debt and investing data.
Pay Off Student Loans
$37,693 balance
5.8% interest rate
20 year repayment term
Total paid before $500/mo surplus payment: $63,771
Total paid with $500/mo surplus payment: $43,360
By adding a $500/mo surplus payment, you save $20,411 and pay off your student loans in 5 years instead of 20.
Invest
You invest $500/mo.
Average rate of return: 10%
Balance after 20 years: $361,993.36
After 20 years, you contribute $120,000 but earn $241,993.36 in interest.
Balance after 15 years: $200,810.61.
After 15 years, you contribute $90,000, but earn $110,810.61 in interest.
If you opted to direct the $500 a month toward your student debt, you could pay off your loan in 5 years instead of the full repayment term of 20 years. This would save you $20,411 over the life of the loan. Then, let’s say that after paying off your student loans, you began investing that $500 a month. After 15 years, you would have earned $110,810.61 in interest. In total, you “earn” $131,221.61 between both the savings on interest and the interest that accrued on your investments.
Now, if you chose to pay only the minimum monthly payment on your student loans and invest that $500 a month instead, it would take you the entire 20-year repayment term to pay back your student loans. However, you would have earned $241,993.36 in interest on your investments. Even after considering the additional $20,411 cost of making only the minimum monthly payments on your student loans, you still score a net earning of $220,933.36.
In this case, prioritizing investing over paying off your student loans makes mathematical sense. To calculate whether it makes sense for your specific situation, utilize investment calculators and student loan repayment calculators.
Create a Balanced Approach Between Debt Payoff and Investing
The examples we’ve discussed illustrate an “either/or” approach. However, it isn’t necessary to be successful in paying off your student loans OR investing. In fact, creating a balanced approach may work best for you.
If focusing solely on one leaves you anxious about your progress in regards to the other, find a middle ground. For example, in the case of having an extra $500 each month, it’s okay to split up your payments. Directing half towards your debt and half towards your investments isn’t a bad idea if it gives you peace of mind.
FAQs About Paying Off Student Loans vs Investing
The decision of whether to pay off student loans or invest may feel difficult. It’s normal to still have questions. Here are a few of the most common ones:
Is there a downside to paying off student loans early?
When borrowers ask this question, they’re often concerned about facing a prepayment penalty. A prepayment penalty is a fee charged when a borrower pays off their entire loan balance earlier than scheduled. While some lenders may charge a prepayment penalty, student loan lenders cannot.
With that said, the only notable downside to paying off your student loans early is that you may experience a temporary drop in your credit score. By paying off your student loans, you are closing an active line of credit. By doing so, the positive repayment history associated with the account will no longer be factored into your credit score.
Should I use all my savings to pay off my student loans?
While it may be tempting to use your entire life’s savings to wipe out your student loan debt, it isn’t the best approach. Before even considering investing or putting a surplus payment on your student loans, make sure you have a fully funded emergency savings of at least 3 to 6 months of expenses.
However, if you have a fully funded emergency savings, it may make sense to use the remaining balance to pay off your student loans.
What else can I do to pay off my student loans faster?
Consider refinancing. In a simple sense, refinancing your student loan allows you to swap your current student loan(s) for one with a lower interest rate or more favorable terms. Then, you can save money over the life of the loan and expedite the process of getting your balance to zero.
Opt into automatic payments. Many private student loan lenders offer a 0.25% interest rate discount to borrowers who opt in to automatic payments. While a small deduction, it can make a significant difference depending on your current interest rate and outstanding loan balance.
Cut back on expenses. If you don’t already track your spending, consider doing so. By understanding where your money goes, you may find that you’re able to cut back expenses in certain areas. Then, you can re-direct that money toward loan payments.
Pick up a side hustle. The average side hustle generates between $507 and $746 per month, according to USA Today. If you have the capacity to take on a side gig, the additional income could cut down your repayment period.
Final Thoughts from the Nest
When it comes to the decision of whether to pay off student loans or invest, there is no one-size-fits-all solution. Before making a decision, take the time to understand what makes most sense for your unique financial situation. If you still feel unsure, consider consulting a financial or investment advisor for personalized advice.
The content of this article is not, nor should it be, taken as financial advice. The content of this article is for educational purposes only. For personalized financial advice, please consult a financial or investment advisor.
Cosigning is a popular practice in the world of private student loans. Most students do not have sufficient enough credit histories to qualify for competitive private loans on their own, which is why a cosigner steps in to help. However, at this point you may be wondering, “does cosigning a student loan affect my credit?”
If your child, relative, or close friend ask you to cosign for a private student loan, be informed before making a decision. Cosigning a private student loan is a hefty decision to make, and there are ways it could hurt your credit.
What is a Private Student Loan Cosigner?
A private student loan cosigner is an individual who agrees to sign onto a private student loan alongside the borrower, often in cases where the borrower can’t qualify for the loan or receive favorable terms on their own.
Because cosigners are equally responsible for repaying the loan, any missed payments by the primary borrower ultimately become the cosigner’s responsibility. Likewise, if the primary borrower causes the loan to go into default, you are responsible for the loan as the cosigner.
In the 2019-2020 academic year, 92% of private undergraduate student loans and 63% of private graduate student loans were cosigned.
In many cases, students are unable to qualify for private loans or receive favorable loan terms without a cosigner. In short, private lenders want to know that they will be getting their money back when lending to people. So, due to students’ limited credit history, often due to their age, students can be risky investments for lenders. By tacking on a cosigner with a strong credit history to a student loan, lenders can be more confident that their money will be returned in full over time.
A student with a cosigner is more likely to repay their loan on time and in full as opposed to a student without one. So, with a cosigner, the chance of receiving the best possible private loan is significantly higher.
Unlike private student loans, federal student loans do not require a cosigner. Students are able to borrow loans that they qualify for based on their Free Application for Federal Student Aid (FAFSA) application.
However, if a student is looking to take out a private student loan, a cosigner will almost always be necessary.
Cosigning a student loan can affect your credit both positively and negatively. Consider the advantages and drawbacks before making the decision to cosign.
How It Hurts Your Credit
#1: A Hard Inquiry
When you cosign a private student loan, most private lenders will request for a hard inquiry, or access to review your credit report. Hard inquiries can hurt your credit score by up to 10 points, though the damage is only temporary.
While a hard inquiry will only lower your credit score temporarily, it is important not to open too many credit lines at once. Having multiple hard inquiries can lower your credit score significantly and may seem like you are overextending yourself financially, which isn’t appealing to lenders.
#2:Potential Default
If the primary borrower defaults on the student loan, the default will appear on both of your credit histories. Furthermore, your credit score and chances of opening new credit lines will be severely harmed.
Your loan contract (also known as a promissory note) specifies how many missed payments you can have before your loan enters into default. Before cosigning a student loan, be sure to thoroughly read the loan terms and have a serious conversation with the primary borrower.
#3: Potential for Late Payments
As a cosigner, you are legally responsible for the loan, just like the primary borrower. If the primary borrower misses a payment or makes late payments, these actions can hurt your credit. Keep this in mind before shouldering this financial responsibility.
How It Can Help Your Credit
#1:Diversified Credit Mix
10% of your FICO score is made up by your credit mix. If you have multiple lines of credit, this can actually boost your credit score. Make sure to make all your payments on time and in full to remain in good credit standing.
#2: New Credit Line
Adding a new credit line to your credit history can minimally boost your score. However, it is crucial for the primary borrower to make payments on time and in full so that there are no negative implications for the both of you.
What Are the Other Risks of Being a Cosigner?
Change in Debt-To-Income Ratio
Private student loan lenders measure a borrower’s credit reliability with the debt-to-income ratio. Your debt-to-income ratio (DTI) is measured by comparing the amount of debt you have to your pre-tax income.
For example, let’s say that you earn $1,500 every month before taxes. Your car payment, mortgage, and credit card payments total up to $750. 750 divided by 1,500 is .5, making your debt-to-income ratio 50%.
There are two types of debt-to-income ratios that may be impacted – your back-end ratio and your front-end ratio. Your back-end ratio (all your monthly debt payments divided by your pre-tax income) is considered healthy when lower than 36%. Your front-end ratio, or only your housing expenses divided by your pre-tax income, should be no more than 28%. In general, though, the lower your debt-to-income ratio is, the better it looks to lenders.
If your back-end DTI is higher than 36%, it’s not recommended for you to cosign for a private student loan. If the student loan is approved, your DTI will only get higher and look more unfavorable to lenders.
Varying Cosigner Release Terms
Some private student lenders offer cosigner release options. This option allows for cosigners to remove themselves from the loan and no longer be liable for it. Generally, a cosigner can be released from the loan if the primary borrower has made a certain number of payments on time and in full.
If the private student loan you are cosigning does not offer a cosigner release option, you may be locked into the loan until it is fully paid off. The only way around that is if the primary borrower chooses to refinance the loan and does not have you cosign the new loan.
Commonly Asked Questions About Cosigning a Student Loan
What credit score does a cosigner need for a student loan?
This varies from lender to lender. As a general rule of thumb, a “good” credit score is at least 670. However, the better your credit score is, the more likely the borrower is to qualify for the student loan. Along with qualifying, the borrower will be more likely to receive a better interest rate if they have a creditworthy cosigner.
Do I need to cosign if the student already has a good credit score?
Only 8% of students get approved for private student loans without a cosigner.
If the student has a strong credit score, you may not necessarily have to cosign for the student loan. However, if the student lacks the credit history needed to originate a loan, they may not qualify for the loan on their own.
Furthermore, even if the student has a satisfactory credit score, having a cosigner who also has a good credit score and solid credit history will help the student acquire a lower interest rate and other favorable loan terms.
Does being a cosigner show up on my credit report?
Yes, being a cosigner will show up on your credit report because you are technically opening up a new credit line. Any late payments, defaults, and missed payments will also show up on your credit report. Therefore, make sure that the primary borrower is making their payments on time and in full.
Can cosigning a student loan affect me buying a house?
Yes, it is possible that being a cosigner on a student loan will affect your chances of buying a house. Whether you’re looking for a new mortgage or refinancing your current mortgage, it may be difficult to be approved or qualify for competitive terms if you have cosigned a student loan. This is because while the student loan isn’t technically yours, you are still legally responsible for it. Your debt-to-income ratio is also higher with the cosigned loan than without. Accordingly, it can make you a less attractive borrower to mortgage lenders.
Can both parents cosign a student loan?
No, only one person can cosign a student loan. If you’re having trouble deciding who should cosign a student loan, use Sparrow’s free online tool to compare cosigners and make the decision. If you fill out a free application with us, you can see which private student loans you qualify for across all of Sparrow’s partners. In addition to that, you can input the information of potential cosigners and see how they individually impact the loan and its terms.
In short, cosigning a student loan CAN affect your credit. It is a serious decision that can impact both you and the primary borrower’s finances, for better or for worse. Before you sign anything, do your research. Assess whether or not your finances are at an adequate state to be responsible for a private student loan.
According to Forbes, the average student debt per person is $28,950. That’s a lot of debt. Student loan debt like that can make it hard to make ends meet. Fortunately, there are so many ways to pay off your student loans. Some of them may even surprise you.
To help get you started, we’ve made a list of 17 creative ways to pay off your student loans.
Being a freelancer gives you the freedom to work around your schedule. Plus, you can work as just about anything online. You could be a virtual assistant, do graphic design, or write articles. Pangea is a great freelance website specifically designed for college students and graduates. They offer a minimum pay of $15/hour and guidance in starting a freelance career.
Teach Abroad
Teaching abroad can save you money depending on where you teach. A lot of countries have lower costs of living than the United States. So, you can save money on both rent and general living expenses. Be sure to research where you want to teach before you go. You will need to be certified to teach abroad.
Work as a Grocer Delivery Driver
You can get paid to deliver groceries with apps like Shipt or Instacart. Customers will put their orders in through the app, and you’ll go to pick up the items and deliver them to their house. You can get paid between $16 and $22 an hour, plus tips.
Donate Plasma
New plasma donors can earn up to $400/month. Your plasma can then be used to develop cures for certain diseases. So, not only will you be making money but helping to make advancements in medicine. Isn’t that great? Visit donatingplasma.org for more information on getting started.
Use Your Tax Refund
For many adults, a tax refund can be incredibly exciting, as you now have some extra income on your hands. While you only get a tax refund once a year, this extra money can be used to help pay down a lot of your student loans. Talk to an accountant or do research to learn more about tax refunds.
Drive for Uber or Lyft
With Uber and Lyft, you can get paid for driving. The best part? It doesn’t have to be a big time commitment. You get to set your own hours and choose the number of rides you pick up. You’ll also have the opportunity to earn tips.
Have a Yard Sale or Sell Items Online
You know what they say. One man’s trash is another man’s treasure. Nowhere is this more evident than in yard sales. You can sell old clothes, textbooks, or anything else at a physical yard sale or on websites like eBay.
Walk Dogs
What if we told you that you can get paid for hanging around dogs? Well with websites like Rover and Wag, you can. You can set your schedule and walk dogs whenever you’re available. While there may be service fees on the websites, you’ll also have a chance to earn tips from clients.
Babysit
If dogs aren’t your style, then what about kids? There are a lot of parents who need help watching their kids. Reach out to family and friends to see when you can babysit. You can also use websites like Care.com to expand your services to other people.
Negotiate a Raise
If you’re in good standing with your company, you can negotiate with your boss for a raise. This income boost can help you earn more money to put toward your debt. Be sure to build a case as to why you deserve a raise first, and then schedule the meeting with your boss.
Tutor
Just like you needed help with some classes, so do other students. Reach out to college students you know or to your old school and make it known that you’re available to tutor others. You can also use online websites like Tutor.com to help students virtually from wherever you are.
Find an Employer With Debt Payoff Benefits
Some employers are willing to give you extra money to put toward lowering your student debt. So, you’ll be able to get work experience all while paying off your student loans. You can use Dwindle Student Debt, a job site that specializes in listing jobs with debt payoff benefits, to find these opportunities.
Making some extra income can be a great idea to pay off debt. However, there are several other strategies you can implement to pay off your student debt faster.
Refinance Your Student Loans
Another great option is to refinance your student loans. Student loan refinancing can get you better loan terms like a lower interest rate. You’ll need at least good credit and a strong income to qualify. Refinancing is available for both federal and private student loans. However, you’ll lose federal benefits like income-driven repayment plans or loan forgiveness if you refinance federal loans. So, just take the time to consider whether refinancing is the right move for you.
An autopay discount is when you get an interest rate discount for signing up for automatic student loan payments. You can get a rate reduction of up to .50%. As great as this sounds, not every lender offers it, so be sure to ask if this is available for you.
Student Loan Forgiveness Programs
Student loan forgiveness programs will partially or completely forgive your remaining student loans. They can be a great way to get rid of your federal student loan debt. The federal government offers different programs you can apply to. They all have their own requirements, so talk to your loan servicer to see which is best for you. These programs are not available for private loans.
Biweekly student loan payments can help you pay off your debt faster. Divide your regular payment into two, and then make that half payment every other week. Doing this will get you a little bit ahead on interest and can even result in 1 more full payment per year. On the other hand, biweekly payments can be a little challenging to make. Only do it if you have the additional income to do so.
Final Thoughts from the Nest
This list is a great starting point, but you’re by no means limited to just these options. There are a lot of different ways to pay off your student loans faster. You just have to look for them.
If you decide that refinancing is one of the solutions you want to try, use Sparrow to help you. Sparrow partners with 17+ lenders that offer great refinancing options. All you have to do is fill out the Sparrow application. This application will then match you to what you best qualify for from our lenders. Complete the Sparrow application and get started on paying off your loans quicker.
In a very simple sense, student loan refinancing allows you to swap your current student loan for one with a better interest rate or terms. By doing so, you can save thousands of dollars over the life of your loan. In fact, borrowers who used Sparrow to refinance reduced their interest rate by 2.29 percentage points, saving them around $17,000 over the life of their new loan, on average.
While the prospect of saving $17,000 may have you ready to jump straight into refinancing, there are several things to consider beforehand. Let’s break down the process of refinancing your student loans, including everything you should consider before signing the dotted line.
How to Refinance Student Loans in 7 Steps
To make the process of refinancing your student loans simple, follow these 7 steps.
#1: Decide if Refinancing Makes Sense for You
Before you refinance your student loan debt, it’s important to consider whether refinancing is a good idea in the first place. You should consider refinancing under the following circumstances:
Your financial situation is sound. Most lenders will require you to have a strong credit score, typically of at least 650, to refinance. Lenders will also expect you to have a stable income as it confirms to them your ability to make loan payments. If your credit score is low, or if your income is unstable, you should consider refinancing when both are in check.
You know you can qualify for a lower interest rate or better terms. If your interest rate is high, and you are confident you can qualify for a lower interest rate, it makes sense to refinance. Likewise, if you are unsatisfied with your current loan terms, and are confident you could qualify for better ones, refinancing your student loans makes sense.
You have a federal student loan but don’t plan on using any of the federal protections. Federal student loans have certain advantages that private student loans do not, such as student loan forgiveness and income-driven repayment plans. If you don’t plan on using either, however, refinancing to a private student loan may make sense for you.
On the flip side, you should notconsider refinancing if any of the following circumstances apply to you:
You plan to use federal student loan protections. As soon as you refinance federal student loans to private student loans, you lose federal student loan benefits such as loan forgiveness opportunities and income-driven repayment plans. If you plan to use either of those benefits, it’s better to hold off on refinancing.
You are pursuing loan forgiveness. If you have federal student loans and are currently pursuing a loan forgiveness program, you should not refinance. By doing so, you will lose the opportunity to have your loans forgiven.
You recently declared bankruptcy. The purpose of refinancing your student loans is to secure a better interest rate or terms. Many private lenders will not allow you to refinance if you have declared bankruptcy within the last 4-10 years. If they do allow you to refinance with them, they will likely give you less favorable terms given your financial situation. If you have filed bankruptcy in the last 10 years, consider seeing if you qualify for a refinance loan, but understand that it is unlikely.
Your financial situation hasn’t improved since you borrowed the loan. To secure more favorable terms, you will almost always need a better credit score or income than when you initially borrowed the loan. If your credit score has dropped or if your income has dwindled since you initially borrowed the loan, however, you may not qualify for a better loan.
With that all said, you should explore your student loan refinance options to see if you qualify for a more favorable loan. There is absolutely no harm in exploring your options on Sparrow, as it doesn’t hurt your credit score, and you never know what refinance loan you may qualify for.
#2: Fill Out the Sparrow Application
After you’ve decided if refinancing is right for you, complete the Sparrow application. By completing the Sparrow application, you will be able to see what student loan refinance options are available to you at our 15+ partnering student loan lenders.
Completing the application will not hurt your credit score in any way.
To complete the application, you will need the following information:
Personal information
First and last name
Email address
Phone number
Date of birth
Citizenship status
Social security number
Address
Permanent address
Mailing address
Loan information
Amount needed
When you need funds disbursed
Financial information
Income
Housing expenses
School information
Where you currently are/previously studied
Enrollment status
Graduation date
GPA
#3: Compare Loan Offers
After filling out the application, offers will appear on the screen, showing you what refinance loans you qualify for at our 15+ partnering student loan lenders. The rates and terms shown are prequalification offers, meaning they are estimates of what you will qualify for at each given lender. If you have multiple offers, compare them to ensure you’re selecting the best refinance loan for you.
Generally speaking, the loan with the lowest interest rate will save you the most money over the life of the loan. However, you should consider other factors such as:
Whether the interest rate is fixed or variable
The repayment terms
The repayment plans available to you
Member benefits
Cosigner release policies (if applicable)
The total cost of the loan
Fixed vs variable interest rate. Fixed interest rates will remain the same throughout the life of the loan. Variable interest rates will change as the market fluctuates. If you prefer one over the other, make sure the refinance loan you choose provides that.
Repayment terms. Repayment terms include all the conditions involved in borrowing money from that lender. Make sure you are reading the fine print before agreeing to borrow a loan — there may be fees noted in the repayment terms that you don’t want to miss.
Repayment plans. Each individual lender will offer a different set of repayment options. Most, however, will have a standard repayment plan, which gives you fixed payments for the duration of your repayment period. If you are looking for a specific repayment option, double check that the lender you select has it.
Member benefits. Some lenders have additional benefits for borrowers such as free career assistance, autopay discounts, or the ability to skip one payment per year. While you shouldn’t put member benefits ahead of other factors such as the interest rate, they’re a nice bonus to consider if deciding between two near-identical loan offers.
Cosigner release policies. If you plan to include a cosigner on your refinance loan, you should consider the lender’s cosigner release policies. While some lenders do not offer a cosigner release option, meaning the cosigner must remain on the loan until it is paid off, other lenders do offer the option for the cosigner to be released from their responsibility, typically after the primary borrower makes a certain number of payments on the loan. Make sure to read the lender’s cosigner release policy if your cosigner prefers to be removed from the loan down the line.
Total cost of the loan. The purpose of refinancing, in a very simple sense, is to pay less on your student loan over time. Consider the total cost of the refinance loan in comparison to the loan you currently have. Does it save you money in the long run? If so, refinancing makes sense. If it costs you more in the long run, however, reconsider the decision to refinance.
Use these factors to compare loan offers and choose the one that is best for you.
#4: Complete the Formal Application
Once you’ve decided which refinance loan offer is best for you, it’s time to complete the lender’s formal loan application. Remember, the loan offers you see on Sparrow are prequalification offers, or estimates of the loan terms you will receive after submitting the lender’s formal application. To officially apply and borrow with a lender, you must complete their formal application.
To do so, find the loan offer you’d like to move forward with and click “Explore,” then “Get approved with [lender].” The application will then reroute you to the lender’s website to complete their formal application. To complete the lender’s formal application, you will need the same information you used to complete the Sparrow application.
After the lender processes your request, you may need to provide additional information such as proof of your income or official identification. While you wait to hear back from the lender, gather the necessary documents you may need to prove your income or identity such as:
Recent pay stubs
Proof of employment
W-2s
Bank statements
Valid driver’s license
Passport
Social security number
#5: Accept the Loan
Once you’ve received a formal refinance loan offer from the lender, review the offer to be sure it still suits you. Because loan terms can fluctuate with the market, they may not be identical to what you prequalified for through the Sparrow application, although they should be fairly similar.
Once you’ve double checked the loan terms, go through the lender’s process to accept the loan.
#6: Verify That the Loan Was Paid Off
After accepting the loan, the lender will use the amount of your new loan to pay off your initial loan. The length of this process will vary depending on the lender(s) involved.
Ask your new lender directly how long they estimate the process will take. After that timeline passes, check in with the lender to verify that your initial loan was completely paid off.
#7: Begin Making Payments on Your New Loan
Once your initial loan is paid off, you will begin making payments on your new loan. Be sure to check in with the lender to find out when your monthly payments will be due. If you have concerns about making the payments on time, consider opting in to automatic payments.
Commonly Asked Questions About Student Loan Refinancing
While the process of refinancing with Sparrow is fairly simple, it’s common to still have questions about whether refinancing is right for you. Below are some of the most commonly asked questions about student loan refinancing.
Is It Worth It to Refinance Student Loans?
Refinancing your student loan(s) is worth it if you will be able to secure more favorable terms, and thus, save money over the life of the loan. Whether it is worth it is ultimately subjective and highly dependent on the amount you are able to save by refinancing.
Can I Refinance My Student Loans at Any Time?
Generally speaking, you can refinance your student loans at any time. While some student loan lenders may require you to have graduated, others will allow you to refinance while still in school.
Can I Refinance My Student Loans More Than Once?
Yes. You can refinance your student loans as many times as you’d like.
Does Refinancing Hurt Your Credit?
Submitting a formal loan application with a lender will result in a hard credit inquiry, which will temporarily hurt your credit. However, according to FICO, a hard inquiry typically only decreases your credit score by less than 5 points.
What Credit Score Do You Need to Refinance Student Loans?
The credit score requirements for refinancing will vary depending on the lender. In general, most lenders will require you to have a credit score of at least 650 to qualify. The higher your credit score, however, the more likely you are to receive a better interest rate and terms.
What is the Best Student Loan Refinancing Company?
There is no single best student loan refinancing company. The best lender will always be the one that offers you the best interest rate and terms, which will vary from person to person. To find the best student loan refinancing company for you, complete the Sparrow application.
Final Thoughts from the Nest
The idea of swapping around your student loans may feel overwhelming. However, following these 7 steps can help guide you through the process. To what rates you qualify for with our 15+ partnering student loan lenders, complete the Sparrow application.
Many people don’t talk about the different pathways that you can take after high school graduation, except the traditional four-year college route. Going to trade school is a viable option to consider if attending college is not for you. You may be wondering, ‘what is trade school’ and ‘is trade school free?‘
Trade school has a shorter time commitment, is less expensive, and teaches you specialized skills for direct entry into the career field of your choice after graduation.
Because going to trade school is a lesser-known option, many students have no idea what trade school is, how they can apply, and what they can do with it.
What is Trade School?
Trade school, also known as career, technical, or vocational school, is a specialized institution that provides students the skills, hands-on training, and education necessary to work in a specific “trade” or occupation right after graduation.
These occupations are typically hands-on careers, like cosmetology, plumbing, welding, carpentry, and automobile repair.
For most trade schools, a high school diploma or GED is necessary to attend.
Trade School vs. College
Factors
Trade School
College
Time Commitment
Anywhere from eight months to two years
Four years
Type of Education
Specialized education; will only take courses necessary to their specified field
Generalized education; must take General Education courses like math, science, and English along with any major requirements
$38,185 for private schools, $22,698 for public, out-of-state schools, and $10,338 for public, in-state schools for the 2021-22 school year
Post-Graduation Salary
Depends on specialization and location
High-paying jobs after college generally make more in salary than high-paying trade jobs
Job Security
Very strong; skilled labor workers are in high demand and have slimmer chances of being replaced by job automation
Depends on the situation; job security can fluctuate based on economic crises, demand for work, etc.
Career Flexibility
Rarely flexible; you are specializing in one trade
Very flexible; students learn flexible skills that are applicable outside of their major
Pros and Cons of Trade School
Consider the pros and cons of attending trade school carefully before making your decision.
Pros of Trade School
Time: Trade school only takes a maximum of two years, which is half the time you spend at a traditional four-year college. Once you’ve graduated, you can find employment almost immediately. If you’re looking for a relatively short time commitment and quick employment, trade school might be the best option for you.
Money: On average, trade school is less expensive than a four-year college. Because trade schools are anywhere between eight months and two years, you’ll be paying for a shorter period of time as opposed to if you went to a four-year institution. Plus, if you’re eligible for financial aid or employer-paid tuition reimbursement, you might even attend for little-to-no cost.
Specialized Education: You don’t need to take any general education courses, like math, English, or science, at trade school. All your education will be centered around the field that you are specializing in, and you’ll receive focused, hands-on training.
Career Assistance: Most trade schools help their graduating students secure jobs within their specialized industries. Generally, trade schools offer skilled trades-focused career fairs, early employment assistance, and a wide network of employers.
Cons of Trade School
Varying Reputability and Quality: When you’re researching prospective trade schools, be sure to dive deep into the student assistance programs, completion rates, and job placement statistics of the school. Trade schools vary in reputability and quality, and you don’t want to attend a trade school that won’t provide you with the necessary skills and assistance to earn your trade certificate and be employed after graduation.
Accreditation: Not all trade schools are properly accredited, meaning that these schools do not qualify for federal financial aid. If you do not attend an accredited trade school, you will most likely have to pay out of pocket or turn to private lenders.
Limited Career Selection/Flexibility: Because you’ll be learning the technical skills necessary for one specific industry, it will be difficult to secure jobs outside of your specialized field. For example, if you attend a trade school for HVAC (Heating, Ventilation, and Air Conditioning), it will be near impossible to obtain a job in plumbing or cosmetology without going back to school.
Is Trade School the Right Choice for Me?
Here are some questions you should ask yourself when deciding whether or not trade school is the right choice for you:
Do I know what I would specialize in? Do I want to specialize in it? Why?
Do I want to start working right after graduation?
Can I see myself dedicating time and effort to this career, or will I get sick of it quickly?
Is there a demand for this job in the market?
Will this career allow me to be financially stable?
How to Pay for Trade School
While the cost of trade school is relatively cheaper than a four-year college, you’ll want to be informed of the options you have for financing your education. While trade school can cost just a few thousand dollars, pricier trade schools can cost up to $17,000 per year.
Public trade schools are usually cheaper than private trade schools, so be sure to compare tuition and additional fees between schools to avoid paying more than you need to.
Scholarships and grants are both forms of gift aid, meaning they do not need to be repaid. They are great ways to defray the cost of tuition, and there are many options available for trade school students.
You can find more scholarships and grants for trade school students by using scholarship search engines.
Federal Student Loans
The federal government offers student loans for students pursuing postsecondary education. To find out which loans you qualify for, you will have to submit the Free Application for Federal Student Aid (FAFSA).
The FAFSA opens on October 1st and closes on June 30th every year. Be sure to take note of these dates, and submit your FAFSA as soon as possible to qualify for as much aid as you can get.
You should prioritize federal student loans over private student loans, as federal student loans generally have lower interest rates, flexible repayment options, and borrower protection plans.
If scholarships, grants, and federal financial aid don’t cover the cost of tuition for you, consider getting a private student loan.
Private student loans are offered by private organizations that set their own interest rates, repayment options, and borrower protection terms.
Because private student loans operate individually and are not all partnered with the same trade schools, it can be challenging to find what private loans you qualify for with different trade schools.
Sparrow can help. If you submit a free application with us, you can see what private student loan options you have with the trade school of your choice. Here are a few of our top picks for student loans for trade school:
Sallie Mae is one of Sparrow’s lending partners that offers competitive interest rates, multiple repayment options, and no origination fee or prepayment penalty. Sallie Mae is one of the largest private student loan companies that lend to undergraduate, graduate, MBA, law, medical, dental, and career training program students.
College Ave is an online student lender that aims to simplify, clarify, and personalize the student loan borrowing experience. College Ave is known for its competitive interest rates, strong customer experience, and for allowing its customers to choose their own loan terms.
Ascent is a private student loan lender that does not require cosigners or have any application fees. They offer both outcomes-based and credit-based loans, making Ascent an extremely attractive lender for first-time borrowers and students with no credit history.
Closing Thoughts From the Nest
With the skilled labor shortage, going to trade school is a great option if you’re looking for an affordable education and to be employed quickly.
Be sure to thoroughly research trade school programs before making a selection; many trade schools differ in reputability, curriculum, student support services, accreditation, and cost. Remember that if a trade school is not accredited, you will be unable to receive federal financial aid.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Both PAYE and REPAYE are great, affordable repayment options for federal student loans. If you’re here, then you’ve probably heard of both. The problem is you’re not exactly sure what the difference between the plans is or which one to choose. In the epic battle of PAYE vs REPAYE, we’re here to help. Let’s get into it.
Pay as You Earn (PAYE)
Pay as You Earn is an income-driven repayment (IDR) plan that came into effect in 2012. It can be a bit hard to qualify for but offers great benefits.
How your monthly payment is set: Your monthly payment will be 10% of your discretionary income. Married couples filing taxes separately won’t have their spouse’s income calculated into the payment. The monthly payment cannot be more than what you would get on the 10-year standard repayment plan.
What you need to qualify: To qualify for the PAYE plan, you need a federal Direct Loan taken out on or after October 1, 2011. Parent PLUS Loans are ineligible. You’ll also need to demonstrate partial financial hardship.
Repayment period: Your repayment period will be 20 years.
Revised Pay as You Earn (REPAYE)
Revised Pay as You Earn is an IDR plan that came into effect in 2017. The REPAYE plan is a lot easier to qualify for but may not have the same benefits.
How your monthly payment is set: Your monthly payment is 10% of your discretionary income. If you’re married, they’ll also take into account your spouse’s income. This monthly payment can exceed what you would pay on a standard 10-year repayment plan.
What you need to qualify: As long as you have qualifying loans, you can get the REPAYE plan. A qualifying loan for REPAYE includes most federal Direct Loans. Parent PLUS Loans are ineligible.
Repayment period: If you have undergraduate loans, your repayment period is 20 years. If you have loans for grad school, your repayment period is 25 years.
Choosing Between PAYE vs REPAYE
Now that you have a better understanding of the plans, we can move on to the burning question in your mind: PAYE or REPAYE?
Before we get into that, though, let’s make sure that an income-driven repayment plan is the best plan for you. Here are some questions to ask yourself to see if an IDR is right for you:
Do you have federal student loans?
Is the standard 10-year plan too expensive for you?
Are you planning to pursue loan forgiveness?
If you answered yes to at least the first two, then an IDR plan can be a great option for you. With that out of the way, we can finally help you decide which of the two plans you should get. Keep in mind that both are good plans but the one that’s going to be good for you depends on your situation and what you want in a repayment plan.
PAYE is a great option for those with at least partial financial hardship. That requirement, though, can make it hard to qualify. In addition to partial financial hardship, you also must meet the following:
Have received a federal loan on or after October 1, 2007, and had no outstanding loans at that time
Have received a loan disbursement on or after October 1, 2011, or consolidated on or after that date
The REPAYE plan would be your best repayment option if you don’t qualify for PAYE.
If you do qualify for PAYE and still need help deciding, here is a chart going over the key differences between the plans:
PAYE
REPAYE
Monthly Payment and Calculation
10% of your discretionary income Spouse’s income not counted
10% of your discretionary income Spouse’s income counted
Eligible Loans
Most Federal Direct Loans taken out on or after October 1, 2011
Most Federal Direct Loans
Easy to Qualify?
No
Yes
Repayment Period
20 years
20 years for undergraduate loans 25 years for graduate loans
Interest
Interest subsidized 100% first 3 years Up to 10% of principal can be capitalized
Interest subsidized 100% first 3 years and 50% rest of period 0% interest capitalized as long as you stay with the plan
Both plans offer different things. So, deciding which option is right for you is ultimately up to what you want in a repayment plan.
The Federal Student Aid’s Loan Simulator is another great tool for you to use. The simulator will give you an idea of what your payments would be under each plan. The simulation will also include information such as interest costs and the potential for loan forgiveness. Be sure to include all of the following information for accurate results:
You and your spouse’s (if applicable) student loan type, balance, and interest rate
Your tax filing status, family size, and state of residence
You and your spouse’s (if applicable) adjusted gross income
Frequently Asked Questions About PAYE vs REPAYE
Is PAYE or REPAYE better for Public Service Loan Forgiveness (PSLF)? Under these plans, the government will forgive any remaining balance after your repayment period is over. However, you may finish paying before you can get loan forgiveness. Talk to your loan servicer for more information about what you should do.
Can you switch between PAYE and REPAYE? You can switch between federal repayment plans whenever you need to. Be sure to talk to your loan servicer before making the switch.
Can you make extra payments on REPAYE? You can make extra payments on your plan, which will pay off your debt faster. Paying it off faster means there may be less money for loan forgiveness. So, it’s really up to you. Is loan forgiveness a priority? Or do you want to just pay it off as fast as you can?
What happens when you leave a REPAYE plan? If you leave the REPAYE plan for whatever reason, the interest will capitalize. This means you’ll owe any unpaid interest you have on the loan.
Final Thoughts from the Nest
Both the PAYE and REPAYE plans are great options for your federal loans. Choosing the best one for you depends on your financial situation and what you want in a repayment plan. If for whatever reason these don’t work out, there are plenty of other federal repayment plans you can switch to.
If you have federal student loans and are looking for a different option to pay off your debt faster, refinancing is a great way to do that. Sparrow has many refinancing options from different lenders. To get started, fill out the Sparrow application. It’ll then match you with what you best qualify for from any of our 15+ lenders.
While student loan forgiveness scams have been deceiving borrowers for as long as we can remember, Biden’s pending decision regarding student loan debt relief has created a new opportunity for scammers to take advantage of more borrowers.
As borrowers, we want to keep you and your families safe from student loan forgiveness scams. When looking online to find out which federal student loan forgiveness programs you qualify for, be sure to trust information that is offered by the U.S. Department of Education or reputable sites.
While real student loan forgiveness programs do exist, such as Public Service Loan Forgiveness and Borrower Defense to Repayment, there are a variety of common tactics used to convince you of other student loan forgiveness programs that ultimately don’t exist.
To avoid falling for student loan forgiveness scams, here are the red flags to look for and what to do if you’re a victim of one.
Common Student Loan Forgiveness Scams
If you receive a call, email, or text message with one of the following messages, you are dealing with a student loan forgiveness scam:
“Act immediately to qualify for student loan forgiveness before the program is discontinued.” Note the aggressive language of the student loan forgiveness scam. Urgency is a major red flag and a straight giveaway of being a scam.
“Your student loans may qualify for complete discharge. Enrollments are first come, first served.” To avoid falling for these student loan forgiveness scams, conduct your own research on the federal Department of Education’s website to see which student loan forgiveness programs you qualify for. Most student loan forgiveness programs require a certain number of loan payments and employment in specified fields for your debt to be wiped out. There is no broad federal student loan forgiveness program, meaning that not all borrowers’ student loan debt will be cleared.
“Student alerts: Your student loan is flagged for forgiveness pending verification. Call now!” An urgent message is a dead giveaway that the solicitor is trying to conduct a student loan forgiveness scam.
The federal government will never ask you for an upfront or monthly fee to cancel your student loans in whole. It just doesn’t work like that.
You will also never be asked to provide personal information, like your FSA ID and FSA password, over the phone.
If the person reaching out to you says anything akin to what was mentioned above, end contact immediately.
Red Flags to Look Out For
Calling from Reputable Locations
Scammers may call you from Washington, D.C. to create a false impression that the call is coming from a federal agency.
One borrower reported that they received a call from Washington, D.C. from a scammer who made an exciting offer: “It looks like your student loan has been flagged eligible for the recent stimulus forgiveness and relief legislation, however, your application needs to be completed.”
The caller had even provided a name and agent number and emphasized the urgency of the loan discharge, saying it would be served on a first-come, first-served basis (red flag!).
Betsy Mayotte, president of the Institute of Student Loan Advisors, notes the location from where the call “came” from: “What’s interesting is that this number came in as a D.C. number, which I’m sure just adds credibility to their scam.”
If you receive a student loan forgiveness call from D.C. that doesn’t seem right to you, hang up.
Asking for an Upfront Fee
This is the number one giveaway of a student loan forgiveness scam. The federal government cannot and will not ask you to pay an upfront fee to cancel your student loan debt.
Saying You Need to Make a Choice Quickly
Scammers employ the scare tactic of urgency to pressure borrowers into giving up their personal information or paying nonexistent fees quicker. Time-sensitive phrases like, “First-come, first-served,” “Act immediately” or “[We need this] now” are major red flags to look out for. If the federal government is contacting you, they will not urge you to do anything.
Asking for Access to Your Account
If a scammer asks for access to your FAFSA account or any other personal information, do not give it to them. This is the easiest way to have your identity stolen or be robbed of your money.
By accessing your sensitive information, scammers put themselves in between you and your student loan servicer, making it more difficult for you to decipher the scam before it’s too late.
Promising Immediate Loan Forgiveness
Hearing that all your federal loan debt will be discharged in a short amount of time sounds too good to be true. This is another tactic that scammers employ to encourage borrowers to pay any upfront fee or give up information about themselves.
If anything sounds too good to be true, it’s likely a scam. Your loan provider will be able to tell you whether or not you qualify for loan forgiveness, so reach out to them directly to obtain the correct information and not fall prey to scams.
Asking for your FSA ID Password
Your FSA ID password is on the same legal status as a legally binding signature. If you share your FSA ID or a Power of Attorney, you are giving the petitioner the power to take any actions they choose and act on your behalf. Never give your FSA ID password to anyone except yourself and family members that you trust.
What to Do If You Were a Victim of a Student Loan Forgiveness Scam
If you were a victim of a student loan forgiveness scam, take the following steps as soon as possible.
Contact Your Federal Loan Servicer
If you were a victim of a student loan forgiveness scam, contact your federal loan servicer as soon as possible. Make sure that no unauthorized actions were taken on your loans, and request to annul any authorization agreement that’s on file.
If you provided any banking or credit card information to the student loan forgiveness scammer, contact your bank or credit card company immediately. You’ll want to dispute any payments that have been made to the company that is scamming you and cancel any payments that are scheduled to process.
Submit a Complaint to StudentAid.gov
Report the scam to the U.S. Department of Education so you can prevent any more scams from happening. You can submit a complaint at studentaid.gov and manage your cases through the portal they provide.
File a Complaint with the Federal Trade Commission
If you believe that your identity has been stolen by a student loan forgiveness scam, report this immediately to the Federal Trade Commission at identitytheft.gov. Identity theft is a dangerous, scary thing, so you’ll want to remedy the issue before matters worsen.
File a Complaint with the Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau is in charge of handling all complaints about questionable financial products and services. You can submit a complaint at consumerfinance.gov.
Closing Thoughts From the Nest
At Sparrow, we want to help protect you from becoming a victim of student loan forgiveness scams.
With scammers taking advantage of people every day, it’s crucial to stay informed and take the necessary steps to prevent any student loan forgiveness scams from happening to you or your family members.
In 2021, 43.4 million students in the United States were signed under a federal student loan.
When it comes to filling the gaps in tuition that can’t be covered by scholarships and grants, federal student loans are a great option. Plus, most students are eligible for these loans because, unlike private student loans, federal student loans do not require a cosigner or a high credit score.
Let’s find out the advantages and disadvantages of federal student loans so that you’re best informed before making an important financial decision.
Advantages of Federal Student Loans
Federal student loans are offered by the federal government and have interest rates, terms, and conditions set by law. Federal student loans are favorable options for students to consider for the following reasons:
No Credit History Needed
Unlike private student loans, which usually require an excellent credit score, steady income, and strong credit history for borrowers to be approved for the loan, most federal student loans don’t factor credit into your eligibility.
To qualify for a federal student loan, you just need to meet the following requirements:
Be a U.S. citizen or a qualifying citizen
Have a Social Security Number (SSN)
Be accepted or enrolled into a qualifying institution
Prove qualifications to pursue a higher education
Meet academic progress requirements
Be enrolled at least half-time
No Cosigner Necessary
Because most students have little to no credit history after graduating high school, private student lenders usually require a cosigner to sign the loan alongside the borrower.
A cosigner can be a parent, relative, or close family friend who agrees to take full responsibility for the loan if you miss any loan payments or default on the loan.
With most federal student loans, a cosigner is not necessary to be approved for the loan.
Lower Interest Rates
All student loans have interest rates, which are percentages of the amount of money borrowed that you must pay for an established time period.
For example, if you take out a $50,000 student loan with an annual 4% interest rate, you must pay an additional $2,000 on top of your loan payments each year. In general, the lower the interest rate, the better.
Federal student loans offer a wide range of repayment options, including income-driven repayment plans, which set your monthly student loan payment at an amount based on your income and family size. Tailored repayment plans of this kind are not available for private student loans.
Most federal student loans offer anywhere between a six- to nine-month grace period after you graduate, are enrolled less than half-time, or drop out. This means that you won’t be charged with loan payments until after the grace period ends, giving you time to be financially prepared and settled.
Be sure to identify the kinds of repayment options that each federal student loan offers before signing for one.
Borrower Protection Plans
Most federal student loans offer borrower protection plans designed to help the borrower if any financial difficulties arise that prevent them from making payments on time.
Loan deferment and forbearance are two types of borrower protection plans offered by federal student loans, and both allow the borrower to temporarily stop their loan payments for an established period of time.
One key difference between loan deferment and forbearance is that interest continues to accrue while the loan is in forbearance, but while in deferment, it does not.
Federal loan deferment and forbearance plans usually go for three years, while private loans typically only offer around one year to pause payments.
This means that the federal government can forgive your student loan debt, erasing some or even all of your remaining balance so you do not have to make payments any longer.
While this sounds like it should excite every federal student loan borrower, there are specific requirements that you must meet to qualify for federal student loan forgiveness.
For example, you qualify for federal student loan forgiveness if you’ve served in the military, have taught full-time for five years at a qualified primary or secondary school, or currently have an income-driven repayment (IDR) plan and have met a certain number of payments.
For more information, visit StudentAid.gov to see what student loan forgiveness options exist.
Disadvantages of Federal Student Loans
Origination/“Loan” Fees
Some federal student loans have origination fees, which are fees that must be paid for “starting” or signing for the loan. The federal government refers to these fees as “loan fees.”
The loan fee is charged from the amount of money you are borrowing, meaning that you will receive less money than what you actually borrowed. You are still responsible for paying the entire amount borrowed, not the amount disbursed by the loan.
For example, let’s say that you are taking out $10,000 with a 2% origination fee. 2% of $10,000 is $200, and the $200 is going to be taken out of the $10,000 you borrow. This means that while you are borrowing $10,000, only $9,800 will be disbursed to your school.
For federal Direct Unsubsidized loans and Direct Subsidized loans, the origination fee is 1.057%. For federal Direct PLUS loans, the origination fee is 4.228%.
Private loans usually do not have origination fees, so this is an important factor to consider.
Aggregate Borrowing Limits
Undergraduate and graduate students can only borrow as much as the federal government dictates. Undergraduate students can borrow only up to $57,500 total in all federal student loans, while graduate students can only borrow up to a total of $138,500.
Private loans, on the other hand, tend to have much more flexible borrowing limits, often covering up to the total cost of tuition.
Some Federal Student Loan Qualifications Are Based on Financial Need
To qualify for some federal student loans, you will need to be at or below a certain income threshold. If your family makes more money than what is outlined by the Department of Education, you will not be allowed to receive certain types of federal student loans.
Private student loans, on the other hand, have much more flexible income thresholds to qualify.
Disadvantageous Terms for Federal Direct PLUS Loan Borrowers
Federal Direct PLUS loans are for graduate students, parents, and professional students. The origination fee for these loans is 4.228% and the interest rate is a set 7.54%. These may be unfavorable terms for the aforementioned borrowers, as other private student loans could offer better terms.
Borrowers with excellent credit and a strong credit record should consider private student loans in lieu of the federal Direct PLUS loan.
Which is Better: Federal or Private Student Loans?
This depends on who the borrower is and what the borrower is looking for.
Experts say that federal student loans are the preferable option for student borrowers who can demonstrate financial need and are pursuing an undergraduate degree. Federal student loans offer more favorable benefits, including flexible repayment options, lower interest rates, borrower protection plans, and loan forgiveness.
Students who do not qualify for any federal student loans should apply for private student loans if they cannot cover the cost of college without them. These students should keep in mind that a cosigner with a strong credit score, long credit history, and steady income is recommended to be approved for a competitive private loan.
Are Federal Student Loans Worth It?
Whether federal student loans are worth it will depend on the borrower. If there are tuition gaps to fill after exhausting all possible grants and scholarships, experts say that federal student loans should be the first option to consider.
Federal student loans offer more favorable terms than private student loans, but this option only applies to students who qualify for federal student loans in the first place.
Closing Thoughts From the Nest
Given the current astronomical college prices, taking out student loans is necessary in most cases for students.
In order to fill in the gaps that scholarships and grants cannot fill, be sure to do your research on the different kinds of student loans that the federal government offers to find the best one for you. If federal student loans don’t seem like the right option for you,consider finding private student loans with Sparrow. Sparrow offers a free, online application that you can fill out to see all the loans that you qualify for, including interest rates, repayment options, and borrower protection plans.
Once the summer wraps up, it’s the busiest time of the year for high school seniors: college application season.
From juggling deadlines, to standardized tests, to finalizing your college list, the process of applying for college can become quite tumultuous and hectic.
If you need a breakdown on how to apply for college, here’s seven easy steps you can follow to guide you through the process.
Step One: Visit Colleges
Many students fixate on the academic fit, student culture, or prestige of colleges when forming their college list, often without considering where they will be living for the next four years of their life.
Visiting prospective colleges in-person is an important step to take when figuring out what you’re looking for in a college geographically, spatially, and climate-wise.
For example, if you’re from a big city and the college you’re visiting is in a tiny, suburban town, consider how adaptable you might be with the change. If you’ve grown up in sunny weather your entire life, consider how altered climates might impact you.
Visiting colleges is also a great way to get a feel for campuses, interact with students, and attempt to envision your four years there. After all, seeing pictures of a college campus on the Internet versus being there in person are incomparable.
If visiting colleges is not an option for you, opt-in for virtual tours that the college offers, and contact the admissions office to connect you with current students who can share their experiences with you.
Step Two: Take the ACT or SAT
Due to the COVID-19 pandemic, many universities became test-optional for the application cycle, and some even became test-optional permanently.
Test-optional is when the student is allowed to submit their college application sans standardized testing scores, without any disadvantage to their strength as an applicant.
The UC System has gone test-optional permanently, Harvard extended their test-optional policy to 2026, and now MIT has gone back to requiring standardized test scores.
Because the test-optional policy varies from school to school, be sure to determine which schools require standardized test scores so you’ll know whether or not you will need to take the ACT or SAT.
Despite the test-optional policy, students are highly encouraged to take the ACT or SAT if their circumstances allow it. A strong standardized testing score is a beneficial addition to your application, and if the schools you are applying to do not require test scores, a weak score can’t hurt your application.
When deciding between the SAT and ACT, take a timed, “real-life” attempt at a practice test for both the SAT and the ACT and see which test you do better on.
Here’s a breakdown of the structural differences between the ACT and the SAT.
Once you’ve attended both in-person and virtual college tours, spoken with students who are attending potential college options, and made a list of prospective schools, it’s time to narrow down your list.
Group your schools into safety schools, target schools, and reach schools.
Safety Schools
Target Schools
Reach Schools
A school that you’re guaranteed to get into. This can mean that:You are well above the 75th percentile for average student statistics (GPA, SAT or ACT score, etc.)
Acceptance rate is around 30%.
A school that you are a competitive applicant for, but admission is not guaranteed. This can mean that:Your GPA, class rank, and test scores are within the 50th percentile.
Acceptance rate is around 15-20%.
A competitive school that is extremely selective and admission is unlikely. This can mean that:Your GPA, class rank and test scores are lower than average.
Acceptance rate less than ~15%.
Make note of the application fees and deadlines that are specific to each school. Submitting applications can cost from $35-$90, but if you qualify for financial aid, application fees may be subsidized.
Step Four: Complete the FAFSA
The Free Application for Federal Student Aid (FAFSA) opens on October 1st and closes on June 30th. You must submit the FAFSA to be eligible to be considered for federal financial aid, such as grants, loans, and scholarships.
Financial aid is disbursed on a first-come, first-serve basis, so be sure to submit your FAFSA as soon as possible after the October 1st open date the year prior to when you plan to enroll.
Step Five: Make Note of Application Deadlines
Colleges have individual application deadlines that you should stay on top of. Create a Google sheet with the schools you are applying to, how you are applying, and which deadline to meet.
Generally, there are three ways to apply to a college: early action, early decision, and regular decision. You should note that individual research must be conducted to familiarize yourself with a school’s application processes.
Early action: You submit your application earlier than the regular deadline (usually due in the fall of your senior year) and hear whether you’ve been accepted or not from the schools earlier in the year. Early action is not binding and may increase the chances of being admitted.
Early decision: You submit your application earlier than the regular deadline and must commit to the school if you are accepted. Students generally apply early decision if they are set on attending a specific school. Students cannot apply early decision to multiple schools since it is a binding agreement.
Regular decision: You submit your application by the regular deadline (usually in the winter) and hear back from schools within the regular time frame.
Sample Way to Organize Application Deadlines:
College
Type of Application
Deadline
Yale University
Early Decision
November 1st
University of Chicago
Early Action
November 2nd
Wellesley College
Regular Decision
January 8th
University of Southern California
Regular Decision
January 15th
Step Six: Get Your Application Materials Ready
Here’s a handy list of application materials you will need when applying for college:
High school transcripts: You can access your transcripts from your high school. Schools will usually ask for either an unofficial or official transcript. An unofficial transcript is usually available online and can be easily accessed by you. An official transcript is sent from your high school to the requesting institution directly.
Letters of recommendations (usually two): Colleges will usually ask for two recommendation letters. It is encouraged that students submit one letter of recommendation from a STEM (Science, Technology, Engineering, or Math) teacher and the other from a Humanities/Social Sciences teacher. If there is the option to submit additional letters of recommendation, take advantage of this. When asking teachers for recommendation letters, be sure to ask early so that they have ample time to write a stellar letter.
Personal statement essay: Your personal statement essay is the main college essay that you will apply to every college with. It should describe an important aspect of yourself that you wish to highlight.
List of extracurriculars with descriptions: Keep your resume handy for the extracurriculars section of your college application. You will be asked to detail your extracurricular activities, highlight any awards or leadership positions, and describe your roles.
Test scores: AP Test score(s), SAT/ACT score
Be sure to check with individual schools for specific application requirements.
Step Seven: Submit Your Application
You can submit all of your college applications online through common applications, which allow you to send your application to multiple schools from one portal.
The most popular common application is the Common App, which is used by 900+ colleges.
The Coalition for College is another common application that is partnered with 150+ colleges.
Bonus Steps
While not necessarily part of the college application process, these last few steps are important in actually getting to college.
Step 8: Review Your Financial Aid Awards
Congratulations! You’ve been accepted into college and have received multiple financial aid awards to consider and compare.
You’ll want to find the net price that you’ll have to pay for the school year and compare your aid offers. The net price is the total that you pay for the school year once all scholarships, grants, and loans have been factored in.
First, create a spreadsheet with a column for each of the schools that you were accepted to.
You’ll want to record the cost of attendance, the amount of free aid that you’ve received, the amount you’ll have to borrow, and the cost of attendance when subtracted from the free aid. For an example of what this can look like, check out this table.
Take note of the following considerations: Which school offered the most financial aid? What is my family’s financial budget? Which financial aid offers are reasonable to accept, and which are not?
If you have any questions about your financial aid offer, contact the school’s financial aid office for assistance.
Step Nine: Accept the Admissions Offer and Put in Your Deposit
After much consideration, you’ve finally decided which school you want to attend from the extensive list of schools you were offered admission from.
Though it may differ from school to school, the standard acceptance deadline is May 1st, which is National College Decision Day.
When you do decide which offer to accept, you will likely be required to put a deposit down to secure your spot. Your school should instruct you on how to pay your deposit, so keep a lookout in your email for the information.
Step Ten: Explore College Financing Options
Scholarships, grants, and student loans are the three main ways that students cover the cost of tuition.
Scholarships
Scholarships are a form of gift aid that is awarded based on merit and personal achievements. You do not need to pay back any scholarships that you receive.
All students can apply for scholarships and win free money for school. Here are some of our favorite scholarship search engines:
Be sure to look into the scholarships that your school offers; the applications for these scholarships are usually due by the start of the school year.
Grants
Grants are another form of gift aid that are awarded based on financial need. Your financial aid package should include grants that you are eligible for, and you should accept all the grants that you receive because they do not have to be paid back.
Outside of the grants that you’ve received from your financial aid offer, you can apply to grants that are offered by the federal government, your state, private organizations, and your school.
Federal Student Loans
Federal student loan offers should show up in your financial aid package. These are loans offered by the federal government and generally offer better terms for undergraduate borrowers as opposed to private student loans.
Federal student loans are usually unsubsidized or subsidized. With subsidized loans, the federal government will pay the interest that accrues while you are in school. So, when you graduate, the balance on your subsidized loan will be the exact amount you borrowed. With unsubsidized loans, the government will not cover the interest that accrues. So, when you graduate, the unsubsidized loan balance will be the amount you originally borrowed plus the interest that accrued while you were in school.
If given the choice between an unsubsidized and a subsidized loan, go with the subsidized loan.
Be sure to give priority to your federal student loans and turn to private student loans as the last resort.
Private student loans are offered by private organizations, like banks and financial institutions.
These should be your last resort options, as interest rates are usually higher for private student loans and repayment plans tend to be less flexible.
When you’re looking for private student loans, Sparrow can help. Sparrow offers a free application that once submitted, matches you with private student loans you qualify for. Sign up today.
Closing Thoughts From the Nest
We hope that this step-by-step guide helps you along your college application journey. We’ve all been there before, and we know you can do it!
If you need any assistance regarding how to apply for college, reach out to your high school’s college counselor, speak with upperclassmen, and use your resources. Best of luck!
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Navigating the student loan process can be overwhelming. With so many student lenders to choose from, deciding which one you’d like to work with can be quite the challenge.
Ultimately, the best student lender for you will be the one that suits you best. That said, it’s helpful to know a bit about each of your options to make an informed decision.
The following are our picks for the best private lenders for student loans.
Best Private Student Lenders of 2022
Arkansas Student Loan Authority
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students attending higher education institutions.
College Ave is an online student lender with the mission to make the student loan process more simple, clear, and personal.
College Ave offers both private student loans and student loan refinancing for undergraduates, graduate students, professional school students, career school students, and parents of students.
Best Features:
Strong customer experience
Competitive interest rates
Ability to choose your own loan term
Drawbacks:
Strict cosigner release policy
College Ave is the best private lender for borrowers who want a more flexible repayment term that allows them to find a loan that matches their budget.
The Custom Choice Loan® is funded by Citizens. The loan option is designed to provide borrowers with greater flexibility and control when it comes to funding their college education.
The Custom Choice Loan is available for undergraduate and graduate students.
Best Features:
Competitive interest rates
Flexible repayment options
Strong customer service
Drawbacks:
Some Custom Choice Loans® are not accessible to students enrolled less than half-time.
No repayment plan shorter than 7 years or longer than 15 years
The Custom Choice Loan® is the best private lender for borrowers that want competitive interest rates, are seeking a flexible repayment term, and want strong borrower benefits.
No cosigner release option on traditional student loans; no option to add a cosigner on refinance loans
Loan products are unavailable in certain states
Earnest is the best private lender for borrowers who want competitive interest rates, unique borrower perks, and flexible repayment options that allow them to find a loan that matches their budget.
Edly offers Income-Based Repayment (IBR) loans through FinWise Bank, an FDIC-insured bank. IBR loans create an alternative loan option for students by setting post-graduation payments based on income.
Students who borrow an IBR loan from Edly will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income.
Best Features:
Loan payments are based on income.
Repayment begins when the borrower has an income of at least $30,000.
No cosigner required
Drawbacks:
The borrowing limit is capped at $25,000 per semester, which may not cover all programs.
Only available for a select group of schools
Offers a 4-month grace period, which is shorter than the typical 6-month grace period offered by other private student lenders.
Edly is the best private lender for borrowers who want a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at the borrower’s credit score or income, Funding U looks at non-traditional metrics such as GPA and estimated future income to assess creditworthiness.
Best Features:
No cosigner required
No credit history required
Variety of repayment options
Available to DACA students with a work-eligible Social Security card
Drawbacks:
Unavailable in 13 states
Maximum funding amount is $20,000, which is less than most other private lenders.
Unavailable to students enrolled less than half-time
Loan payments are required while in school.
Funding U is the best private lender for borrowers who are high-achieving undergraduate students with limited credit history and no access to a creditworthy cosigner.
INvestED is the best private lender for borrowers who are residents of or students in Indiana and want competitive interest rates and a variety of repayment options.
ISL Education Lending is a nonprofit student lender established in 1979 with the mission of supporting students and families who have exhausted other sources of aid.
LendKey is an institution that connects borrowers with a network of 100+ lesser-known credit unions and community banks, allowing borrowers to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions.
MPOWER is an online lender that works with international and DACA students to provide affordable college financing.
MPOWER offers non-cosigned undergraduate and graduate student loans for international, domestic, and DACA students.
Best Features:
Available to international, domestic, and DACA students
Provides additional assistance such as scholarship opportunities
Borrowers can receive up to 1-1.5% in rate discounts depending on the loan type.
Drawbacks:
Only one repayment term of 10 years
Higher interest rates and fees than other lenders
MPOWER is the best student loan company for borrowers who are international or DACA students, don’t have a credit history, and can’t access a qualified cosigner.
Unavailable to international students or student visas
No biweekly payment via autopay
Nelnet Bank is the best private lender for borrowers who want competitive interest rates, a variety of repayment options, and a flexible forbearance policy.
Prodigy Finance is an online student lender founded in 2007 to help international students in master’s degree programs find affordable college financing.
Best Features:
No cosigner required
No collateral required
No credit history required
Variety of repayment options
Drawbacks:
Not available in all 50 U.S. states
Limited interest and repayment options
Higher interest rates and fees than other online lenders
Prodigy Finance is the best private lender for international student borrowers with no credit history.
SoFi is an online student lender founded in 2019 and now one of the largest student loan companies in the industry.
SoFi offers both private student loans and student loan refinancing. SoFi’s student loan offering is available for undergraduates, graduates, law and MBA students, as well as parents of students.
Best Features:
Competitive interest rates
Variety of repayment options
Variety of membership perks such as career coaching, job search assistance, and more
Drawbacks:
Unclear credit requirements
High loan minimum
SoFi is the best private lender for borrowers who have a high credit score and want competitive interest rates.
How to Pick the Best Private Lender for Student Loans
The best student lender will always be the one that suits you best. That said, you should look for the following qualities in a student lender:
Offers Competitive Interest Rates
The interest rate on your student loan is essentially the cost to borrow with a lender. Generally speaking, the lower the interest rate, the better. Look for a lender that offers competitive interest rates.
Strong Customer Service
The lender you select will be the lender you work with for the entire duration of your repayment term (if you don’t refinance with another lender, that is), which can be up to 15-20 years. Make sure the lender has a record of strong customer service before you agree to work with them.
Offers Flexible Repayment Options
Each private student lender will offer a different set of repayment options. While you may initially prefer one, life changes such as a different job can quickly change your repayment preferences. Make sure the lender you select has an array of repayment options so that if you need to change in the future, you have the option to do so.
Where to Find the Best Private Lender for Student Loans
To find the best private student lender for you, complete the Sparrow form. Rather than searching for student lenders one-by-one, the Sparrow form will show you what rates you pre-qualify for at over 15 different student lenders. Then, you can compare the offers side-by-side to make sure you’re selecting the best lender for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
A key factor to deciding whether to get a federal student loan or not is looking at the interest rate. Your federal student loan interest rate will add to how much you pay over the life of the loan. But what is student loan interest? And how is your interest rate determined?
Here’s everything you need to know about your federal student loan interest rate.
What is Student Loan Interest?
Student loan interest is the cost of borrowing the loan and the way lenders profit off of lending you money. Interest rates are calculated as a percentage of your loan. So, if you have a 5% interest rate on a $100 loan, your interest is $5. Because interest accumulates on your loan, it raises the overall price of the loan. Additionally, the longer your repayment period, the more interest builds up, and the more you’ll pay.
How Are Federal Student Loan Interest Rates Determined?
Unlike private student loan interest rates, which are set by factors like your credit score, federal student loan interest rates are set by federal law. To calculate the interest rate, they’ll take the 10-year Treasury note yield and add a fixed increase. A 10-year Treasury note is a loan you lend out to the government. The yield is the amount of interest the government owes you expressed as a percentage. The 10-year Treasury Note is often used as a benchmark for other loan interest rates.
Each type of federal loan will have its own interest rates. The interest rates for the year are decided in the spring and come into effect July 1st of that year. The rates will remain the same until June 30th of the following year.
(If this sounds confusing, don’t worry. All you need to know here is that federal student loan interest rates are set by federal law each year.)
All federal student loan interest rates are fixed and include rate caps. A rate cap is the maximum interest rate that they can charge you.
The following are the formulas for federal student loan interest rate:
Direct Unsubsidized Loans for Undergraduates – 10-year Treasury Note Yield + 2.05%, capped at 8.25%
Direct Unsubsidized Loans for Graduate Students – 10-year Treasury Note Yield + 3.60%, capped at 9.50%
Direct PLUS Loans – 10-year Treasury Note Yield + 4.60%, capped at 10.50%
Current Federal Student Loan Interest Rates
Due to the COVID-19 pandemic , the U.S. Department of Education has implemented a COVID-19 emergency relief program for federal student loans. The program offers 0% interest rate on your federal student loans until December 31, 2022.
The current federal student loan interest rates for the 2022-2023 school year are:
Direct Subsidized Loans and Direct Unsubsidized Loans for Undergraduates – 4.99%
Direct Unsubsidized Loans for Graduate or Professional Students – 6.54%
Direct PLUS Loans – 7.54%
These federal interest rates only apply for loans taken out on or after July 1, 2022 and before July 1, 2023. If you took out a loan before or after this time frame, you will have a different interest rate.
Current Federal Student Loan Fees
In addition to paying interest on your federal student loan(s), you will also encounter fees. You won’t normally be charged extra for those fees. Instead, the fees will be taken out from the amount disbursed for federal student loan(s). Because of the fees, you will receive less money than you officially borrow. However, you are responsible for paying back the whole loan, not just the amount you received.
So, for example, if you borrowed $1,000 in a Direct Subsidized Loan, $10.57 would be charged in fees, and the remaining balance of $989.43 would be disbursed to your school. However, you would still be responsible for paying back the full $1,000.
Final Thoughts from the Nest
Knowing interest rates before you take out a loan is important to figuring out the overall cost. The great thing about federal student loan interest rates is they’re fixed and capped, so you won’t be charged too much to borrow.
While federal student loans are great, private student loans can be a big help, too. Some private student loan rates may be lower than federal loans. To get a jump start on your search for private loans, use the Sparrow application. Filling out this one application will match you with what you are qualified for from 15+ private lenders.
Earnest offers both private student loans and student loan refinancing.1 Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Fixed APR Range: 4.42% to 15.90%* (undergrad; includes 0.25% auto pay discount); 4.42% to 14.30%* (grad; includes 0.25% auto pay discount) Variable APR Range: 5.62% to 16.20%* (undergrad; includes 0.25% auto pay discount); 5.89% to 14.97%* (grad; includes 0.25% auto pay discount)
Loan Amounts: $1,000 up to the total cost of attendance
• Competitive interest rates • Flexible repayment options • Wide range of loan terms to match your budget • Nine-month grace period3 • Option to skip 1 monthly payment per year4 • Allows biweekly payments via autopay5
• Loans aren’t available to borrowers in Nevada • Students enrolled less than half-time are not eligible • No cosigner release
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for an Earnest student loan, you’ll have access to some of the best rates in the industry. Earnest’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate, MBA, Law and Medical Students
Fixed APR*
4.42% to 15.90%*
4.42% to 14.30%*
Variable APR*
5.62% to 16.20%*
5.89% to 15.97%*
*Rates as of November 1, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of in-school repayment options
Earnest offers you four repayment options for your student loans.6
If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students are limited to interest only and immediate repayment options.
Wide range of loan terms to match your budget
Earnest offers a wide range of loan terms to reduce the burden of your student debt. If you have a cosigner, you can choose a loan term of 5, 7, 10, 12, or 15 years. If you don’t have a cosigner, you’ll have to choose between a 10, 12 or 15-year loan term, unless you are a graduate student. In that case, you may be considered for 5, 7, 10, 12, and 15 year loan terms.6
Offers a nine-month grace period3
After you are no longer in school at least halftime – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. While most lenders offer a six-month grace period, some require immediate repayment.
Earnest, on the other hand, offers a nine-month grace period on its student loans. This can be a massive benefit if you need some extra time to find a job and stabilize your income.
Be careful though – interest starts to accrue as soon as the loan is disbursed so delaying your payments means you’ll be paying more interest over the lifetime of your loan.
Option to skip one monthly payment every year4
Earnest is the only lender that allows you to skip one monthly payment on your student loan every year. This can be incredibly helpful if you lose your job or face an unexpected expense.
In order to qualify, you must:
Make the request at least five business days before the payment is due.
Make the request after six months of timely payments of both interest and principal.
While this feature can be extremely helpful when life hits a bump in the road, do note that the principal and interest from that payment will be spread out across your remaining payments, resulting in increased monthly payments.
Allows biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, Earnest gives you the option to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
In addition to offering biweekly payments via autopay, Earnest gives you the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Earnest, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Drawbacks of Earnest Student Loans
Loans aren’t available to borrowers in Nevada
If you live in Nevada, you’ll have to consider other lenders for your private student loan. A variety of lenders offer private student loans to borrowers in Nevada, such as College Ave, Ascent, and more.
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through Earnest. If you’re studying less than half-time, you may want to consider another lender for your private student loan.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky. Unfortunately, Earnest does not offer any form of cosigner release. Instead, you will have to apply to refinance your student loan, which is only available once you’ve graduated.
Earnest: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.42% to 15.90%* (undergrad); 4.42% to 14.30%* (grad)
Variable APR Range
5.62% to 16.20%* (undergrad); 5.89% to 15.97%* (grad)
Loan Terms
For cosigned loans: 5, 7, 10, 12 or 15 years.6 For solo borrowers: 10, 12 or 15 years.6 For graduate students with non-cosigned loans, you may be considered for 5, 7, 10, 12, and 15-year loan terms.6
Loan Amounts
$1,000 up to cost of attendance.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
$35,000 for cosigned loans.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
65%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Primary borrower must have a Social Security number. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident.
Location
Not available to borrowers in Nevada.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Fixed repayment: Pay $25 a month during school.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
9 months.
In-school Deferment
Yes.
Military Deferment
Yes.
Internship, Residency, or Fellowship Deferment
Borrowers can defer payments for up to 48 months during a medical residency, internship, or fellowship program.
Forbearance
Up to 12 months available.
Cosigner Release
No. Borrowers may refinance with Earnest and release their cosigner.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Earnest.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Online application: a few minutes. Approval: Varies by applicant.
Before you take out a loan from Earnest…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Earnest7 a legitimate lender?
Yes, Earnest is a legitimate lender that was founded in 2013 and has been providing private student loans since 2019.
Is Earnest available in all 50 states?
Earnest is available in all 50 states except Nevada.
How long does it take to get an Earnest student loan?
Submitting an application through Earnest takes a few minutes. Once you’ve submitted your loan application, Earnest will return a decision about your eligibility, but the exact timeline of this response varies by applicant. If you qualify, you will receive the rate and terms of your loan.
What happens if I don’t qualify for an Earnest student loan?
If you don’t qualify for an Earnest student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Earnest student loans federal or private?
Earnest loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.8
Does applying for a loan through Earnest hurt my credit score?
Applying for a loan through Earnest could hurt your credit score. Earnest has both eligibility check (hard credit check that may temporarily impact your credit score) and rate check (soft credit check, which will not impact your credit score).
Earnest Disclosures
1 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for total cost of your refinanced loan.
2 Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.67% APR to 16.15% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.87% APR to 16.35% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
3 Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.
4 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
5 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
6 Earnest’s Loan Cost Examples: These examples provide estimates based on principal and Interest payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $118.28) and a 11.69% APR would result in a total estimated payment amount of $21,290.40. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $126.82) and a 13.03% APR would result in a total estimated payment amount of $22,827.79.
These examples provide estimates based on interest only payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $145.41) and a 11.69% APR would result in a total estimated payment amount of $26,173.03. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $156.59) and a 13.03% APR would result in a total estimated payment amount of $28,186.67. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on fixed $25 payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $169.92) and a 11.69% APR would result in a total estimated payment amount of $30,584.74. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $188.42) and a 13.03% APR would result in a total estimated payment amount of $33,915.55. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on deferred payments. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $174.79) and a 11.69% APR would result in a total estimated payment amount of $31,462.16. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $193.75) and a 13.03% APR would result in a total estimated payment amount of $34,874.28. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
7 Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.
Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.
Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
Student loan forgiveness allows for all, or a portion, of your student loan debt to be removed.
Yes, you read that right. All of it, gone with the click of a button.
While the idea of having your student loan debt wiped out forever sounds dreamy, it isn’t that simple. While most federal loans qualify for student loan forgiveness programs, private student loans do not. Even then, each individual program will have its own unique requirements to qualify.
If you’re pondering the possibility of having your student loan debt forgiven, here’s what you need to know.
Certain professions, typically those that serve our community, are eligible for several student loan forgiveness programs.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program (PSLF) is a government program that was created under the College Cost Reduction and Access Act of 2007. With the goal to ease the burden of student loan debt for qualified public service workers, the program has forgiven the loans of over 460,000 student borrowers since its inception.
What You Need to Qualify
To qualify for PSLF, you will need to have made 120 on-time, qualifying monthly payments on a Direct Loan, while working for a qualifying employer. If so, the remainder of your federal student debt balance will be forgiven. Qualifying employers include U.S. federal, state, local, and non-profit organizations.
While it is ultimately your employer that determines whether you qualify, not your role itself, there are a variety of jobs that are often considered qualifying:
Teachers, staff members, and administrators at public schools
Law enforcement officers at the federal, state, or local level
Employees of federal, state, or local agencies
Military members
Social workers at public service agencies
Public health professionals such as doctors and nurses
Employees at 501(c)(3) organizations
It’s important to note that the Public Service Loan Forgiveness program can be incredibly challenging to be accepted into. In fact, since 2020, only 2.16% of PSLF applications have been accepted. That said, we still recommend applying if you believe you qualify.
How Much Can Be Forgiven?
If you qualify, the remainder of your federal student debt balance can be forgiven.
Teacher Loan Forgiveness
Teacher Loan Forgiveness is a federal program that allows teachers to have a portion of their federal student loan debt forgiven.
What You Need to Qualify
To qualify, you must:
Be a highly-qualified teacher
Have taught at a low-income school or educational service agency for at least five consecutive school years
In terms of your student loans, you must not currently have, nor have in the past, any outstanding balance on your Direct Loans or Federal Family Education (FFEL) Loans as of October 1, 1998 (or the date you received your loans after that date). The loans must also have been borrowed prior to your five years of teaching.
How Much Can Be Forgiven?
If you are a full-time secondary-level science or mathematics teacher, or special education teacher, you may be eligible for up to $17,500 in student loan forgiveness. If you teach a different subject, you may be eligible for up to $5,000 in student loan forgiveness.
Student Loan Forgiveness for Nurses
Nurses are eligible for a variety of student loan forgiveness programs, such as Public Service Loan Forgiveness, Nurse Corps Loan Repayment, National Health Service Corps Loan Repayment, Perkins Loan Cancellation, and Army Nurse Corps Benefits/Health Professions Loan Repayment.
Nurse Corps Loan Repayment
The Nurse Corps Loan Repayment program is offered by the Health Resources & Service Administration. The program provides student loan forgiveness for nurses that work in critical shortage facilities, or healthcare facilities lacking primary, mental health, and dental care.
What You Need to Qualify
To qualify, you must:
Be either a registered nurse (RN), nurse faculty (NF), or advanced practice registered nurse (APRN)
Work full-time in a critical shortage facility or accredited nursing program
Have attended a qualifying nursing school in the United States
How Much Can Be Forgiven?
If you qualify, you can have up to 85% of your nursing school debt forgiven.
National Health Service Corps Loan Repayment
The National Health Service Corps (NHSC) Loan Repayment Program is also offered by the Health Resources & Service Administration. However, the eligibility criteria is a bit stricter in comparison, and the program requires you to serve two years at an NHSC-approved site.
What You Need to Qualify
To qualify, you must:
Be a U.S. citizen
Be fully trained and licensed to practice in an NHSC-approved primary care medical, dental, or mental health discipline in which you apply to serve
Be a provider in the Medicare, Medicaid, and State Children’s Health Insurance Program (as applicable)
Be a health professional in an eligible discipline with qualifying student loan debt for your degree
Be working at an NHSC-approved site
How Much Can Be Forgiven?
The amount you can get forgiven depends on your level of participation in the program. If you serve full-time, you can receive up to $50,000 in student loan repayment for the initial two-year term. If you serve part-time, you can receive up to $25,000 for a two-year term.
Army Nurse Corps Benefits/Health Professions Loan Repayment
If you are a nurse on active duty or in the Army Reserve, you may be eligible for a substantial amount of student loan forgiveness.
What You Need to Qualify
To qualify, you must be a nurse on active duty or in the Army Reserve.
How Much Can Be Forgiven?
If you qualify, you can receive up to $250,000 in student loan forgiveness.
Military Student Loan Forgiveness and Assistance
Members of the military are eligible for several student loan forgiveness programs including Public Service Loan Forgiveness, National Defense Student Loan Discharge, and Veterans Total and Permanent Disability Discharge.
National Defense Student Loan Discharge
National Defense Student Loan Discharge is a federal program available to students who have served in the military.
What You Need to Qualify
To qualify, you must have served 12 consecutive months in a duty station that qualified you for either imminent danger or hostile fire pay. You must also have Federal Perkins Loans or Direct Loans to qualify.
How Much Can Be Forgiven?
The amount you can have forgiven depends on a variety of factors. For more information on how much you may be eligible for specifically, contact your loan servicer.
Veterans Total and Permanent Disability Discharge
If you are a veteran with a service-related disability, the Veteran Total and Permanent Disability Discharge program may be able to help you.
What You Need to Qualify
To qualify, you must be able to provide proof that you are permanently disabled, including appropriate documentation from the Department of Veteran Affairs.
How Much Can Be Forgiven?
This program can forgive up to your entire remaining loan balance.
Student Loan Forgiveness: By Loan Type
While most of the above student loan forgiveness programs are for Federal Direct Loans and Federal Family Education Loans, Parent PLUS Loans and Perkins Loans are also eligible for some forgiveness programs.
Parent PLUS Loan Forgiveness
Parent PLUS Loans are eligible for certain forgiveness programs such as PSLF and Military Loan Forgiveness. You can also receive loan forgiveness on Parent PLUS Loans by opting into an income-driven repayment plan or working for a federal agency that offers debt forgiveness benefits.
Perkins Loan Cancellation
If you qualify for Federal Perkins Loan Teacher Cancellation, you can have 100% of your Perkins Loan(s) canceled. To qualify, you must have served full time in a public or non-profit elementary or secondary school system as a:
Teacher working with students from low-income families;
Special education teacher; or
Math, science, foregin language, or bilingual education teacher (or any other field of study deemed by the state education agency to have a shortage of qualified teachers).
Other Student Loan Forgiveness Programs
Income-Driven Repayment Loan Forgiveness
Income-driven repayment (IDR) is a federal loan repayment option that bases your monthly payment on your income instead of your remaining loan balance. After 20-25 years of qualifying payments on an IDR plan, your remaining student loan balance can be forgiven.
State-Sponsored Repayment Assistance Programs
Some states offer robust student loan assistance programs. For example, Iowa currently offers six assistance programs, one of which being the Teach Iowa Scholars program that provides qualifying first-year Iowa teachers with $4,000 per year for teaching in designated shortage areas. Likewise, New York offers nine assistance programs, one of which offering qualified social workers up to $26,000 in debt assistance. Check your state’s website to learn more about their student loan assistance programs.
Loan Discharge Programs
Loan discharge removes your obligation to repay your debt in certain circumstances. While similar to student loan forgiveness programs in that the remainder of your student debt can be forgiven, it differs in that loan discharge is typically only granted for extenuating circumstances.
The following are the most common discharge programs offered for student loans.
Closed School Discharge
Closed school discharge is designed to offer loan discharge to students whose school closed while they were still enrolled or shortly after they withdrew. If you qualify for a closed school discharge:
You will no longer be obligated to make payments on your federal student loan debt,
You will receive reimbursement for any payments you have already made, whether voluntarily or through forced collection; and
Any record of the loan and repayment history associated with it will be deleted from your credit report.
Borrower Defense to Repayment Discharge
The Borrower Defense to Repayment Discharge program is designed to assist students whose schools misled them or participated in misconduct that violated state laws. This program can remove all or some of your federal student loan debt.
Total and Permanent Disability Discharge
If you have become totally and permanently disabled, you may qualify for Total and Permanent Disability Discharge. To qualify, you must be able to provide documentation of a disability from a qualified source such as the U.S. Department of Veteran Affairs, the Social Security Administration, or a physician.
Many private student lenders also have a total and permanent disability discharge program. To check if your lender does, reach out to them directly.
Discharge Due to Death
Should a student loan borrower die, their federal student loan debt will be discharged. Parent PLUS Loans borrowed on behalf of a now-deceased student also qualify.
Frequently Asked Questions About Student Loan Forgiveness
Can I Get My Student Loans Forgiven Due to COVID-19?
While the COVID-19 pandemic has impacted many borrowers’ ability to repay their student debt, the pandemic itself is not grounds for student loan forgiveness. As a result of the pandemic, however, federal student loans are in forbearance.
That said, there have been motions to forgive up to $20,000 per borrower in student loan debt. However, litigation is currently blocking these motions from moving forward.
As a result, the forbearance has been extended until 60 days after the litigation is resolved or debt is forgiven. If neither happen before June 30th, payments will resume 60 days after that.
Are Student Loans Forgiven After 10 Years?
Student loans are not automatically forgiven after 10 years. However, if you were approved for Public Service Loan Forgiveness, you will be granted student loan forgiveness after 120 qualifying payments, or around 10 years.
Is There an Income Limit for Student Loan Forgiveness?
Currently, there are no income restrictions for federal student loan forgiveness programs.
Can You Make Too Much Money to Qualify for PSLF?
There are currently no income restrictions for the Public Service Loan Forgiveness Program. However, to qualify, you must be on a qualifying repayment plan, many of which are income-driven repayment plans. If your income is too high relative to your outstanding balance, you may not qualify for an income-driven repayment plan.
Is Loan Forgiveness Taxable Income?
Student loan forgiveness granted under the Public Service Loan Forgiveness Program is not considered taxable income. Loans that were forgiven under discharge programs, however, are typically considered taxable income.
Final Thoughts from the Nest
When researching student loan forgiveness programs, be weary of scams. If a program calls you directly, requires you to make decisions “immediately” or with any sense of urgency, or requires you to pay upfront to have your debt forgiven, do not move forward with the program.
If you have questions about which student loan forgiveness programs may be available to you, it’s best to contact your loan servicer directly for more information.
Earnest offers both private student loans and student loan refinancing.1 With competitive interest rates, customizable repayment plans, and a forward-looking eligibility criteria, Earnest is a good fit for borrowers who don’t have a cosigner but have a strong credit score.1
Fixed APR Range: 4.96% to 9.79%* (includes 0.25% auto pay discount)
Variable APR Range: 5.49 % to 9.74%* (includes 0.25% auto pay discount)
Loan Amounts: $5,000 ($10,000 for California residents) to $500,000
• Competitive interest rates • Customizable payments and loan terms • Merit-based rates • Option to skip one monthly payment every year3 • Allows biweekly payments via autopay4
• Refinancing is unavailable in Kentucky and Nevada • Variable interest rates aren’t available for borrowers in all states • You can’t apply with a cosigner • Student borrowers cannot take over parent PLUS loans that parents took out on their behalf
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan refinance search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Competitive interest rates and zero fees for qualified borrowers
When looking to refinance your student loan, finding a low interest rate is typically a top priority. If you qualify to refinance through Earnest, you’ll have access to some of the best rates in the industry. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Earnest Student Loan Refinancing
Fixed APR*
4.96% to 9.79%*
Variable APR*
5.49 % to 9.74%*
*Rates as of September 28, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Customizable payments and loan terms
Earnest offers expansive repayment options that allow you to customize your terms before locking in your loan. Unlike most lenders, Earnest allows you to set the exact payment amount you want without being restricted to standardized options that are not right for you. In addition, you can even specify the exact number of months in which you want to pay off your loan.
If you are looking for a lender that offers flexibility to match your monthly payments to your budget, Earnest is an excellent option for you.
Earnest offers a unique merit-based underwriting process that allows you to get approved with even a short or nonexistent credit history. Earnest’s underwriting approach looks at traditional financial data (credit score) as well as alternative financial data (bank account information) to provide personalized loan offers.
This can save you thousands, or even or tens of thousands, of dollars over other lending options that only look at your credit score to determine your rates.
Option to skip one monthly payment every year3
Earnest is the only lender that allows you to skip one monthly payment on your student loan every year. Therefore, this can be incredibly helpful if you lose your job or face an unexpected expense.
In order to qualify, you must:
Make the request at least five business days before the payment is due.
Make the request after six months of timely payments of both interest and principal.
While this feature can be extremely helpful when life hits a bump in the road, do note that the principal and interest from that payment will be spread out across your remaining payments, resulting in increased monthly payments.
Allows biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, Earnest gives you the option to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
In addition to offering biweekly payments via autopay,4 Earnest gives you the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Earnest, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Earnest also allows borrowers to make same-day payments and schedule multiple extra payments at once.
Refinancing isn’t available to borrowers in Kentucky and Nevada
If you live in Kentucky or Nevada, you’ll have to consider other lenders to refinance your private student loan. Complete the Sparrow application to compare real rates from more than 17 different lenders to make sure you’re getting the best rate possible.
Variable interest rates aren’t available to borrowers in all states
Variable interest rates are not available to borrowers in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas. So if you’re a borrower from one of these states and set on a variable interest rate, you’ll want to explore other lenders.
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can typically help you qualify for better loan terms. However, Earnest does not allow you to apply for refinancing with a cosigner.
Student borrowers cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). However, Earnest does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through Earnest — it will just be in your name, not the student’s name.
Choose a term between 5 and 20 years.5 Choose a precise loan term, down to the month.
Loan Amounts
$5,000 ($10,000 for California residents) to $500,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
650.
Minimum Income
No minimum. Applicants must have a written job offer for employment starting within six months or have consistent income.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
$135,000.
Maximum Debt-to-Income Ratio
65%.
Ability to qualify if you’ve filed for bankruptcy
Yes, if you don’t have accounts recently in collection and after the bankruptcy drops off your credit report. This happens after seven years for Chapter 13 bankruptcy and after 10 years for Chapter 7.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or possess a 10-year, non-conditional green card.
Location
Not available to borrowers in Kentucky and Nevada. Variable rates aren’t available to borrowers in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas.
Must have graduated
Yes, but you may be able to refinance in your last semester before graduating if you have an income or job offer.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
Borrowers cannot apply with a cosigner.
Repayment Options
In-school Deferment
Yes.
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Up to 12 months available, in 3-month increments, if you have: • An involuntary decrease in income, such as a reduction in hours, unpaid leave, or a change from full-time to part-time employment. • An involuntary loss of employment at no fault of your own. • A significant increase in essential costs such as medical expenses, emergency home repairs, or child care.
Cosigner Release
There’s no option to add a cosigner, but refinancing removes the original cosigner.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No option for a cosigner.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Earnest.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
No.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff/application to approval
Timeline varies by applicant, but generally, 2-5 business days.
Before you take out a loan from Earnest…
Complete the Sparrow application to compare real rates from more than 17 different lenders to make sure you’re getting the best rate possible.
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FAQ
Is Earnest a legitimate lender?
Yes, Earnest is a legitimate lender that was founded in 2013. The online lender has helped over 164,000 borrowers refinance $14.5 billion in student loans.
Are Earnest student loans federal or private?
Earnest loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.6
No. Earnest is not available to borrowers in Kentucky and Nevada. In addition, variable rates aren’t available to borrowers in Alaska, Illinois, Minnesota, New Hampshire, Ohio, Tennessee, and Texas.
How long does it take to refinance my student loan through Earnest?
Submitting an application through Earnest takes a few minutes. Once you’ve submitted your loan application, Earnest will return a decision as soon as possible, typically within 2-5 business days. Then, if you qualify, you will receive the rate and terms of your loan.
Does applying for a loan through Earnest7 hurt my credit score?
Earnest has both eligibility check (hard credit check that may temporarily impact your credit score) and rate check (soft credit check, which will not impact your credit score).
What happens if I don’t qualify for student loan refinancing through Earnest?
If you don’t qualify for refinancing through Earnest, the company will inform you why. Then, depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you get the best rate.
1 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.
2 Actual rate and available repayment terms will vary based on your income. Fixed rates range from 5.21% APR to 10.04% APR (excludes 0.25% Auto Pay discount). Variable rates range from 5.74% APR to 9.99% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 9.13% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.21%. For loan terms over 15 years, the interest rate will never exceed 9.24%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account.
3 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.
4 You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
5 Earnest’s Loan Cost Examples: These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.
6 You may lose benefits associated with your underlying federal and/or private loans if you refinance such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options. If you file for bankruptcy, you may still be required to pay back this loan.
7 Loan Eligibility criteria: Your debt is from paying for education at a Title IV accredited school. The debt is from your education or your child’s. The debt you’re refinancing is for a completed degree or one that will be completed at the end of this semester. You are currently the primary borrower on the student loans you would like to refinance, and you will remain the primary borrower after refinancing. You must reside in the District of Columbia or one of the 47 states Earnest Operations LLC is authorized to lend in (all but Delaware, Kentucky, and Nevada). This is strictly a student loan refinance product. There is no opportunity to borrow more than your outstanding qualifying student loan amount. You must be the age of majority in your state or older at the time you apply, as well as be a United States citizen or Permanent Resident Alien without conditions. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX.
Earnest Loans are made by Earnest Operations LLC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit www.earnest.com/licenses for a full list of licensed states. For California residents: Loans will be arranged or made pursuant to a California Financing Law License.
Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
The best student loan will always be the one that meets your needs best. That said, it’s helpful to start the process with a list of strong options to make navigating the process easier.
Here are our top picks for the best places for private student loans.
The loan options shared are in no particular order. Interest rates reflected in this article were last updated on 03/06/23. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670 Best for: Residents of, or students in, Arkansas.
Fixed Interest Rate: 4.83% to 16.16% (cosigned, undergraduate); 5.61% to 16.16% (graduate) Variable Interest Rate: 6.15% to 16.08% (cosigned, undergraduate); 6.68% to 16.08% (graduate) Maximum Borrowing Limit: $200,000 Minimum Credit Score: 540 Best for: International and DACA students who have a lower credit score.
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700 Best for: Residents of, or student in, Texas.
College Ave – Both undergraduate and graduate degrees
Fixed Interest Rate: 5.05% to 16.99% (undergrad); 5.05% to 14.49% (grad) Variable Interest Rate: 5.49% to 16.99% (undergrad); 5.49% to 14.49% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers looking for a repayment term that matches their budget.
Custom Choice – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90% (undergrad); 4.42% to 14.30% (grad)* Variable Interest Rate: 5.62% to 16.20% (undergrad); 5.89% to 15.97% (grad)* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650 Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A Best for: Borrowers who want an income-based repayment (IBR) loan.
EdvestinU – Both undergraduate and graduate degrees
Fixed Interest Rate: 7.00% to 10.57% Variable Interest Rate: 8.12% to 11.02% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 7.49% to 12.99% Variable Interest Rate: N/A Maximum Borrowing Limit: $20,000 per school year Minimum Credit Score: N/A Best for: Borrowers that were high-achieving undergraduate students.
INvestED – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670 Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660 Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% (undergrad); 12.74% (grad) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A Best for: International and DACA borrowers without a cosigner.
Nelnet Bank – Both undergraduate and graduate degrees
Fixed Interest Rate: 4.49% to 15.47%* Variable Interest Rate: 6.29% to 15.51%* Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: N/A Variable Interest Rate: 6.70%+ Maximum Borrowing Limit: $220,000 Minimum Credit Score: N/A Best for: International student borrowers with no cosigner.
Sallie Mae – Both undergraduate and graduate degrees
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44 to 13.80% (undergrad); 4.99% to 13.60% (grad) Variable Interest Rate: 5.99% to 14.30% (undergrad); 5.99% to 14.10% (grad) Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Private student loans are provided by private entities such as banks, credit unions, and other financial institutions. Because each lender is its own unique entity, their eligibility requirements will vary. There are a couple of requirements, however, that are fairly standard:
Be Enrolled in an Eligible Program
Private student loans can only be used for educational purposes. So, in order to be considered for a private student loan, you’ll need to be enrolled in an eligible program.
Be a U.S. Citizen, Permanent Resident, or Eligible International Student
Most private student lenders will require you to meet certain residency requirements. If you are a U.S. citizen or permanent resident, you will be eligible with most student lenders.
If you are an international student, certain student lenders may require you to apply with an eligible U.S. citizen or permanent resident cosigner. If you do not have a cosigner available, you can explore loan options with companies such as MPOWER and Prodigy Finance, who work specifically with international students with no Social Security Number or cosigner.
How to Pick the Best Place for Private Student Loans
The Annual Percentage Rate (APR) of a student loan is the annual interest rate you will incur, plus any additional fees or costs the lender tacks on. APR is typically one of the most important elements of a student loan because it’s essentially what you’ll be “charged” each year to borrow the loan.
The Type of Interest Rate You Prefer
Student loan interest rates are either fixed or variable. Fixed interest rates will remain the same throughout the life of the loan. Variable interest rates are subject to change in response to the market. If you prefer one over the other, make sure the loan you borrow has that type of interest rate.
A Repayment Plan That Suits You
Each student lender will offer a different set of repayment plans. Like other loan features, the best repayment plan will be the one that suits you best. For example, if you know you prefer a standard repayment plan, make sure the lender you choose offers it.
A Monthly Payment You Can Afford
Once the loan enters repayment, you will be responsible for making a minimum monthly payment. Your exact monthly payment will depend on your interest rate, repayment plan, and repayment term. Before agreeing to a loan, estimate your future monthly payment to make sure it’s affordable given your predicted post-graduate salary.
A Flexible Cosigner Release Policy
To borrow a student loan, you may need a cosigner to qualify. While some cosigners are comfortable remaining on the loan until it’s paid off in its entirety, others may prefer to be released from their responsibility. If you or your cosigner would like the option to release your cosigner later on, look for a lender with a flexible cosigner release policy.
What is the Best Place for Private Student Loans?
There is no one-size-fits-all approach to student loans. The best student lender for you will be the one that offers you the best interest rate and loan terms.
To find the student lender that suits you best, complete the Sparrow form. In as little as 3 minutes, we’ll show you what rates you pre-qualify for at our 15+ partner lenders. Then, you can compare the loan rates side-by-side to be sure you’re picking the best option for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
In the 2020-2021 school year, students received $26 billion in Pell Grant awards. And of course, seeing how the cost of education has been rising, you might want to get in on some of that award money. If you’re not sure about your Pell Grant eligibility, here’s what you need to know in order to qualify.
What is a Pell Grant?
The Federal Pell Grant is a grant from the U.S. Department of Education. It’s available for low-income students wanting to pursue post-secondary education. Because it’s a grant, it does not need to be paid back.
The maximum award amount is subject to change but has recently been around $6,000. For the 2021-2022 school year, for example, the award limit was $6,495. While it’s entirely possible to get the full amount, you may get less than that. Your Pell Grant award amount will depend on your Expected Family Contribution (EFC), the cost of your school, your enrollment status, and how long you’ll be attending.
In some instances, you may be eligible to receive an additional award for attendance in an extra term. For instance, say you received $3,000 from the Pell Grant. You get $1,500 for the fall semester and $1,500 for the spring semester. But then, you take a summer semester, and you get another $1,500. This is what a Year-Round Pell is. Depending on your situation, you may be eligible for it.
How to Determine Your Pell Grant Eligibility
Before you start planning how you’ll use the money, remember you need to be eligible first. If you’re not eligible, you won’t get the money. Here are the Pell Grant eligibility criteria you need to know about.
Income
A significant requirement for the Pell Grant is having financial need. Anyone with an Expected Family Contribution (EFC) at or below $5,846 has a financial need and is eligible for the grant. Your EFC is calculated by looking at:
your family size
the number of people in college in your household
the cost of the school or university, and
you and your family’s income and expenses.
Because the requirement is to have an EFC less than $5,846, there is no set income cutoff.
Age
There is no age limit to the Pell Grant. As long as you are an undergraduate student, you can be eligible. You must also not have a bachelor’s, graduate, or professional degree. When you do earn that degree, you will no longer be able to receive the Pell Grant award.
Timeframe
The Pell Grant will only be available to you, as long as you still meet the requirements, for 12 terms. Or, in other words, 6 academic years. After that, you will have reached your lifetime eligibility limit for the Pell Grant.
Military Service
Students with parents who served in the military might be able to get a larger Pell Grant. If your parent or guardian died as a result of service in the U.S. Armed Forces in Iraq or Afghanistan or was a public safety officer who died as a result of active service in the line of duty, then you might be eligible to get the larger grant amount. But, you must have been either less than 24 years old or enrolled in a college or career school at least part time. If you meet these requirements, talk to a financial aid officer about getting a larger Pell Grant.
Frequently Asked Questions About the Pell Grant
Why Am I Not Eligible for the Pell Grant? Reasons for ineligibility include not having financial need, having at least a bachelor’s degree, or a change in enrollment status.
Do I Have to Pay Back a Pell Grant? Typically, no. But if you drop from full-time to half-time enrollment status, drop out of school, or if your financial need reduces, you will have to pay back the Pell Grant. Your school will provide you with information on how to start repayment.
How Do You Know If You Are Pell Grant Eligible? To apply for a Pell Grant, you have to fill out the FAFSA. When you fill out the FAFSA, they will do the calculations needed to see what your EFC and financial need are. If you’re eligible for the Pell Grant, the grant will show up on your financial aid award package. If you don’t see the Pell Grant in your financial aid award package, then you probably weren’t eligible.
Final Thoughts from the Nest
Pell Grants provide much-needed funding to students from low-income families who need to pay for college. Eligible students must be undergraduate students with no degree and demonstrate financial need.
If you are not eligible, it would be smart to check out other forms of student aid like student loans. In fact, the Sparrow application can match you with what private student loans you qualify for from any of our 15+ partnering lenders. Sign up to get started now.
The average 4-year in-state college degree will run you nearly $25,000 per year, or over $100,000 for the entire degree. If you’re borrowing student loans to cover this, it’ll likely cost you even more once interest is factored in.
Having a job while in school can not only help you manage your college expenses but help you chip away at your student loan debt before you even graduate.
Here are the 12 best jobs for college students to start paying off your student debt.
Best On Campus Jobs for College Students
On-campus jobs are ideal in college as you won’t have a commute, you can work with other people your age, and they tend to be more flexible and understanding of a college student’s busy schedule.
You may find securing an on-campus job to be easier as well, as many college programs and offices are run primarily by student workers.
Fitness Instructor
If you enjoy working out, being a fitness instructor at the campus recreation center is a perfect job for you. There are often a wide variety of fitness classes you can teach such as spin, aerobics, and barre, so you’re bound to find a class you enjoy teaching.
The average entry-level fitness instructor makes around $19 per hour, which is higher than most traditional college jobs.
Resident Assistant
Resident assistants (RAs) are an essential part of living on campus. They help maintain the dorms, support students in various ways, and help uphold campus policy.
The exact terms of compensation will vary from school to school, but oftentimes, being an RA gets you both free room and board and a stipend.
At the University of Connecticut, for example, RAs receive a housing waiver plus a stipend of $4,510 for the academic year, paid out biweekly. While the housing waiver doesn’t give you cash in your pocket, it does result in significant savings overall.
Tutor
If you tend to excel in an area of study, putting your knowledge to use as a tutor could score you some serious cash, around $18 per hour to be exact. While some campuses may have specific tutoring centers you can apply to, you can also offer tutoring services privately.
Rideshare Driver
If you have a car on campus, driving for a rideshare service such as Uber or Lyft may be a perfect fit for you. With the ability to pick your own hours, being a rideshare driver is perfect if you’re busy or have a schedule that changes frequently. Plus, college students are always in need of a ride, especially if your campus is big or spreads throughout a city.
The average rideshare driver makes around $15 per hour, but this rate can vary significantly based on tips and location.
Best Off-Campus Jobs for College Students
The best jobs for college students aren’t always on campus. If you’re itching to work outside the campus atmosphere, there are a variety of off-campus jobs you may enjoy.
Babysitter
If you love working with kids, consider being a babysitter for local families. To connect with families looking for babysitters, search for “[Town] Babysitting Group” on Facebook, then promote your services within the group.
The average hourly rate for babysitting is around $11 per hour, however, it can range significantly based on the number of children you’re caring for, their age(s), and any special requests the parent(s) may have. For example, picking up the children from school, bringing them to practice, or making them dinner will often result in a higher hourly rate.
Dog Walker/Pet Sitter
If kids aren’t your thing but dogs are, dog walking and pet sitting will be right up your alley. Apps like Rover are designed to connect pet owners with dog walkers and sitters, making it an easy gig to pick up when you have free time. Plus, the average dog walker makes around $15 per hour.
Food Service
Waiting tables at a local restaurant may sound a bit less fun than playing with puppies, but it can be fairly lucrative. During peak seasons where more families are visiting campus — open house season, the end of semesters when parents are coming to pick up their kids, etc. — you can rack up quite a bit of cash.
The average food service worker makes $13.91 per hour, but at some chain restaurants such as Chili’s, you can make upwards of $22 per hour.
Ocean Lifeguard
Lifeguards, in general, are paid fairly well. However, if your school is close to an ocean, you may want to consider applying for an ocean lifeguard role. Ocean lifeguards tend to make more than pool lifeguards, bringing in around $16 per hour. While you would have to obtain a lifeguard certification, it’s the perfect gig if you enjoy sitting in the sun and being by the water.
Best OnlineJobs for College Students
If showing up to work in person isn’t your jam, we can’t blame you. Working from your dorm in your pajamas does sound pretty sweet, and there’s several jobs that will allow you to do just that.
Freelance Writer
As a freelancer, you’re essentially your own business. You get to choose what services you offer and at what rate, making it a highly flexible and fairly lucrative job. In fact, the average freelance writer makes around $23 per hour as a base rate.
Online English Teacher
If you enjoy working with children but don’t want to be physically in person, consider teaching English as a Second Language (ESL) online. Most ESL tutoring websites will set you up with a proper curriculum and provide guidance around how to actually teach English. Plus, the average ESL teacher makes $23 per hour, which is a fairly high rate in comparison to other college jobs.
Social Media Manager
If 95% of your screen time is spent scrolling through Tik Tok, being a social media manager is the gig for you. Social media managers make around $22 per hour when just starting out and even more with experience.
Interpreter/Translator
If you know more than one language, interpreting or translating is for you. Beginner interpreters can make around $23 per hour, but it can range depending on the languages you know and the organizations you work with.
College Jobs and Their Impact On Your Student Debt
It might be challenging to imagine how a $13 per hour college job could actually make a dent in your student debt, so let’s illustrate it.
Let’s say you worked 5 hours per week at $13 an hour. Before taxes, you’d make $260 per month. For simplicity’s sake, we’ll use your pre-tax income to estimate how much you’d save.
Now, let’s say you worked that same job, at the same rate, and for the same number of hours per week, for the entire duration of your college career.
$260 per month x 12 months in a year x 4 years (the typical length of a bachelor’s degree) = $12,480
Here’s how much you could save on the average student loan*, depending on how much you put towards your debt.
Example 1
Example 2
Example 3
Loan Balance
$37,584
$37,584
$37,584
Interest Rate
5.8%
5.8%
5.8%
Repayment Term
20 years
20 years
20 years
Percentage of Income Put Towards Student Debt
10%
20%
30%
Dollar Amount Put Towards Student Debt
$1,248
$2,496
$3,744
Amount Saved Over the Life of the Loan
$2,580
$4,851
$6,861
As you can see, putting even a small portion of your income towards your debt can result in significant savings. So, while working in college can sometimes be challenging to manage, consider picking up one of the jobs listed above, even for just a few hours a week.
*The average student loan balance is $37,584. The average student loan interest rate is 5.8%. The average student loan borrower takes 20 years to repay their student loan debt. Calculations are based on the averages — a $37,584 loan with a 5.8% interest rate and a 20-year repayment term.
The purpose of student loan refinancing is to score a better interest rate or terms. And landing a better interest rate could quite literally save you thousands. So, before choosing just any refinance loan, make sure you’re getting the best rate possible.
Here are the best rates for student loan refinancing.
September 2024’s Best Rates for Student Loan Refinance
Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan refinance search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Fixed APR range: 4.90% to 6.99% Variable APR range: 5.32% to 9.12% Maximum Borrowing Limit: $400,000 Minimum Credit Score: 720, or 690 with a qualified cosigner
Fixed APR range: 3.94% to 8.48% Variable APR range: N/A Maximum Borrowing Limit: $5,000 ($10,000 for California residents) to $300,000 Minimum Credit Score: 670
Best for: Borrowers who want to work with a non-profit lender.
Fixed APR range: 4.49% to 8.99% Variable APR range: 4.49% to 8.99% Maximum Borrowing Limit: Up to your total outstanding balance Minimum Credit Score: Does not disclose
Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Before you refinance your student loan(s), you should consider a few factors.
Loan Type
If you have federal student loans, refinancing will eliminate a variety of benefits unique to federal student loans. If you plan on utilizing any of those benefits, such as income-driven repayment and potential forgiveness, hold off on refinancing.
The purpose of refinancing is to score a lower interest rate or better terms than the loan(s) you currently have. You will need to have a steady income and a good credit score to receive competitive loan offers. If your income and/or credit score isn’t in a better place than when you originally borrowed the loan, it’s best to wait until it is to refinance.
Lenders may examine your repayment history before agreeing to lend to you. If your repayment history is full of late payments, it may be challenging to qualify for a competitive refinance loan. On the other hand, if your repayment history shows consistent on-time payments, you may qualify for a solid refinance loan.
The key to finding the lowest student loan refinance rate is comparing your options side-by-side. Without the transparency to see all of your loan options in one place, it can be challenging to decipher which is the best option.
To see which student loan refinance options you qualify for, and at what rates, submit the Sparrow application. The Sparrow process will allow you to explore the best student loan refinance rates in one place.
Does Refinancing your Student Loan Hurt Your Credit?
When you inquire about a potential refinance loan, you may go through a prequalification process which will allow the lender to give you an estimate of the interest rate and terms you would qualify for. The prequalification process does not hurt your credit.
If you decide to move forward with a loan option, you will need to submit a formal application which will hurt your credit score. A formal refinance loan application results in a hard credit check inquiry, although this will only hurt your credit score temporarily.
If you have federal student loans, now might not be the best time to refinance your student debt. Federal student loans are currently scheduled to remain in forbearance until June 30th, 2023 or 60 days after student loan forgiveness litigation is resolved or debt is forgiven. During this time, federal student loans will not be accruing interest, and making minimum monthly payments is not required. Refinancing your federal student loans during this time would make interest start to accrue, and minimum monthly payments would be required.
If you have private student loans, however, there are no time limits on refinancing.
Before refinancing your student loans, consider whether now is the appropriate time to refinance. If so, start the process with Sparrow to be sure you receive the best rates for student loan refinancing.
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
College is on the horizon and you’ve never felt more excited. You’ve already got plans for what you’ll do to your dorm and what classes you’re going to take. But there’s just one little problem: student loans. You know you might need to take out some student loans for college, but you just don’t know if you should. And if you did decide to get student loans, you wouldn’t know where to start. Sound familiar?
If you’ve ever thought “what is a student loan?,” here’s what you need to know.
What Is a Student Loan?
A student loan is a form of financial aid where you borrow money for college from a lender with the expectation that it’s going to be paid back. There are two main types of student loans you need to know about — federal and private.
Federal Student Loans
Federal student loans are issued by the federal government. There are four basic types of federal loans that you can get.
Direct Subsidized Loans are for eligible undergraduate students who have financial need.
Direct Unsubsidized Loans are available for undergraduate, graduate, and professional students.
Direct PLUS Loans are available to graduate or professional students and parents of students.
Because these are all part of a federal student aid program, you can find the applications on the Federal Student Aid website. To apply for Direct Subsidized and Unsubsidized Loans, fill out the FAFSA. This application will also determine if you have any financial need based on factors like your annual income or your income level. To apply for Direct PLUS and Direct Consolidationloans, complete their individual applications.
Private Student Loans
Private student loans are issued by private lenders such as banks, credit unions, and financial institutions. To be eligible for private student loans, you must have at least a strong credit score and a steady income. Additionally, each lender will also have their own set of requirements that you’ll have to meet. Be sure to talk to lenders about their qualifications. You’ll also want to ask them about their application since each private loan will have its own application process.
How Do Student Loans Work?
The basic idea of student loans is that, unlike with scholarships and grants, you are borrowing the money which will have to be paid back over time with interest. Calculated as a percentage of your loan amount, student loan interest is essentially the cost of borrowing student loans. It’s what lenders will get for letting you borrow their money.
The amount you pay in interest will depend on a variety of factors such as your interest rate, your loan amount, and the length of your loan term. Generally speaking, the higher your interest rate and the longer your loan term, the more you will pay over the life of the loan. Take a look at the table below to get a better idea of this.
Loan #1
Loan #2
Loan #3
Loan Amount
$10,000
$10,000
$10,000
Interest Rate
5%
3%
5%
Loan Term
10 years
10 years
5 years
Total Interest
$2,727.86
$1,587.29
$1,322.74
Notice how although all the loans have the same loan amount, the differences in their interest rates and loan terms impact how much total interest is paid. Both Loan #1 and Loan #2 have a loan term of 10 years but two different interest rates. The difference in those interest rates results in saving nearly $1,200 with Loan #2. Similarly, Loan #1 and Loan #3 have the same interest rates but different loan terms. This time the difference results in about $1,400 in savings.
Even the smallest changes to your loan term or interest rate can have an impact on how much you’ll pay over the life of the loan.
Why Do Students Get Student Loans?
Student loans are a great resource to help fill in the gaps in paying for college. Because the cost of college is getting so high, students often don’t have the money to pay for it out of pocket. So, they’ll resort to financial aid like scholarships, grants, and loans.
Do You Have to Pay Back Loans?
Yes. The money is borrowed, which means it has to be paid back. You’ll do this by making monthly loan payments over a period of time. There are different repayment plans available to federal and private student loans. The exact repayment plan you should get will depend on your financial situation and what you think is best for you.
Monthly payment is 10-20% of your discretionary income
Repayment period is between 20-25 years
Graduated Repayment Plan
Monthly payments start out low and gradually increase over repayment term
Repayment period is 10 years
Can be difficult if your future income doesn’t grow as expected
Extended Repayment Plan
Lower monthly payment compared to other plans
Repayment period is extended to 25 years
Pay more interest over time
Private Student Loan Repayment Options
The private student loan repayment options available to you will depend on what your private lender offers. That said, there are four standard plans that you’ll typically hear about:
Immediate Repayment
Start repayment as soon as the loan is disbursed
Must make full payments even while in school (monthly loan payment + monthly interest payment)
Interest-Only Repayment
Start repayment as soon as the loan is disbursed
Only make full interest payments while in school
Partial Repayment
Start repayment as soon as the loan is disbursed
Only make partial interest payments while in school
Deferred Repayment
Start repayment after grace period ends, usually 6 months after graduation
Must make full payments (monthly loan payment + monthly interest payment)
Is a Student Loan a Good Idea?
Student loans are a great form of aid that can help college students afford an education that would otherwise be challenging to pay for. But, it’s important to be realistic. Keep in mind that you’re borrowing money you will pay back with interest, so only take out what you need, and have an idea of how you’ll pay it back. Also, do your research on loans and how they work to help you stay ahead. As long as you do these things, you can keep your loans from becoming the ghost that haunts you at night.
Final Thoughts from the Nest
Student loans are a great resource to help pay for college as long as you are mindful about how you use them. Think about what kind of loan you want, how much money you need, and how you’ll start repayment. Don’t forget that Sparrow is here to help. The Sparrow application can match you with what private student loans you qualify for with any of our 15+ partnering lenders. Sign up to get started now.
Soft credit checks (also called “soft pulls” or “soft inquiries”) occur when you or someone you authorize, such as an individual or company, checks your credit report. There are a few common reasons a soft credit check would occur — to prequalify for a loan, for employment background checks, and to check your credit score.
How Do Soft Credit Checks Work?
A soft credit check, in a simple sense, is a quick peek into your credit history done purely for informational purposes. It allows you, or whomever you authorize, to briefly assess how effectively you’ve managed your debt thus far but is not intended to assess your ability to handle a new line of credit.
In comparison, a hard credit check is done when submitting a formal application for new credit. It is intended to assess your ability to manage a new line of credit, and therefore, the inquiry will remain on your credit report and will impact your score temporarily.
Does a Soft Credit Check Hurt Your Credit?
A soft credit check does not hurt your credit score. Soft credit checks are not associated with a potential new debt, and thus, are not factored into your credit score calculation.
Think of it from a lender’s perspective. Taking a quick peek into your credit score to see where you’re at is fairly harmless. Applying for ten new lines of credit in one month, however, is an indicator that something isn’t quite right.
(Remember, looking at your credit score for informational purposes results in a soft credit check, while applying for a new line of credit results in a hard credit check.)
Your history of soft credit inquiries is, in a way, irrelevant to lenders as it doesn’t provide any information about your ability to manage new credit. Your track record of hard credit checks, however, shows lenders when you’ve requested new lines of credit and for what reasons, which can help them evaluate the potential risk in lending to you. A larger number of hard credit checks can raise a red flag for lenders depending on how close together they are.
Commonly Asked Questions About Soft Credit Checks
Can Lenders See Soft Credit Checks?
Lenders can’t see soft credit checks. While a soft credit check may stay on your credit report, depending on the credit bureau, it will only be visible to you, not lenders.
How Long Does a Soft Credit Check Stay on Your Credit Report?
Both hard and soft credit checks can stay on your credit report for up to two years. However, only hard credit checks will impact your score, and the impact won’t last for the entire two years. Typically, hard credit checks only affect your credit score for a few months (if you maintain your credit otherwise).
How Many Soft Inquiries is Too Many?
There is no threshold for “too many” soft credit checks. However, you should monitor the number of hard credit checks you incur in a year. Generally speaking, it is recommended to keep the number of hard credit checks to less than six per year.
How Can I Check My Credit Score Without Hurting It?
Checking your credit score for personal reasons will result in a soft credit check, and thus, will not hurt your credit score.
Several financial institutions, such as banks and credit card companies, offer free FICO scores as an added benefit of working with them. If yours do not, utilize the Annual Credit Report website to obtain your credit report. By law, you are entitled to a free copy of your credit report once per year from each of the three major credit bureaus.
Does Prequalifying for a Loan Hurt My Credit?
More often than not, prequalifying for a loan will not hurt your credit score as prequalification is often assessed through a soft credit check. That said, some lenders do perform a hard credit check during the prequalification process. Be sure to check with the lender directly before any credit check is performed to avoid unexpected hard credit checks.
When prequalifying for a student loan through Sparrow, a soft credit check is utilized to determine the rates you may qualify for with each potential lender. Using Sparrow will not hurt your credit score.
Final Thoughts from the Nest
A soft credit check will not impact your credit score, but a hard credit check will. Before agreeing to a credit check of any kind, be sure to understand what type of credit check will be performed. Understanding how the two types of credit checks impact your score will help you maintain a score that demonstrates creditworthiness.
Interest, often expressed as a percentage, is the cost of borrowing money from a lender. It can be one of two types: simple or compound. The difference between simple and compound interest lies in how they are calculated. While seemingly small differences in their formulas, the type of interest on a loan can drastically change what you pay over time.
Here’s what you need to know about simple vs compound interest.
Simple Interest vs Compound Interest
What is Simple Interest?
Simple interest is calculated based on the principal of the loan, or the amount you originally borrowed. So, in other words, the amount of interest you accrue each month will only be calculated based on the amount you initially borrowed.
What is Compound Interest?
Compound interest is calculated based on the principal of the loan plus any unpaid interest accrued on the loan. So, over time, interest will accrue on top of both the principal and any previously accrued interest.
Simple vs Compound Interest Example
Let’s say you had a principal loan balance of $30,000. For simplicity’s sake, let’s say it costs you $3 per day in interest to borrow that money.
With simple interest, it will cost you $90 per 30-day month in interest. ($3 x 30 days = $90)
With compound interest, your balance would increase to $30,003 on the first day. The next day, the interest amount would be calculated on a balance of $30,003, not the principal balance of $30,000. So, over time, the interest can accrue quite quickly as it compounds on itself.
Which is Better: Simple or Compound Interest?
If you have the option to choose between simple and compound interest, we recommend selecting simple interest.
Simple interest will often cost you less over time than compound interest because you will only pay interest on your principal loan balance. With compound interest, you will pay interest on your interest (say that 10x fast), which will inevitably cost you more over the life of your loan.
Here’s an example of how simple and compound interest would impact how much you pay over the life of the same loan.
Simple Interest
Compound Interest*
Principal Balance
$30,000
$30,000
Interest Rate
5.8%
5.8%
Repayment Period
15 years
15 years
Total Paid Over the Life of the Loan
$56,100
$69,888
Total Interest Paid Over the Life of the Loan
$26,100
$39,888
*Compounded quarterly. Loans will compound on different frequencies. How often the interest compounds can drastically change how much you pay over time.
While the two loans have the same principal balance, interest rate, and repayment period, the loan with compound interest would cost you $13,788 more over the life of the loan.
Are Student Loans Simple or Compound Interest?
All federal student loans operate on simple interest, and the vast majority of private student loans do, too. However, some private student loans do operate on compound interest, which often compound daily. To verify how your student loan interest is calculated, check with your lender directly.
Once you know how your student loan interest is being calculated, you can estimate your overall interest cost. To do so, use the simple and compound interest formulas.
Simple interest loans: Principal x interest rate x loan term = simple interest
Compound interest loans: (Principal (1 + interest rate)^ Number of compounding periods in a year) – principal = compound interest
As you can tell, the compound interest formula is a bit more complicated than the simple interest formula. If you have trouble doing the calculation by hand, you can utilize a compound interest calculator to help you.
How to Save on Student Loan Interest
Interest is often a major expense when it comes to borrowing a student loan. In fact, the average student loan accrues $26,000 in interest over the course of 20 years.
While opting for a simple interest loan is a great start to minimizing interest costs, there are a variety of ways to minimize it even further.
Refinancing your student loan debt can result in significant savings in interest. In fact, borrowers who used Sparrow to refinance reduced their interest rate by 2.29 percentage points, saving them approximately $17,000 over the life of their new loan, on average.
When you refinance, you essentially take out a new loan with a better interest rate or terms and then use the new loan to pay off your old loan.
Here’s how a 2.29% interest rate reduction could impact how much you pay over the life of your loan.
Principal Balance
Initial Interest Rate
Expected Total Payment Over the Life of the Loan
Interest Rate After Refinancing with Sparrow (Initial Interest Rate – Average 2.29% Savings in Interest)
Expected Total Payment Over the Life of the Loan with the New Interest Rate*
Savings from Refinancing
$10,000
8%
$17,202
5.71%
$14,909
$2,293
$30,000
6.5%
$47,040
4.21%
$40,514
$6,526
$50,000
5%
$71,171
2.71%
$60,905
$10,266
*Note that these numbers are based on a full 15-year repayment term, prior to making payments on the initial loan. The calculations will change based on how far into your repayment period you are, any surplus payments you may have made, and the new loan term you choose.
Add a Cosigner to the Loan
A cosigner is an individual who signs onto a loan alongside you, taking legal responsibility for paying back the loan should you fail to do so. A creditworthy cosigner gives lenders a “second line of defense,” if you will, lowering the risk for them to lend to you.
As a result, lenders will often offer you a lower interest rate on your student loan if you have a creditworthy individual cosign your loan.
Believe it or not, you can actually negotiate your student loan interest rate. While it isn’t 100% effective, it can’t hurt to call up your loan servicer and ask for a lower interest rate.
See if the Lender Offers an Autopay Discount
Many private student lenders offer an interest rate discount, often 0.25%, for opting into autopay. By opting in to autopay, your student loan payments will automatically be withdrawn from your account each month.
You should only opt in to autopay, however, if you are absolutely positive it will not result in an overdraft of your account.
The type of interest you have on a loan can drastically impact how much you pay over the life of the loan. So, before borrowing, consider whether the loan has simple or compound interest.
To explore a variety of student loan options at low interest rates, submit the Sparrow application.
Back in 2013, the federal government removed the borrowing limits for Parent PLUS Loans. This meant parents could take out the full amount of their child’s college education in Parent PLUS Loans, which ultimately led to increased Parent PLUS loan debt. In fact, the average Parent PLUS Loan debt is around $29,600 according to a recent study. Parent PLUS Loan forgiveness can help you get rid of this debt.
Here’s what you need to know about Parent PLUS Loan forgiveness.
Do Parent PLUS Loans Qualify for Forgiveness?
The answer is yes! There are several programs that offer Parent PLUS Loan forgiveness.
Income-Contingent Repayment
The Income-Contingent Repayment (ICR) plan is a form of income-driven repayment for federal student loans. It’s typically a more affordable repayment option because your monthly payment is 20% of your discretionary income. Plus, you can get loan forgiveness after 25 years of payments.
Technically, Parent PLUS loans are ineligible for the Income-Contingent Repayment (ICR) plan. But if you were to consolidate your Parent PLUS Loans via a Direct Consolidation Loan, you would then qualify. Talk to your federal loan servicer about consolidation options and ICR plans.
Public Service Loan Forgiveness for Parent PLUS Loans
The Public Service Loan Forgiveness (PSLF) Program will forgive the student debt of public service workers. You’re eligible as long as you work for a qualified employer and have made 120 on-time payments under an income-driven repayment plan. Your payments must have started after October 1, 2007.
Like the ICR plan, PSLF is only available for Direct Loans. But, you can always consolidate to be eligible. You can access the application for forgiveness through the PSLF Help tool. In addition to that, you’ll also have to submit an employer certification form when you apply.
Military Forgiveness Programs
You might be able to get Parent PLUS Loan forgiveness if you’ve served or are currently serving in the military. But there are some programs that limit forgiveness to borrowers who took out loans on behalf of a student service member.
The exact loan amounts and requirements needed will depend on the program. So, talk to your loan servicer about military forgiveness options available to you.
Federal Agencies
Some federal agencies will offer Parent PLUS Loan forgiveness as an incentive to work for them. So, the employee of the agency has to be the borrower of the loans. For example, if you worked for the federal agency that has this option, you could use this benefit. But, if your child, the student, worked for the agency, you wouldn’t be able to do this.
Other Options to Get Rid of a Parent PLUS Loan Faster
If you can’t qualify for forgiveness, you still have other options to help pay off your PLUS Loans faster.
Employer Student Loan Repayment Assistance
Certain employers may offer student loan repayment assistance programs (LRAP). If so, your employer will make monthly payments to your lender to help you to pay off your student loans quicker. Employers will have different policies on their LRAP when it comes to how much money they can pay or what loans are eligible. Talk to your employer about whether they offer a LRAP and their policies regarding it.
Consider Refinancing
Student loan refinancing is the process of letting a private lender pay off your loans, whether they’re private or federal student loans. In doing so, they’ll give you a new private loan to pay them back, but with better loan terms. To be able to get those better terms, though, you’ll need at least a strong credit score and stable income.
Additionally,refinancing a federal loan will disqualify you from federal benefits. This means missing out on income-driven repayment plans or forgiveness programs. You’ll need to be sure of your decision before moving forward with this if you have federal loans.
If you do decide to refinance your Parent PLUS Loans, you can get started by filling out the Sparrow application. The Sparrow application will match you with what refinance loans you qualify for from 15+ lenders.
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You may also be eligible for a discharge of your Parent PLUS Loans. Loan discharges free you from any obligation to finish paying back the loan. With federal discharge programs, you might even get reimbursement for payments. As a bonus, the discharge will be reported to credit bureaus, and any adverse credit history associated with your loans will be erased.
Parent PLUS Loans can be discharged for several reasons, such as:
Death of a parent or a student on whose behalf the loans were borrowed
The parent becomes permanently and totally disabled
Bankruptcy discharge
Closed school discharge
False certification discharge
Identity theft discharge
Unpaid refund discharge
Defense to repayment discharge
The amount discharged and the requirements to get a loan discharged is dependent on the program. Talk to your loan servicer for more information on loan discharge programs and which ones you qualify for.
Final Thoughts from the Nest
Although a lot of the information online may focus on the students, there are plenty of resources to help parents with Parent PLUS Loan forgiveness. If you don’t qualify for any of the Parent PLUS Loan forgiveness programs, consider refinancing with Sparrow. To get started, fill out the Sparrow application.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
If managing your student debt is becoming a challenge, you aren’t alone. As a veteran or active duty service member, there are various options to help you manage your student loan debt such as military student loan forgiveness programs.
Here are some of the best military student loan forgiveness programs you should know about.
Military Student Loan Forgiveness Programs
Student loan forgiveness programs are federal government programs that cancel your student loans. The exact amount each program will cancel and the requirements for such depend on the program itself. Some of these programs are directly tailored for military service members.
National Defense Student Loan Discharge
The National Defense Student Loan Discharge is for students who have served in the military. To qualify, you must have served for 12 consecutive months in a duty station that qualifies you for imminent danger or hostile fire pay. You also must have Federal Perkins Loans or Direct Loans to be eligible.
The amount of debt that will be discharged will vary. Contact your loan company for more information on how much debt you can get discharged.
To apply, you’ll need to fill out a Department of Defense form and send it to your loan servicer. You must also submit a letter explaining why you think you qualify. Contact your lender for information on how to get started.
Veterans Total and Permanent Disability Discharge
The Veterans Total and Permanent Disability Discharge is a forgiveness program available to those with a service-related disability. This program will release you from your loans and is available for most types of loans.
To qualify, you must prove that you are permanently disbaled. You’ll need to submit documentation from the Department of Veteran Affairs showing that you have a service-related disability and are unemployable due to that disability. After securing that documentation, contact Nelnet, the company that assists the Department of Education with this program, for more information on your options if you believe you are eligible.
To apply, fill out the application available on the Federal Student Aid website.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) is a program designed to forgive the student loans of public service workers, including military members and veterans. The PSLF Program will forgive all of your remaining debt after you meet the eligibility requirements for the program.
To qualify, you must work full-time for a qualifying U.S. government employer, or a tribal government, or a non-profit organization. You have to make 120 on-time payments under a qualifying repayment plan on your loans before you can get your loans forgiven. Additionally, these payments must have started after October 1, 2007.
While Direct Loans are the only federal loan type that qualify, you can consolidate other federal loans into a Direct Consolidation loan to qualify instead.
To apply, fill out a PSLF form and an employment certification form. The application and the employment form should be sent to FedLoan Servicing.
Other Ways to Manage Your Student Loan Debt as a Member of the Military
If you don’t meet the requirements for any of the above military student loan forgiveness programs, don’t fret. There are still other things you can do to help manage your student loans.
Opt In to an Income-Driven Repayment Plan
An Income-Driven Repayment (IDR) plan is a federal loan repayment option. It bases your monthly payment on a percentage of your discretionary income as opposed to your loan amount.
There are currently four different IDR plans available to students with federal student loans. They are Income-Based Repayment (IBR), Pay as you Earn (PAYE), Revised Pay as you Earn (REPAYE), and Income-Contingent Repayment (ICR). These IDR plans are great because it makes it easier to pay back your loans.
Talk to your federal loan servicer about how to get started with an IDR plan.
Refinance Your Loans for a Lower Interest Rate
Another option you have to manage your debt is to refinance your student loans. Refinancing is the process of a lender paying off your loans and giving you a new loan with better terms. While you can refinance both federal and private student loans, it is an especially good option for private student loans. Unlike federal loans, private loans aren’t eligible for forgiveness programs or income-driven repayment plans. If you do decide to refinance your federal student loans, you will lose out on federal benefits.
Qualified applicants will need at least a good credit score and stable income. To get started, use Sparrow. Sparrow is a student loan search tool that connects you with lenders. Many of our partnering lenders offer great refinancing options. By filling out our application, you’ll get matched with what you best qualify for.
Cap Your Interest Rate Through the Servicemembers Civil Relief Act
With the Servicemembers Civil Relief Act, you can cap your interest rate on your student loans. This means that during an active duty period, the highest interest rate you can be charged is 6%.
This benefit only applies, however, to loans taken out before your active duty service. For federal loans, this means you must have been in active duty status on or after August 1, 2008. Private student loans do not have this restriction. Additionally, there are no fees or charges that will be made with this benefit.
Frequently Asked Questions About Military Student Loan Forgiveness
Do Military Members Qualify For PSLF? Yes, military members do qualify for PSLF. To be eligible for PSLF, you need to be a public service worker. A public service worker is anyone who works full-time for a qualifying U.S. employer. The military would be a qualified U.S. employer.
Do You Pay Student Loans While Deployed? No. You can get military service deferment on your federal loans if you are called to active duty. The military service deferment is limited to 60 months and 180 days after discharge from service. Talk to your student loan servicer to get a deferment request form.
Do Veterans Have to Pay Back Student Loans? Yes, they do. All student loans have to be paid back unless you qualify for forgiveness programs such as PSLF.
Final Thoughts from the Nest
If you are finding your student debt tricky to handle as a service member, know that there are a variety of military student loan forgiveness programs available to you as well as other options to help you manage your debt. If you decide to go with the option of refinancing, remember that here at Sparrow, we’ve got your back. To get started, fill out the Sparrow application.
According to Education Data, American parents save $5,143 annually for their kid’s college, on average. Without this parental support, paying for college can feel out of reach. However, each year, thousands of students pay for college on their own, successfully utilizing a variety of resources to support them.
Here’s how you can pay for college without your parents’ help.
#1: Start Saving Early
While there are a variety of recommendations regarding how much to save, the approaches may not be feasible if you are paying for college on your own. So, rather than focusing on saving a certain amount, focus on saving as much as you can. Consider picking up a side hustle or part-time job prior to college to provide you with an additional income.
If you are in a position where you are unable to direct any income towards saving for college, don’t worry — you aren’t out of luck. While helpful to have some cash to put towards college, it isn’t a make-it-or-break-it factor.
#2: Utilize AP Classes
As a high school student, you may be offered the opportunity to take AP courses. While these courses require additional labor, they can save you thousands of dollars if counted for college credit.
What are AP Credits?
The Advanced Placement (AP) program was created by the College Board to provide high school students the opportunity to take college-level courses and earn college credit for doing so. The program offers a wide variety of courses, from AP English Language and Composition, to AP US History, to AP Psychology.
At the culmination of each course, AP students are offered the option to take the AP exam. If you score sufficiently on it, you could gain college credit and skip the equivalent course in college. Skipping the equivalent college course could allow you to graduate early, which in turn could save you thousands of dollars in tuition and fees.
How Much Can AP Credits Save You in College?
The amount of money AP credits can save you varies greatly depending on the courses you take, the school you choose to attend, and the major you decide to enroll in.
Each school will have its own unique AP credit policy. So, while some schools may only accept 5s on the AP exam (the highest you can score), other schools may accept 3s and up. Likewise, some programs may require you to take all of the major courses at the school itself, which could discount your AP credit. Let’s break this down with an example.
Let’s say you apply to the University of Connecticut.
If you take the AP English Language and Composition exam, you will only be eligible for the equivalent UConn course credit if you score a 4 or 5. However, if you took the AP Calculus BC exam, you would only need to score a 3 to be eligible for the equivalent UConn course credit.
If you do earn a qualifying score, though, you would earn anywhere from 3 to 6 credits on average. At UConn, 15 credits is the average semester course load. So, if you took 5 AP courses throughout your high school career and earned qualifying scores on all exams, you may be able to knock an entire semester off of your college career at UConn.
At UConn, out-of-state tuition is around $20,000 per semester. So, in theory, the AP credits could save you nearly $20,000.
While this will change from school to school, the same idea applies. Depending on the courses you take, the school you attend, and your AP score, you could save a decent chunk of money.
How to Find Out Where Your AP Score Counts
If you applied to multiple schools, check to see which school(s) will accept your AP scores for credit. Simply search for “[school name] AP credit policies” to find each school’s policy.
If you already have your AP test scores in hand, check to see which scores will qualify for the equivalent course credit at each school. If you don’t have your test scores yet, see which school takes lower scores. The lower the accepted score, the more likely you are to score high enough for it to count for credit.
If you have specific questions regarding how your AP credits could help you graduate early, reach out to your intended college’s program directly. They will be able to provide you with a more accurate assessment of how your AP credits may be applied to your degree to save you money in the long run.
#3: Be Strategic About Which School You Choose to Apply To
The cost of college will differ greatly depending on the type of school you choose to attend. For example, while the average cost of a 4-year in-state public institution is $25,487 per year, the average cost of a full-time in-district community college program is $3,730 per year.
When paying for college without your parents’ help, you may find more affordable college options more appealing. Consider the average cost of each college program when deciding where to apply.
Likewise, consider the application fees of each school. To avoid paying hundreds of dollars in application fees, narrow down your list of schools to the ones you could truly see yourself attending. For the ones you do apply to, contact the school directly to ask about an application fee waiver. Many schools waive application fees for students like yourself who are navigating the college process without parents.
#4: Apply for Scholarships
Scholarships are essentially free money. (Yup, money you don’t have to pay back.) So, it’s recommended that you exhaust all scholarship options before considering student loans.
Throughout the search process, you will encounter a variety of scholarship opportunities, such as academic scholarships, private scholarships, institutional scholarships, and need-based scholarships.
To find scholarships to apply to, consider the following sites:
Sallie Mae’s Scholarship Search Tool: While Sallie Mae is one of the most well-known private student loan companies, they also offer a robust scholarship search engine. After registering, the engine will send you customized scholarship recommendations based on your profile.
Scholarships.com: As one of the most established scholarship websites, Scholarships.com has reported nearly $19 billion in scholarships, making it a great place to search for and apply to scholarships.
Chegg.com: Chegg is well-known for its textbook rental service and homework help, but it’s also a great resource for scholarships. Chegg offers over 25,000 scholarships and tutors to help review your scholarship essays before you submit them.
Fastweb.com: Fastweb has over 1.5 million scholarships in its database and will send you personalized application recommendations based on your profile. The platform will even email you when deadlines are approaching so you don’t miss any opportunities.
Niche.com: Niche.com is known for providing insight on colleges and universities from over 140 million real reviews and ratings. However, the site also offers a wide variety of scholarships, using a similar matching process as other platforms.
Cappex.com: Cappex database holds over $11 billion in scholarship opportunities and allows you to narrow your search based on a variety of factors.
#5: Apply for Financial Aid
If you are an independent student, you do not need your parents’ information to apply for federal student aid through the FAFSA. If you are a dependent student, however, you will need your parents’ information to complete the form.
Dependent vs Independent Student
For financial aid purposes, you are considered an independent student if you are at least one of the following:
At least 24 years old
A graduate/professional student
An orphan or ward of the court
An emancipated minor
Married
Someone who is homeless or at risk of being homeless
Have legal dependents (children)
Have a dependency override from a financial aid administrator with proper documentation
If you are at least one of the above, you are considered an independent student. To see what federal financial aid you qualify for, complete the FAFSA.
If you do not identify with any of the above, you are considered a dependent student. If able, you should complete the FAFSA with your parents’ information. You will need information such as:
Social Security Numbers
Tax information
Family income information
Records of untaxed income
Information on any financial assets you or your parents may have
If you are considered a dependent but obtaining that information from your parents is not possible for whatever reason, you should consider filing for a dependency override. A dependency override allows you to file as an independent despite being considered a dependent by the above criteria. You can file a dependency override for the following reasons:
An abusive family environment (ie. sexual, mental, physical, or other forms of domestic violence)
Abandonment by parents
Incarceration or institutionalization of both parents
Parents lacking the mental or physical capacity to raise a child
Parents cannot be located
Unsuitable household (ie. child is removed from the home and placed in foster care)
A married student’s spouse dies or gets divorced
Filling out the FAFSA can provide you with access to thousands of dollars in financial aid. Make sure to complete the form as soon as you can after the October 1st open date.
#6: Compare Aid Offers Carefully
Without financial support from your parents, finding an affordable school will likely be a top priority. So, when you receive financial aid packages from each school, be sure to compare the aid offers carefully.
Start by writing down the following information for each school:
The cost of attendance
The free aid you won’t have to pay back (ie. scholarships, grants, etc.)
The cost to attend after subtracting the free aid
The aid you would have to pay back (ie. any federal student loans you were offered and any private student loans you would need to take out)
For example, let’s say you applied to the University of Connecticut, Eastern Connecticut State University, and the University of Bridgeport as an in-state student. You also won $6,000 total in private scholarships — one $5,000 scholarship and one $1,000 scholarship. Comparing aid offers may may look like:
$5,000 in federal student loans Remaining balance: $14,760
*For the sake of this example, the cost of attendance metrics used are for an in-state, on-campus student. The other metrics are random numbers just used to illustrate the concept.
Comparing the offers side-by-side will allow you to see which school is most affordable. In this example, you can see that while the University of Bridgeport offered more scholarship money than Eastern Connecticut State University, the difference in tuition still makes ESCU more affordable. Make sure to compare your aid offers carefully to determine which school is best for you financially.
#7: Don’t Be Afraid to Ask For More
It never hurts to ask for more financial aid, especially if your parents are claiming you as a dependent student but not helping you pay for college.
To appeal your financial aid, simply submit a financial aid appeal letter to the school’s financial aid office. Make sure to address the financial aid director by name, be polite, and provide appropriate documentation. You can use a financial aid appeal letter template to craft your letter.
#8: Use Savings First
When it comes time to actually confront the bill, dip into your savings first only if you have an emergency savings set up.
Most financial professionals recommend an emergency savings that is at least 3 months of your typical expenses. So, if you know you typically spend around $1,500 per month, you’ll want to have an emergency savings of $4,500.
While putting some of your savings towards your college education is helpful, you should not do so at the expense of putting yourself in an unstable financial situation. If you do have savings, however, consider putting what you can towards your tuition bill.
#9: Consider Student Loans
While helpful, student loans should be somewhat of a last resort as you will have to pay them back with interest.
First, look at the federal student loans offered to you in your financial aid package. Federal student loans will typically have lower interest rates than private student loans as well as more flexible repayment terms.
If you were not offered federal student loans, or if federal student loans do not cover your remaining balance, consider private student loans. If you are applying without a cosigner, you will likely need a strong credit score to qualify on your own. If you don’t have a strong credit score, consider non-cosigned loan options.
The most efficient way to find a student loan option that you qualify for is to use Sparrow. Sparrow allows you to compare loan options from 15+ premier student lenders in one place. This allows you to rest assured knowing you found the best loan option available to you.
#10: Get a Part-Time Job or Side Hustle During School
Picking up a part-time job or side hustle can help you pay for college expenses such as books and other course supplies during the school year. Depending on how much you’re able to bring in, you may be able to pocket some of the money to pay for the following year’s tuition. Reach out to your school’s office of student employment to inquire about on-campus positions, or consider off-campus positions that may pay more.
#11: Ask for Help
Paying for college without your parents’ help may be overwhelming, but know that there are resources available to help. If at any point you feel confused about the next step or how to handle a certain aspect, ask for help.
Nurses are not exempt from the national student loan debt crisis. On average, nurses graduate with a median student debt of $40,000 to $54,999.
For this reason, many nurses turn to student loan forgiveness programs to ease the burden of their unpaid nursing education debt. There are many available nurse loan forgiveness programs, but they all vary based on the type of degree you have, the kinds of loans you’re signed under, and the healthcare facility you work for.
Let’s find out which nurse loan forgiveness program is most beneficial to you.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program (PSLF) is a federal program that forgives the remaining balance on Direct loans for qualifying public service workers who meet specific eligibility criteria.
To qualify for PSLF, you must:
Have taken out federal student loans in the past. Private loans do not qualify for PSLF.
Be employed full-time by an eligible federal, state, local, or NPO. Be sure to ask your employer if the organization qualifies for PSLF. Even if your job is a public service role, if your organization is not registered for PSLF, you cannot participate in the program.
Have made 120 qualifying payments on a qualifying repayment plan.
Here are some public service jobs that qualify for PSLF:
The PSLF Program is best for borrowers who work in public service roles and have taken out federal student loans (private student loans do not qualify for PSLF!).
If you’re a nurse looking for loan forgiveness programs for the debt of nursing school, PSLF is a great option to consider. To apply for PSLF, you will have to have made 120 qualifying payments through an income-based repayment plan while being employed full-time by an approved employer. Once you’ve reached this quota, fill out the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification and Application.
Nurse Corps Loan Repayment Program
The Nurse Corps Loan Repayment program is a nurse loan forgiveness program offered by the Health Resources & Service Administration (HRSA). The Nurse Corps Loan Repayment Program encourages nurses to work in critical shortage facilities (CSF), which are healthcare facilities in areas lacking primary, mental health, and dental care.
The Nurse Corps Loan Repayment Program pays up to 85% of your nursing education debt. To qualify for the program, you must meet the following eligibility requirements:
Must be either a registered nurse (RN), nurse faculty (NF), or advanced practice registered nurse (APRN)
Work full-time in a critical shortage facility or an accredited nursing school
Have attended a qualifying nursing school in the United States and territories
The Nurse Corps Loan Repayment Program is best for registered nurses, nurse faculty, or advanced practice registered nurses who work in a critical shortage facility. See if your workplace is considered a critical shortage facility here.
National Health Service Corps (NHSC) Loan Repayment Program
The National Health Service Corps Loan Repayment Program is another nurse loan forgiveness program offered by the Health Resources & Service Administration (HRSA).
In order to qualify for the program, you must:
Be a U.S. citizen
Work as a provider (or be eligible to be a provider) in Medicare, Medicaid, or the State Children’s Health Insurance Program
Be fully trained and licensed to practice in a National Health Service Corps-approved primary, medical, dental, or mental care discipline
Have a qualified student loan
Work in clinical practice at an NHSC-approved site for at least two years
Your loan repayment amount depends on whether you participate in full-time or half-time service. If you do full-time service, you can receive up to $50,000 in loan repayment for your initial two-year term. If you do half-time service, you can receive up to $25,000.
This program is best for providers who work in Medicare, Medicaid, or the State Children’s Health Insurance Program who are willing to work in a healthcare professional shortage area for a two-year commitment.
If you’re a nurse who’s taken out Perkins Loans to cover the cost of your nursing education, Perkins Loan Cancellation is the program for you.
The Perkins Loan Cancellation program is a federal loan forgiveness program that can cancel up to 100% of your debt for five years of eligible service.
The program is best for full-time nurses who work in a qualifying healthcare institution and have taken out Perkins Loans before 2017.
In order to apply, contact the financial aid office of the school that you took out the loan for, or the school’s respective Perkins Loan servicer.
Important Note: The Perkins Loan Program, not the Perkins Loan Cancellation, ended in 2017 and students can no longer apply for Perkins Loans.
Army Nurse Corps Benefits/Health Professions Loan Repayment Program
If you’re a nurse on active duty or in the Army Reserve, you may be able to receive up to $250,000 in student loan forgiveness.
Nurses can also receive signing bonuses, competitive salaries, and other benefits if they decide to serve in the reserves or on active duty for an extended period of time.
This program is best for nurses who plan to serve in the Army.
Other Options for Reducing Nursing School Debt
If you’re looking for options outside of nurse loan forgiveness programs, consider student loan refinancing.
Student Loan Refinancing
Student loan refinancing is when you combine all or some of your loans under one new loan, usually with better terms like a lower interest rate or a longer repayment term.
To refinance your student loans, you’ll have to start looking into refinancing lenders and comparing refinancing terms. If you want to be approved to refinance your student loans, you’ll want to have a strong credit score and steady income.
Best Student Loan Refinancing Companies For Nurses
Refinancing your loans is a great way to secure better loan terms and ease the burden of paying for your loans. Here are some student loan refinancing companies that we recommend for nurses.
The Arkansas Student Loan Authority offers loans to Arkansas residents or students who have attended a school in the state. They offer competitive rates and flexible terms to those who qualify. ASLA is best for nurses who either live in or attended school in Arkansas and want competitive interest rates and flexible loan terms.
Brazos is a nonprofit lender that provides student loan refinancing to Texas residents. Brazos offers competitive interest rates and flexible terms to those who qualify. Brazos is best for nurses who are Texas residents.
College Ave offers student loan refinancing and is known for their strong customer service, competitive interest rates, and flexible loan terms. For example, College Ave offers nonstandard 6- or 9-year loans, which is unlike many other private lenders. College Ave is best for nurses that want access to good customer service and a flexible repayment term.
Earnest offers student loan refinancing with customizable repayment plans where you can choose your repayment term down to the month. Earnest also has forward-looking eligibility criteria and offers competitive interest rates. Earnest is best for nurses who don’t have a cosigner and want a repayment plan customized to their situation.
INvestED offers student loan refinancing to Indiana residents and students who attended school in Indiana. They offer a variety of repayment options, competitive interest rates, and flexible terms. INvestED is best for nurses that are Indiana residents or attended school in Indiana and want access to different repayment options.
ISL Education Lending is a nonprofit student lender offering both private student loans and student loan refinancing. ISL Education Lending is best for nurses who want to work with a nonprofit lender and want competitive interest rates.
LendKey will connect you with a network of 100+ lesser known credit unions and community banks so you can work with and take out loans from smaller institutions. LendKey is best for nurses that are creditworthy borrowers and want to work with smaller lenders with low rates and good customer service.
Nelnet Bank offers student loan refinancing for both private and federal student loans, including parent PLUS loans. Nelnet Bank also offers a flexible forbearance policy and competitive interest rates. Nelnet Bank is best for nurses that are looking for competitive rates and want the ability to refinance student loans, including parent PLUS loans.
SoFi is one of the biggest student loan refinancing companies in the industry. SoFi is best for nurses who have at least an associate’s degree, are a creditworthy borrower, and want to take advantage of SoFi’s borrower benefits.
Closing Thoughts From the Nest
If you’re a nurse who’s taken out federal student loans to pay off tuition, you should definitely take advantage of the nurse loan forgiveness programs and loan refinancing options available to you.
Student loan debt can stack up quickly, so it’s optimal to have a plan ahead of time.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Undergraduate students have a wide range of student loan options to choose from, making the selection process that much more important.
Before agreeing to any one loan, it’s important to understand your options, the pros and cons of each, and how your student loan decision impacts your future.
The following are our top picks for the best private student loans for undergraduates.
The loan options shared are in alphabetical order. Interest rates reflected in this article were last updated on 03/06/23. Rates listed may reflect the lender’s autopay discount. Interest rates are subject to change.
Fixed Interest Rate: 3.20% to 6.34% Variable Interest Rate: 6.06% to 10.61% Maximum Borrowing Limit: Cost of attendance minus other aid; $100,000 lifetime maximum Minimum Credit Score: 670
Fixed Interest Rate: 2.71% to 6.86% Variable Interest Rate: 5.32% to 9.47% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 700
Fixed Interest Rate: 5.05% to 16.99% Variable Interest Rate: 5.49% to 16.99% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers looking for a repayment term that matches their budget.
Fixed Interest Rate: 4.43% to 14.65% Variable Interest Rate: 5.38% to 15.19% Maximum Borrowing Limit: Cost of attendance minus other aid; cannot exceed $99,999 annually or $180,000 cumulatively Minimum Credit Score: 660 for non-cosigned loans
Best for: Borrowers who want a competitive interest rate and strong borrower benefits.
Fixed Interest Rate: 4.42% to 15.90%* Variable Interest Rate: 5.62% to 16.20%* Maximum Borrowing Limit: Cost of attendance mins other aid Minimum Credit Score: 650
Best for: Borrowers who want a competitive interest rate and flexible repayment options.
Fixed Interest Rate: 0.25% to 23.00% Variable Interest Rate: N/A Maximum Borrowing Limit: $15,000 per academic year (plus $10,000 for summer) and $25,000 lifetime. Minimum Credit Score: N/A
Best for: Borrowers who don’t have a strong credit score and want an income-based repayment (IBR) loan.
Fixed Interest Rate: 8.00% to 10.79% Variable Interest Rate: 7.47% to 10.47% Maximum Borrowing Limit: $1,000 to the total cost of attendance Minimum Credit Score: 675 Best for: Borrowers who want to work with a nonprofit that offers flexible repayment plans.
Fixed Interest Rate: 4.61% to 8.67% Variable Interest Rate: 7.88% to 12.34% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 670
Best for: Borrowers who are residents of or students in Indiana.
Fixed Interest Rate: 4.39% to 11.11% Variable Interest Rate: 5.84% to 11.11% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: 660
Best for: Borrowers that want to work with a credit union or community bank.
Fixed Interest Rate: 13.74% maximum (14.75% APR) Variable Interest Rate: N/A Maximum Borrowing Limit: $50,000 per semester; $100,000 per year Minimum Credit Score: N/A
Best for: International and DACA borrowers without a cosigner.
Fixed Interest Rate: 4.49% to 15.47% Variable Interest Rate: 6.29% to 15.51% Maximum Borrowing Limit: $125,000 total for undergraduate students; $500,000 total for graduate students Minimum Credit Score: 680 individually; 640 with a qualified cosigner
Best for: Borrowers who want competitive interest rates and a flexible forbearance policy.
Fixed Interest Rate: 3.75% to 13.72% Variable Interest Rate: 4.00% to 14.34% Maximum Borrowing Limit: School-certified cost of attendance minus other aid Minimum Credit Score: Mid 600s
Best for: Borrowers who want competitive interest rates and a flexible repayment plan.
Fixed Interest Rate: 4.44% to 14.70% Variable Interest Rate: 5.99% to 13.97% Maximum Borrowing Limit: Cost of attendance minus other aid Minimum Credit Score: Does not disclose
Best for: Borrowers with a strong credit score or a creditworthy cosigner.
Before selecting a student loan, you should consider a variety of factors to ensure it’s a good fit for you:
Does the loan require a cosigner? Some private student loans will require you to have a cosigner if you do not meet the minimum credit requirements. As an undergraduate, you may not have enough credit history to have a qualifying credit score, and thus, you may need a cosigner. If you do not have access to a creditworthy cosigner, you will want to consider student loan options that do not require a cosigner or have a flexible minimum credit score requirement.
What is the interest rate? One of the most important factors of a student loan is the interest rate. The interest rate will determine the cost of borrowing the loan and can drastically change how much you pay over time. The general rule of thumb when it comes to interest rates is the lower the better. Before agreeing to borrow a student loan, make sure to calculate the total cost using a student loan payoff calculator.
Are payments required while in school? While most private student lenders will allow you to defer payments until after graduation, some may require you to make payments while in school. If this won’t be feasible for you, make sure the lender you choose has a deferred repayment option.
What Type of Loan is Best for Undergraduate Students?
Federal student loans will typically have lower interest rates and more flexible repayment options than private student loans. So, you should start the student loan process for undergrad by submitting the FAFSA. The information you provide on the FAFSA will determine your eligibility for federal student loans.
However, if you do not receive federal student loans in your financial aid package, you should consider your private student loan options. Unlike federal student loans, private student loans typically require you to meet certain credit requirements. To see which private student loan options you qualify for without hurting your credit, complete the Sparrow application.
With that said, the best student loan option will always be the one that works best for you. You should start by considering federal student loan options, then utilize private student loans to fill in any remaining gaps.
How Your Student Loan Choice Impacts Your Future
The student loan you choose as an undergraduate can impact your future quite a bit. Both the interest rate and the loan terms will impact how much you pay over the life of your loan as well as the monthly payment you are responsible for post-graduation.
For example, a $30,000 student loan with a 6% interest rate will cost you $45,568 over a 15-year repayment term. This will break down to a monthly payment of around $253.
By comparing your loan options side-by-side, you may discover another private student loan at a 4% interest rate. This loan option would only cost you $39,943 over a 15-year repayment term, with monthly payments of $222.
The difference in interest would save you nearly $6,000 over the life of the loan and around $30 on your monthly payments. This is why it is crucial to compare your student loan options carefully as an undergraduate student. Your post-grad self will thank you.
Final Thoughts from the Nest
There is no single best private student loan for undergraduates. The best student loan option will always be the one that works best for you. So, be sure to compare your options carefully and select the loan you feel suits you best.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Teaching is a noble profession to go into. Yet, recently, there has been more attention on problems teachers face with some of the biggest being high student debt but low salaries. In fact, the average teacher’s salary is around $54,842 per year. But, the National Education Association reports that nearly half of all educators still owe more than the average salary, with debt averaging at $58,700. Luckily, there are student loan forgiveness programs that you, as a teacher or potential teacher, can take advantage of so you can still follow your career path without worrying too much about the money.
For the purposes of this article, we are going to define a teacher how Federal Student Aid does. A teacher is someone with a teaching degree who works directly with students or provides classroom-type teaching. Additionally, the teacher loan forgiveness programs discussed in this article are only available for college graduates with federal student loans. If you have private student loans, you’ll want to look into refinancing.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness program allows you to have a portion of your loans forgiven depending on the subject you taught. Full-time secondary-level mathematics or science teachers and special education teachers can get up to $17,500 forgiven. All other subjects can get up to $5,000 forgiven.
To qualify, you must be a highly-qualified teacher who has taught for 5 consecutive school years at a low-income school or educational service agency. To check if your school or education agency is a Designated Low-Income School, check the Teacher Cancellation Low Income Directory.
When it comes to your loans, there must not be nor have been any outstanding balance on your Direct Loans or Federal Family Education Loans (FFEL) as of October 1, 1998 or the date you received your loans after October 1, 1998. Additionally, the loans must have been taken out before your qualifying five years of teaching.
Who It’s Best For
Teacher Loan Forgiveness is best if you have a low amount of student debt since it forgives a lesser amount compared to other programs. On the bright side, it does require fewer years of qualified teaching service than other forgiveness programs. So, it’ll take less time to get some of your debt forgiven.
How to Get It
First, fill out the Teacher Loan Forgiveness Application. Then, submit it to your loan servicer once you’ve completed your five-year teaching requirement. If you are pursuing forgiveness for multiple loans, you will need to submit a separate application to each of your loan servicers.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness Program (PSLF) is another program that helps alleviate student debt for public service workers. The PSLF Program forgives the remaining amount of qualifying Direct Loans as long as you meet the requirements.
To be eligible for PSLF, you must be a public service worker. A public service worker is defined as a full-time employee for a qualifying U.S. federal, state, or local employer. Employees of a tribal government or a non-profit organization also fall under that definition. Additionally, you must make 120 on-time payments under an income-driven repayment plan. Finally, the payments must have started after October 1, 2007.
Because this is only available for Direct Loans, you can’t receive forgiveness for other loans such as FFEL or Perkins Loans since they aren’t eligible. But, if you consolidate those loans, you’ll get a Direct Consolidation Loan, which will then make you eligible for PSLF.
Who It’s Best For
The Public Service Loan Forgiveness Program is best for public service workers with a lot of debt because PSLF forgives the remaining amount of your loans. It’s also great for college students who intend on entering the public service field.
How to Get It
To receive teacher loan forgiveness through PSLF, you will need to fill out and submit a PSLF form. If you haven’t finished making the 120 qualifying payments, your loans will be transferred to a PSLF servicer. They’ll inform you of the number of qualifying payments you’ve made and you can go from there. However, if you’ve already finished the payments, you may not be transferred over to a PSLF servicer.
Along with your PSLF form, you’ll need to submit an employer certification form since you have to work for a qualified employer to receive loan forgiveness through this program. Every time you switch employers, you’ll have to redo the employment certification process to recertify that you still qualify.
Once you’ve finished all your payments, you’re ready to submit the final PSLF form. You will send the final PSLF form to FedLoan Servicing. You can mail it, fax it, or submit it online if they are already your servicer.
Perkins Loan Cancellation
Perkins Loan Teacher Cancellation is a way to get 100% of your Federal Perkins loans canceled as long as you qualify. You’ll qualify if you have served full-time in an elementary school or secondary school as:
A teacher for low-income students, or
A special education teacher, or
You taught in the field of math, science, foreign language, or bilingual education, or
You taught in a field in which there is a shortage in your state
The Perkins Loan Teacher Cancellation is done in increments over the course of five years. In the first two years, you’ll get 15% of your debt canceled. Then, you’ll get 20% canceled in the next two, and 30% in the last year. The discharge will also include any interest you’d accumulate over the course of those five years.
Who it’s Best For
Perkins Loan Forgiveness is best for teachers who have Perkins loans and a high amount of debt since this program cancels all of it.
How to Get It
To apply for the Perkins Loan Teacher Cancellation program, reach out to the school that made your loan or their loan servicer. They can give you more instructions on how to move forward with the cancellation.
Stacking Loan Forgiveness Programs
Each teacher loan forgiveness program is available for different types of loans. So, if you have multiple loans, you can often combine different forgiveness programs. The trick is to not do them at the same time.
For instance, you can get both Teacher Loan Forgiveness and Public Service Loan Forgiveness. But, you’d have to do multiple periods of teaching service. For the Teacher Loan Forgiveness program, you’d have to complete five years of qualifying teaching service. Then, you’d have to do another ten years of teaching to qualify for the Public Service Loan Forgiveness Program.
If you have questions regarding how you can stack loan forgiveness programs, reach out to your federal loan servicer for more information.
Final Thoughts from the Nest
These teacher loan forgiveness programs are great options for teachers who want to continue their career without carrying the burden of making student loan payments. Deciding which teacher loan forgiveness program is right for you is a matter of looking at your own situation and seeing which is the best fit. Again, though, these are only available for federal student loans. If you’re a teacher with private student loans, you should consider refinancing with Sparrow. We partner with 15+ lenders to help you find the best loans on the market. Fill out the Sparrow application to see what you qualify for with our lenders.
ISL Education Lending is a nonprofit student loan lender offering both private student loans and student loan refinancing. ISL Education Lending refinance loans are best for borrowers who want to work with a nonprofit lender, want competitive interest rates, on-site loan servicing, or want to refinance without having a degree.
Fixed APR Range: 6.94% to 11.83%
Variable APR Range: N/A
Loan Amounts: $5,000 ($10,000 for California residents) to $300,000
• Competitive interest rates and zero fees • You can refinance without a degree • Cosigner release option after 24 months
• Only one loan repayment term for in-school refinancing • Students cannot take over parent PLUS loans that parents took out on their behalf • No biweekly payment via autopay
Best Features of Refinancing with ISL Education Lending
Competitive interest rates and zero fees
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for an ISL refinance loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, or prepayment penalties.
You can refinance while in school and without a degree
While most lenders require you to have graduated in order to refinance, ISL allows you to refinance in school or without a degree.
Cosigner release option after 24 months
If you need a cosigner for your refinance loan, ISL might be a good option for you. Unlike several other lenders, ISL allows you to release your cosigner after the first 24 months of consecutive timely payments and meeting the underwriting and credit criteria at the time the cosigner release is requested. This can be helpful if you want to build credit in your own name.
Drawbacks of Refinancing with ISL Education Lending
Only one loan repayment term for in-school refinancing
While very few lenders offer refinancing while still enrolled, if you refinance with ISL while still in school, you will only have a 15-year repayment term.
Students cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). Unfortunately, ISL does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through ISL — it will just be in your name, not the student’s name. However, you can request your student to be a cosigner on the loan.
If you’re looking for a lender that does allow you to transfer parent PLUS loans to the student, you may want to consider another lender.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you refinance through ISL, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With ISL, you can set this up automatically so that the desired monthly payment is drawn from your bank account each month.
ISL Education Lending: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
6.94% to 11.83%
Variable APR Range
N/A
Loan Terms
5, 7, 10, 15, or 20 years.
Loan Amounts
$5,000 ($10,000 for California residents) up to $300,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
670.
Minimum Income
N/A – No income requirement.
Typical Credit Score of Approved Borrowers or Cosigners
750; 760 for cosigners.
Typical Income of Approved Borrower
N/A – No income requirement.
Maximum Debt-to-Income Ratio
40%. Can be 45% for those with a mortgage making a combined income of >$100,000, or 25% if no mortgage or rent is included.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers in all 50 states except Maine and Oregon.
Must have graduated
No.
Must have attended a school authorized to receive federal aid
No.
Percentage of borrowers who have a cosigner
Around 37%.
Repayment Options
Academic Deferment
Yes, borrowers are eligible for up to 24 months of general deferment which can be used for academic purposes. There is no specific academic deferment.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
No.
Cosigner Release
Yes, after the first 24 months of consecutive on-time payments if underwriting and credit criteria is met.
Death or Disability Discharge
Yes, the loan will be forgiven if the borrower dies or becomes permanently disabled, even if the loan is cosigned.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Aspire Servicing Center.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
5-7 days.
Before you take out a loan from ISL Education Lending…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is ISL Education Lending a legitimate lender?
Yes, ISL is a nonprofit student lender that offers both student loan refinancing and private student loans.
Is ISL Education Lending available in all 50 states?
No, ISL is not available in Maine or Oregon.
How long does it take to get an ISL Education Lending refinance loan?
Submitting an application through ISL takes a few minutes. Once you’ve submitted your loan application and submitted documents for underwriting purposes, ISL will review and return a decision, typically in one day. If you qualify, you will receive the rate and terms of your loan as soon as ISL pulls your credit. You will not need to wait until after documentation has been submitted to receive your rate.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for an ISL Education Lending refinance loan?
If you don’t qualify for an ISL Education Lending refinance loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are ISL Education Lending refinance loans federal or private?
ISL loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options. If you are refinancing federal student loans, you may be forfeiting important benefits. Be sure to understand what federal loan benefits you may lose before you choose to refinance federal student loans.
Does applying for a loan through ISL Education Lending hurt my credit score?
In order to estimate what rate you qualify for, ISL conducts a soft credit check, which does not affect your credit score. If you choose to move forward and apply for the ISL loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
INvestED offers private student loans, parent loans, and student loan refinancing. INvestED’s student loan refinance offering is best if you are a resident of Indiana or student who attended school in Indiana seeking competitive interest rates and a variety of repayment options.
• Competitive interest rates • You can refinance without a degree • Offers up to 36 months of academic deferment
• Only available to students that are residents of or attended school in Indiana • No biweekly payment via autopay • You can’t refinance parent PLUS loans in your name • Cosigner release option after 48 months of timely payments
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify to refinance your student loans through INvestED, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, or prepayment penalties.
INvestED Student Loan Refinance
Fixed APR*
5.85% – 9.48%
Variable APR*
8.63% – 12.27%
*Rates as of November 1, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
You can refinance without a degree
While most lenders require you to have graduated in order to refinance, INvestED allows you to refinance in school and without a degree.
Offers up to 36 months of academic deferment
After refinancing your loan with INvestED, borrowers are eligible for up to 36 months of academic deferment if you decide to enroll in a graduate program at least half-time. This allows you to postpone making payments for 36 months while you pursue another degree.
Drawbacks of Refinancing with INvestED
Only available to students that are residents of or attended school in Indiana
While INvestED offers a high-quality student loan refinancing option, it is unfortunately only available to borrowers who are residents of Indiana or attended school in Indiana. If you are neither, you will need to apply with a different lender.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through INvestED, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With INvestED, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
You can’t refinance parent PLUS loans in your name
If your parent has taken out a Parent PLUS loan or a private student loan in their name, your parent will not have the option to refinance that loan or transfer the loan to your name when refinancing with INvestED.
Cosigner release option after 48 months
While INvestED offers the option to add a cosigner, their cosigner release policy does require 48 months of on-time payments, which is longer than some other lenders. INvestED could improve by offering a lower payment requirement for cosigner release.
INvestED: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
5.85% to 9.48%
Variable APR Range
8.63% to 12.27%
Loan Terms
5, 10, or 15 years; 15-year term is only available for in-school refinancing.
Loan Amounts
$5,000 to $250,000.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the unpaid past due amount or $10, whichever is less.
Eligibility Requirements – Financial
Minimum Credit Score
670.
Minimum Income
$36,000.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
50%.
Ability to qualify if you’ve filed for bankruptcy
Yes, but only after 5 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Must be a resident of Indiana or have attended a school in Indiana.
Must have graduated
No.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
35%.
Repayment Options
Academic Deferment
Yes, up to 36 months of deferment for borrowers who enroll at least half-time at an eligible institution for a graduate degree.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes, up to 24 months of forbearance across the lifetime of the loan. Forbearance is available in increments of 1-3 months, and borrowers can only receive 2 forbearance periods in a 12-month period.
Cosigner Release
Yes, after 48 months of on-time payments.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
American Education Services.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
Around 18 days.
Before you take out a loan from INvestED…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is INvestED a legitimate lender?
Yes, INvestED is a legitimate lender that has been working with students for over 40 years.
Is INvestED available in all 50 states?
No, INvestED is only available to borrowers who are studying in or residents of Indiana.
How long does it take to get an INvestED student loan?
Submitting an application through INvestED takes a few minutes. Once you’ve submitted your loan application, INvestED will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an INvestED student loan?
If you don’t qualify for an INvestED student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are INvestED student loans federal or private?
INvestED offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through INvestED hurt my credit score?
In order to see what rate you qualify for, INvestED conducts a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
INvestED offers private student loans, parent loans, and student loan refinancing. INvestED’s student loan offering is best if you are a resident of or student in Indiana seeking competitive interest rates, a variety of repayment options, and a flexible repayment option.
Fixed APR Range: 4.61% to 8.67%
Variable APR Range: 7.88% to 12.34%
Loan Amounts: $1,001 up to the total cost of attendance minus other aid received
• Competitive interest rates • Variety of repayment options • Offers a six-month grace period • Allows up to 24 months of forbearance • Offers a Parent Loan option
• Only available to students that are residents of or attending school in Indiana • Not accessible to students enrolled less than half-time • No biweekly payment via autopay
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for an INvestED student loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, or prepayment penalties.
Undergraduate
Parent Loan
Fixed APR*
4.61% – 8.61%
4.61% – 7.62%
Variable APR*
7.88% – 12.34%
6.10% – 9.51%
*Rates as of October 01, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Variety of repayment options
While still in school, INvestED offers you three repayment options for your student loans, with terms ranging from 5, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Repayment
Don’t make any payments while you’re in school for up to 78 months. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Offers a six-month grace period
Similar to federal student loans, INvestED offers a six-month grace period before you are required to begin making full principal and interest monthly payments. The grace period is available if you are no longer in school at least half-time – because you’ve graduated, left school, or dropped below half-time enrollment.
Allows up to 24 months of forbearance
INvestED offers up to 24 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability). INvestED’s forbearance is offered in increments of 3 months, with a maximum of 24 months available over the life of the loan. Borrowers are eligible for up to two 3-month increments of forbearance within a 12-month period.
Offers a parent loan option
Unlike several other private student lenders, INvestED offers a parent loan option. Parent loans are a good option for parents or guardians who would like to borrow on behalf of a dependent child.
Drawbacks of INvestED Student Loans
Only available to students that are residents of or attending school in Indiana
While INvestED offers a high-quality student loan, it is unfortunately only available to borrowers who are residents of or attending school in Indiana. If you are neither, you will need to apply with a different lender.
Not accessible to students enrolled less than half-time
If you are not enrolled in school at least half-time, you are ineligible for an INvestED student loan. If you’re studying less than half-time, you will need to consider another lender.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay, where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through INvestED, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With INvestED, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
INvestED: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.61% to 8.61%
Variable APR Range
7.88% to 12.34%
Loan Terms
5, 10, or 15 years.
Loan Amounts
$1,001 up to the total cost of attendance minus other aid received.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the unpaid past-due amount or $10, whichever is less.
Eligibility Requirements – Financial
Minimum Credit Score
670.
Minimum Income
$39,996.
Typical Credit Score of Approved Borrowers or Cosigners
710.
Typical Income of Approved Borrower
$31,671.
Maximum Debt-to-Income Ratio
30%.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 5 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident. DACA borrowers are not eligible.
Location
Borrowers must attend an eligible school in Indiana or be a resident of Indiana. Indiana residents attending schools in Colorado, Oklahoma, South Carolina, and Wisconsin are ineligible.
Must be enrolled half-time or more
Yes.
School requirements
Must be enrolled at an eligible Title IV, four-year institution in the U.S.
Percentage of borrowers who have a cosigner
88%.
Repayment Options
In-school Repayment Options
Immediate repayment: Make payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Pay only the interest every month while you’re in school and during the grace period.
Deferred repayment: Don’t make any payments while in school.
Grace Period
6 months.
In-school Deferment
Yes.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes. INvestED offers borrowers up to 24 months’ forbearance over the life of the loan. Forbearance is given in 3-month increments. Borrowers can receive up to 2 forbearances in a 12-month period.
Cosigner Release
Yes, after 48 months of eligible, on-time payments.
Death or Disability Discharge
Yes. INvestED loans are forgiven if the borrower dies or becomes permanently disabled.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
American Education Services.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Did not disclose.
Before you take out a loan from INvestED…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is INvestED a legitimate lender?
Yes, INvestED is a legitimate lender that has been working with students for over 40 years.
Is INvestED available in all 50 states?
No, INvestED is only available to borrowers who are studying in or residents of Indiana.
How long does it take to get a INvestED student loan?
Submitting an application through INvestED takes a few minutes. Once you’ve submitted your loan application, INvestED will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an INvestED student loan?
If you don’t qualify for an INvestED student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are INvestED student loans federal or private?
INvestED offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through INvestED hurt my credit score?
In order to see what rate you qualify for, INvestED conducts a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Sallie Mae is one of the largest online private student lenders, offering borrowers competitive interest rates, a variety of repayment options, and a strong customer experience. Sallie Mae’s loan offering is available for a variety of programs such as undergraduate, graduate, MBA, law, medical, dental, and career training programs. Sallie Mae is best if you are seeking a more flexible repayment plan and competitive interest rates.
Fixed APR Range: 3.75% to 13.72%
Variable APR Range: 4.00% to 14.34%
Loan Amounts: $1,000 up to school-certified cost of attendance
• Strong customer experience • Competitive interest rates • Various repayment options • Allows a six-month grace period on undergraduate loans • Available to international, DACA, and part-time students • Cosigner release option after 12 months
• No biweekly student loan payments via autopay • Not able to see what you qualify for before formally applying
From loan application to disbursement (and beyond), Sallie Mae offers excellent customer service that is available through chat and phone.
Competitive interest rates
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for a Sallie Mae student loan, you’ll have access to some of the best rates in the industry. In addition, you won’t have to pay any origination, application, or prepayment fees.
Undergraduate
Graduate
MBA
Law
Medical
Dental
Career Training
Fixed1
3.75% – 13.72%
4.25% – 12.92%
4.25% – 12.92%
4.25% – 12.85%
4.25% – 12.84%
4.25% – 12.85%
3.75% – 14.08%
Variable1
4.00% – 14.34%
4.50% – 14.10%
4.50% – 14.10%
4.50% – 14.10%
4.50% – 14.09%
4.50% – 14.09%
4.00% – 14.65%
*Rates as of November 1, 2022.
Various repayment options
Sallie Mae offers you four repayment options for your student loans, with terms ranging from 10-20 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school. You will also get a 1% interest rate deduction for opting in to interest-only repayment.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Fixed Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid. You will also get a 0.5% interest rate deduction for opting in to fixed repayment.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after your grace period ends.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Allows a six-month grace period
After you are no longer in school at least half-time – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. The grace period is six months for Sallie Mae student loans.
Available to international, DACA, and part-time students
Sallie Mae offers student loans for a variety of academic programs, such as undergraduate, graduate, and career school programs. Unlike several other lenders, Sallie Mae student loans are also available for international students, DACA students, and part-time students.
International students: As long as you have a Social Security number and a U.S. citizen or permanent resident cosigner, you’re eligible to apply for a student loan through Sallie Mae.
DACA students: Unlike some other private lenders, Sallie Mae offers student loans to DACA borrowers with a citizen or resident cosigner.
Part-time students: While most private lenders require borrowers to be enrolled at least half-time, Sallie Mae makes its loans available to part-time (i.e. less than half-time) students seeking a degree at eligible schools.
Cosigner release option after 12 months
If you need a cosigner for your student loan, Sallie Mae might be a good option for you. Unlike several other lenders, Sallie Mae allows you to release your cosigner after 12 months of timely payments. This can be helpful if you want to build credit in your own name.
Drawbacks of Sallie Mae Student Loans
No biweekly student loan payments via autopay
When you repay your student loan, your payments are due monthly by default. Many borrowers use biweekly autopay, where you automatically pay half your monthly amount once every two weeks, in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan. Sallie Mae unfortunately does not offer biweekly autopay.
Not able to see what you qualify for before formally applying
When you submit a formal student loan application, you will undergo a hard credit inquiry, which can temporarily hurt your credit score. Because of this, many student lenders offer a prequalification process, which allows borrowers to see what rate they’d qualify for without hurting their credit. Unfortunately, Sallie Mae does not offer loan prequalification, which means that in order to see what you’d qualify for with Sallie Mae, you would have to submit a formal application and undergo a hard inquiry. If you’d like to see what rates you qualify for at 15+ student lenders, without hurting your credit score, submit the Sparrow Application.
Sallie Mae: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
3.75% to 13.72%
Variable APR Range
4.00% to 14.34%
Loan Terms
10 to 20 years.
Loan Amounts
$1,000 up to the school-certified cost of attendance.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the past due amount if a payment has not been received within 15 days, however, the fee will not exceed $25.
Eligibility Requirements – Financial
Minimum Credit Score
Mid 600s.
Minimum Income
No income minimum.
Typical Credit Score of Approved Borrowers or Cosigners
749.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident, or a non-U.S. citizen with a creditworthy cosigner who is a U.S. citizen or permanent resident. DACA borrowers are eligible with a citizen or resident cosigner.
Location
Available to borrowers in all 50 states and Puerto Rico.
Must be enrolled half-time or more
No. Sallie Mae student loans are available to part-time students (ie. less than half-time) as well.
School requirements
Borrowers must be enrolled in a degree-granting program at an eligible school.
Percentage of borrowers who have a cosigner
80%.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Make interest-only payments while in school and during the grace period. If you select interest-only repayment, your interest rate will be 1% lower than the deferred repayment option.
Fixed repayment: Pay $25 a month during school and the grace period. If you select fixed repayment, your interest rate will be 0.5% lower than the deferred repayment option.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
6 months.
In-school Deferment
Yes. Borrowers can request to defer payments if returning to school or going to graduate school, for up to 48 months.
Military Deferment
Yes. The borrower must contact the military customer service representative team for more information. Interest rates will be capped at 6% during eligible periods of military service.
Disability Deferment
Did not disclose.
Forbearance
Up to 12 months available, in 3-month increments. Borrowers must pay $50 per loan, with a maximum of $150 per account, to get forbearance.
Cosigner Release
Yes, after 12 months of on-time payments.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability, Sallie Mae will waive all remaining payments on the loan.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Sallie Mae.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
15 minutes.
Before you take out a loan from Sallie Mae…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Sallie Mae a legitimate lender?
Yes, Sallie Mae is a legitimate lender that has been providing student loans since the late 90s.
Is Sallie Mae available in all 50 states?
Yes.
How long does it take to get a Sallie Mae student loan?
Submitting an application through Sallie Mae takes a few minutes. Once you’ve submitted your loan application, Sallie Mae will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan. It may take some time to actually receive your loan. First, you must go through Sallie Mae’s loan certification process. Then, your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Sallie Mae student loan?
If you don’t qualify for a Sallie Mae student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Sallie Mae student loans federal or private?
Sallie Mae loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through Sallie Mae hurt my credit score?
Sallie Mae does not have a custom prequalification process. Typically, prequalifying for a student loan includes a soft credit check, which does not affect your credit score. Thus, if you apply for a loan with Sallie Mae, a hard credit check will be done, which could temporarily hurt your credit score.
*All rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a valid bank account.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with an associate’s degree or higher or borrowers with a high income and strong credit score.
Fixed APR Range: 4.49% to 8.99%
Variable APR Range: 4.49% to 8.99%
Loan Amounts: $5,000 up to your total outstanding balance
• Competitive interest rates • Students can refinance parent PLUS loans in their own name • Comes with borrower protections (forbearance and deferment) • Includes perks like member events, wealth management, and other personal finance services
• Unclear about credit requirements • No cosigner release • Refinancing is unavailable to borrowers without a degree • No spousal consolidation loans
Competitive interest rates and zero fees for qualified borrowers
Although SoFi has strict qualification requirements, the borrowers who do qualify for refinancing have access to some of the most competitive rates in the industry. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
SoFi Student Loan Refinance
Fixed APR*
4.49% to 8.99%
Variable APR*
4.49% to 8.99%
*Rates as of December 05, 2022. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Students can refinance parent PLUS loans in their own name
If your parent has taken out a Parent PLUS loan or a private student loan in their name, SoFi gives your parent the option to refinance that loan or transfer the loan to your name (so long as you are the primary applicant). In addition, SoFi gives parents access to refinancing services to help make debt management easy.
Comes with borrower protections
While borrowers who refinance their federal student loans with a private lender lose access to federal protections (income-driven repayment, loan forgiveness, and loan forbearance), SoFi offers generous borrower protections such as deferment and forbearance. Borrowers who lose their job through no fault of their own are eligible to postpone their payments for three months at a time, for up to 12 months total. Check out the table below to see if you qualify for any of SoFi’s borrower protections:
Deferment
Forbearance
• Returning to school • Rehabilitation treat for a disability • Unemployment • Economic hardship/job loss • Military service
• Unemployment • Economic hardship/job loss • Military mobilization • Natural disaster • National emergency
Note: During deferment and forbearance, interest will still accrue, but the loan will be re-amortized.
Includes perks like member events, wealth management, and other personal finance services
SoFi offers its borrowers a variety of perks that help you take control of your financial future.
Member events: SoFi organizes workshops, speaker series and social events to help you build a strong community.
No-fee wealth management: SoFi offers a no-fee wealth management and investing platform to help you get your money right.
Referral bonus: You can send a link to your friends to use SoFi student loan, investment, or credit card service and deduct up to $75 in student loans. The rules can be found here.
Discount on other SoFi loans: SoFi offers its members a 0.125% discount on additional loans taken out through SoFi, including mortgages and personal loans.
Drawbacks of Refinancing with SoFi
Unclear about credit requirements
While SoFi used to have a minimum credit score requirement of 650, the company no longer shares an explicit minimum credit score. SoFi only shares that “good or excellent” credit scores will be approved, and for refinancing, this usually means those around or above 670. If you do not have a strong credit score, a cosigner with a good credit score will likely be necessary.
No cosigner release
Most private student lenders require or strongly encourage you to apply with a cosigner. Given that young people generally have no/limited credit history, a cosigner can help you qualify for better loan terms.
Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky.
Unfortunately, SoFi does not offer any form of cosigner release on its refinance loans.
Refinancing is unavailable to borrowers without a degree
In order to refinance through SoFi, you must have earned an associate’s degree or higher. If you attended school but did not complete your degree, you are ineligible for refinancing your student loan through SoFi.
No spousal consolidation loans
SoFi does not provide people who are married with the opportunity to combine student loan debt which many see as a simpler route to paying off their debt.
SoFi: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.49% to 8.99%
Variable APR Range
4.49% to 8.99%
Loan Terms
5, 7, 10, 15 or 20 years.
Loan Amounts
$5,000 up to your total outstanding balance.
Ability to transfer a parent loan to the student
Yes.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, $5 late fee if your loan is 15 days past due.
Eligibility Requirements – Financial
Minimum Credit Score
Did not disclose.
Minimum Income
No minimum. SoFi looks at the amount you have leftover after paying your monthly expenses.
Typical Credit Score of Approved Borrowers or Cosigners
700+.
Typical Income of Approved Borrower
$100,000+.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, once the bankruptcy drops off your credit report. This happens after seven years for Chapter 13 bankruptcy and after 10 years for Chapter 7 bankruptcy.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen, permanent resident or have a qualifying visa (E-2, E-3, H-1B, J-1, L-1, or O-1). Non-permanent residents, DACA recipients and those without a qualifying visa need a cosigner who is a citizen or permanent resident.
Location
Available to borrowers in all 50 states.
Must have graduated
Yes, with an associate degree or higher.
Must have attended a school authorized to receive federal aid
Yes.
Must be employed
Yes. If not, the borrower must have enough income from other sources or have proof of a job that starts within 90 days.
Percentage of borrowers who have a cosigner
Around 15%.
Repayment Options
Academic Deferment
Yes, you can postpone payment if you return to school.
Military Deferment
Yes, you can postpone payment while on active military duty.
Disability Deferment
Determined on a case-by-case basis and after specific requirements are verified.
Reduced payments for medical and dental residents
Yes, physicians and dentists can pay $100/month during residency for up to four years.
Forbearance
Cases for hardship forbearance are evaluated on an individual basis so that SoFi can determine the best option.
Cosigner Release
No.
Death or Disability Discharge
Yes. Contact SoFi’s customer service.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
MOHELA.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
One week.
Before you take out a loan from SoFi…
Complete the Sparrow application to compare pre-qualified rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See pre-qualified rates, not rate ranges: Sparrow enables you to compare student loan products you pre-qualify for from multiple lenders side-by-side based on all of the criteria that are important to you, like total repayment amount, APR, repayment options, and monthly payment.
No impact on your credit score: Checking your pre-qualified rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is SoFi a legitimate lender?
Yes, SoFi is one of the largest online lenders in the industry with millions of customers. The company offers student loans and student loan refinancing, along with other financial services such as mortgages, personal loans, insurance, and investment accounts. Since it began offering student loan refinancing in 2012, SoFi has helped nearly 400,000 borrowers refinance $30 billion in student loans.
Is SoFi available in all 50 states?
Yes.
How long does it take to get a SoFi refinance loan?
Submitting an application through SoFi takes a few minutes. Once you’ve submitted your loan application, SoFi will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a SoFi refinance loan?
If you don’t qualify for a SoFi refinance loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive pre-qualified rates from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are SoFi refinance loans federal or private?
SoFi’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through SoFi hurt my credit score?
In order to estimate what rate you qualify for, SoFi conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the SoFi loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Paying for a college education is a significant investment of both time and money. According to US News, for the 2021-22school year, the average tuition for a private institution was $38,185 and $22,698 for a public, out-of-state college.
If we factor in the average 6.8% increase in tuition every year, affording the cost of tuition seems impossible.
Fret not.
In this article, we’ll tell you everything you need to know about one of the best ways to pay for your education expenses: college grants.
What is a Grant for College?
A grant is a form of gift aid, which is basically free money that can defray the cost of a college education and does not need to be paid back. Grants are usually issued to individuals who demonstrate financial need, including low-income students, handicapped students, members of recognized minority groups, or students with military ties.
Scholarships, on the other hand, are awarded based on merit, financial need, or any significant achievements.
What Do College Grants Cover?
College grants cover a variety of education-related costs, such as tuition, room and board, and school supplies. Some college grants allow you to use the money on whatever expenses you deem fit. Others are issued to defray a specified cost.
How to Find College Grants
There are four kinds of college grants:
Federal grants (offered by the federal government)
Statewide grants (offered by your state)
Institutional grants (offered by the college you plan to attend)
Private grants (offered by private organizations, NPOs, foundations, etc.)
Let’s find out how you can find college grants from each of these sources.
Federal Grants
Pell Grant
Federal Pell Grants are a type of federal grant that is awarded to undergraduate students who demonstrate financial need and have not received a bachelor’s, graduate, or professional degree (exceptions apply to students who are enrolled in specific post baccalaureate teacher certification programs).
The cap for the Pell Grant changes every year. For the 2022-23 school year, the maximum Pell Grant award for full-time students is $6,895, though the amount you are awarded is dependent on your college’s tuition and your financial need.
Federal Supplemental Educational Opportunity Grant (FSEOG)
The FSEOG is another kind of federal grant that is awarded to students with exceptional financial need. Awards can range from $100 to $4,000.
The FSEOG is administered directly to your college, and not all colleges participate in the FSEOG program. Check with your institution to see if they offer the FSEOG.
Teacher Education Assistance for College and Higher Education (TEACH) Grants
The TEACH grant is only administered to teachers who agree to complete a four-year teaching service obligation. Once this obligation is completed, the teacher can receive up to $4,000 per year to pay for their post-secondary education.
This grant does not apply to college students who do not plan to be a teacher.
The Iraq and Afghanistan Service grants are awarded to students whose parent or guardian was a member of the U.S. Armed Forces and died during military service in Iraq or Afghanistan after 9/11.
The maximum grant award is equal to the maximum Pell Grant award for the school year.
State Grants
Because state grants are specific to the state, the grant amount and the terms of receiving it will be different between all states.
You can find grants offered by your state by going to your state’s Department of Education website or using this helpful grant search engine.
Other College Grants
Armed Forces Grant
Students who are on active duty or reserve for the Army, Navy, Air Force, Marines, or Coast Guard are eligible to receive financial aid to defray college expenses.
Ask your branch which educational grants you qualify for, or search for grants here.
Fulbright Grants
The Fulbright U.S. Student Program is a distinguished national program that gives out grants to graduating college seniors, graduate students, and young professionals to conduct research, teach English abroad, or pursue higher education.
Applicants must meet the language requirements for the grant they are applying for and demonstrate fluency and adaptability to live in their host country.
Grant awards and lengths vary by award.
Private Grants
Private grants are offered by private organizations, based on the organization’s beliefs or niche.
For example, the American Association of University Women (AAUW) offers career development grants for post-grad female students, while the Asian and Pacific Islander American Scholarship fund offers grants to Asian-American college students who demonstrate financial need.
You can apply for private grants by searching for grants within a niche that you occupy, whether it is your major, ethnicity, or sexual orientation.
How to Apply for College Grants
Complete the FAFSA
The Free Application for Federal Student Aid (FAFSA) is an application you must submit to receive financial aid. The open date for the FAFSA is October 1st, and the deadline is June 30th.
Once you submit your FAFSA, you will receive your Student Aid Report (SAR), which is a document that measures your eligibility for federal financial aid.
Most colleges and states in the United States require you to submit the FAFSA in order to receive financial aid like scholarships, grants, and loans.
Search for Grants Online
The Internet is a magical tool.
You can find grants with a simple search on the web, so take advantage of this privilege!
Here are some of Sparrow’s favorite grant websites that you can navigate through:
Accept Grants Offered in Your Financial Aid Package
Once you’ve been accepted into the school of your dreams, the institution will send you your financial aid package.
Check your financial aid package to see what kind of grants you’ve been offered. Always read the terms of the grants before accepting them.
Closing Thoughts From the Nest
College grants are a great way to cover the cost of college. To stay on top of the game when it comes to college grants and other forms of gift aid, follow our tips:
Reach out to both your high school and (tentative) college’s financial aid offices to find out what grant and scholarship options are available to you. If anyone’s going to know, it’s going to be the workers in the financial aid office!
Submit your FAFSA as soon as possible. The closer you are to the October 1st opening date when you submit your FAFSA, the better your chances will be of receiving aid.
Stay on top of your deadlines. When things are happening so quickly, it can be difficult to keep track of the things you need to do. Be sure to organize your deadlines on a calendar or your phone so that you maximize your chances of receiving aid.
If grants and scholarships don’t cover all the costs of college, consider taking out a student loan. Use Sparrow’s free online tool to see which student loans you qualify for.
As a college student, you’ll no doubt hear about the massive rise in the average student loan debt. Rightfully so, you might get scared and overwhelmed at the idea of incurring a lot of debt. However, the amount of debt you’ll incur is based on factors like the type of loan you take out, the program you’re in, the type of school you go to, and more. Let’s explore these factors further and take a look at the debt averages.
Average Student Loan Debt Overall
First off, let’s get a quick overview of the average student loan debt here in the U.S. On average, according to a report done by the Education Data Initiative, graduates with student loans have a debt of about $37k. And, collectively, that adds up to trillions of dollars in student debt.
Average Student Debt
$37,693
Average Student Monthly Payment
$393
Total Student Loan Debt
$1.75 trillion
Number of Student Loan Borrowers
45.3 million borrowers
Average Student Loan Monthly Payment
Next, let’s talk about monthly payments. Your monthly student loan payment is where you’ll feel the weight of your debt the most. But, there are different factors that go into calculating your payment, such as the length of the loan term, the principal amount, and your repayment plan. To give you an idea of how much money you’re looking at, here is the data on monthly payments.
Average Monthly Student Loan Payment
$393
Median Monthly Student Loan Payment
$250
Average Student Loan Debt: Federal vs Private
Now, let’s get more into it. Your student debt will be affected by the types of loans you take out. The two biggest loan types are federal student loans and private student loans. Recently, private student loan debt has grown much faster than federal loan debt. The data here shows a difference of about $18,000 between the two.
Average Federal Student Loan Debt
$36,510
Average Private Student Loan Debt
$54,921
Average Student Loan Debt by State
You’ll also want to think about where you’ll go to school. Most states’ student debt average falls in the $30,000-40,000 range. There are a few outliers, however. The District of Columbia, Georgia, and Maryland all have average debts higher than $40,000. Meanwhile, North Dakota and Puerto Rico have averages under $30,000.
Alabama
$36,826
Alaska
$33,083
Arizona
$35,047
Arkansas
$33,113
California
$36,351
Colorado
$36,610
Connecticut
$34,677
Delaware
$37,221
District of Columbia
$54,983
Florida
$38,160
Georgia
$41,256
Hawaii
$35,803
Idaho
$32,425
Illinois
$37,460
Iowa
$30,381
Kansas
$32,352
Kentucky
$32,622
Louisiana
$34,165
Maine
$32,543
Maryland
$42,592
Massachusetts
$34,075
Michigan
$34,819
Minnesota
$33,252
Mississippi
$36,508
Missouri
$35,260
Montana
$32,626
Nebraska
$31,726
Nevada
$33,573
New Hampshire
$33,459
New Jersey
$35,095
New Mexico
$33,632
New York
$37,639
North Carolina
$37,217
North Dakota
$28,402
Ohio
$34,496
Oklahoma
$31,376
Oregon
$36,988
Pennsylvania
$35,205
Puerto Rico
$26,918
Rhode Island
$31,954
South Carolina
$38,063
South Dakota
$30,946
Tennessee
$36,035
Texas
$32,671
Utah
$32,150
Vermont
$37,284
Virginia
$38,903
Washington
$35,117
West Virginia
$31,532
Wisconsin
$31,766
Wyoming
$30,476
Average Student Loan Debt by School Type
The type of school you attend will also contribute to how much debt you’ll have. Usually, public colleges are cheaper than private ones. Similarly, for-profit colleges are cheaper than non-profit schools.
Public Institution
$26,382
Private, Non-Profit Institution
$37,971
Private, For-Profit Institution
$21,244
Foreign Institution
$90,500
Average Student Loan Debt by Degree
Different college degrees are going to cost you different amounts of money. Generally, the longer you have to be in school to get that degree, the more it’ll cost you. As you can see in the table below, the higher you go in your degree, the more money you’ll need.
Bachelor’s Degree
$28,400
Master’s Degree
$71,318
Doctorate, Research
$117,198
Law Degree
$157,315
Doctorate, Professional
$210,736
Medical Degree
$265,996
Final Thoughts from the Nest
While a college education can get expensive and leave you with a lot of debt, many factors go into it. Knowing these factors will help you make a good decision about where you should go to school.
Either way, debt can be hard to manage. So, you want to get good loans right off the bat. Sparrow can help with that. Sparrow partners with 15+ lenders that offer great private student loans. Fill out our Sparrow application to get matched with what you qualify for at each of these lenders. Let us take some of the weight so you can focus on getting your school diploma.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students, as well as student loan refinancing. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
• Available to international, domestic, and DACA students • Allows borrowers to refinance a parent’s loan in your name • You can get up to 0.25% in rate discounts
• Offers only one repayment term of 10 years • Higher interest rates and fees than other online lenders • Does not allow for biweekly payments via autopay
Available to international, domestic, and DACA students
MPOWER offers non-cosigned refinance loans to international, domestic, and DACA students. MPOWER considers dozens of data points, such as future income potential, to determine creditworthiness and make a lending decision. The company reviews credit history, but credit scores are not a factor in its decision since most international students do not have U.S. credit scores.
Allows borrowers to refinance a parent’s loan in your name
If your parent has taken out a Parent PLUS loan or a private student loan in your name, MPOWER gives your parent the option to refinance that loan or transfer the loan to your name (so long as you are the primary applicant).
You can get 0.25% in rate discounts
MPOWER rewards you for borrowing responsibly by offering up to a 0.25% rate discount on refinance loans. You can qualify for these rate discounts by enrolling in autopay.
Autopay will automatically debit your loan payment each month. When you enroll, MPOWER gives you a 0.25% deduction on your interest rate for as long as you remain enrolled.
Your discount will remain if you make on-time payments via autopay. An invalid payment, hardship (i.e., forbearance) request, or entering into a modified payment plan may reset your discount, so you may need to enroll again to earn your interest rate discount.
If you take advantage of the autopay discounts, you could save yourself hundreds, and maybe even thousands, of dollars throughout the lifetime of your loan.
Drawbacks of Refinancing with MPOWER
Offers only one repayment term of 10 years
Unlike other lenders that offer a wide variety of repayment options, MPOWER only offers one 10-year repayment term. MPOWER could improve by expanding their repayment options.
Higher interest rates and fees than other online lenders
MPOWER is unique in that it does not require a cosigner, collateral, or credit history. With that said, its rates are quite high compared to other lenders.
MPOWER also charges a 2% origination fee that is added to your loan balance. You can spread the origination fee across the lifetime of the loan. So for example, if you borrow $10,000, you will have to pay a $200 fee as part of your monthly loan payments after graduation.
Does not allow for biweekly payments via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan. It is an effective strategy if you want to “set it and forget it” — essentially allowing you to automatically make payments without having to manually do it at the end of each month.
Unfortunately, when you borrow through MPOWER, you don’t have the option to make biweekly payments via autopay.
MPOWER: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
up to 11.74% (12.69% APR)
Variable APR Range
N/A
Loan Terms
10 years.
Loan Amounts
$2,001 to $100,000.
Ability to transfer a parent loan to the student
Yes.
Application or Origination Fee
Yes, 2% of the total loan amount.
Prepayment Penalty
No.
Late Fees
Yes, $5.00 or 4% of the late amount, whichever is lesser.
Eligibility Requirements – Financial
Minimum Credit Score
N/A.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
N/A.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
15%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
International students must be from one of the 180 countries MPOWER works with. DACA students do not need a Social Security number to qualify.
Location
Available to international borrowers in all 50 states, Washington, D.C., and Puerto Rico. Borrowers are able to refinance loans originated in 190 countries.
Must have graduated
Yes, with at least a bachelor’s degree.
Must have attended a school authorized to receive federal aid
No.
Percentage of borrowers who have a cosigner
Borrowers cannot apply with a cosigner.
Repayment Options
Academic Deferment
Yes, borrowers can postpone payment if they return to school.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes, up to 24 months.
Cosigner Release
N/A. There is no option to add a cosigner.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
N/A. There is no option to add a cosigner.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Launch.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
Yes.
Average time from approval to payoff
10 days.
Before you take out a loan from MPOWER…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is MPOWER a legitimate lender?
Yes, MPOWER is a legitimate lender that offers private student loans and student loan refinancing to international and DACA students.
Is MPOWER available in all 50 states?
Yes, MPOWER is available in all 50 states.
How long does it take to get an MPOWER refinance loan?
Submitting an application through MPOWER takes a few minutes. Once you’ve submitted your loan application, MPOWER will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for an MPOWER loan?
If you don’t qualify for an MPOWER refinance loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are MPOWER student loans federal or private?
MPOWER’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through MPOWER hurt my credit score?
It is unclear whether it will hurt your credit score. MPOWER conducts a soft credit check to determine your eligibility. While soft credit checks typically don’t hurt your credit score, MPOWER has stated that “Any potential lender pulling your credit may slightly lower your overall credit score temporarily.” Therefore, it isn’t totally clear whether or not applying for a loan with MPOWER will hurt your credit score or not.
EdvestinU is a student loan program from the nonprofit New Hampshire Higher Education Loan Corp that offers private student loans and student loan refinancing to students across the country. EdvestinU private student loans are available nationwide to undergraduate and graduate students, as well as international students with an eligible cosigner. It is best if you are looking to borrow from a non-profit lender that provides competitive interest rates, flexible repayment plans, and extended deferment/forbearance.
Fixed APR Range: 4.52% to 9.04%
Variable APR Range: 8.12% to 11.02%
Loan Amounts: $1,000 up to the total cost of attendance
• Work with a non-profit, rather than a traditional lender • Variety of repayment options • Exclusive benefits for New Hampshire residents
• You can’t see if you’ll qualify and what rate you’ll get without a hard credit check • Not accessible to students enrolled less than half-time • Strict cosigner release policy
Work with a non-profit, rather than a traditional lender
EdvestinU has been helping families across the country finance the cost of their college education for nearly 60 years. EdvestinU is not affiliated with any school, and as a non-profit, its goal is to save you money by offering the most competitive rates possible. While EdvestinU doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
Variety of repayment options
EdvestinU offers you three repayment options for your student loans, with terms ranging from 7, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Exclusive benefits for New Hampshire residents
EdvestinU, as well as many other private student lenders, offers a 0.25% discount if you enable automatic payments. This is the lender’s way of incentivizing you to turn on autopay so that you don’t miss a payment.
EdvestinU has taken this to another level by offering New Hampshire residents a 1% rate reduction on fixed rate loans and a 0.25% rate reduction on variable loans.
EdvestinU also offers in-person support and counseling to borrowers from New Hampshire.
If you’re a New Hampshire resident, EdvestinU might be the best option for you.
Drawbacks of EdvestinU Student Loans
You can’t see if you’ll qualify and at what rate without a hard credit check
Unlike many other online lenders, EdvestinU does not allow you to qualify and receive rate estimates without undergoing a hard credit check. This means you will have to undergo a hard credit check, which temporarily hurts your credit, in order to see if you qualify and at what rate. If you want to see if you qualify and at what rate with over 15 different lenders, try our 2-minute form. It’s quick, easy, and does not impact your credit score.
Not accessible to students enrolled less than half-time
If you are not enrolled in school at least half-time, you are ineligible for EdvestinU student loans. If you’re studying less than half-time, you may want to consider College Ave.
Strict cosigner release policy
Given that most private student loans require a cosigner, it would be nice to see EdvestinU offer more flexibility with cosigner release (i.e. taking the cosigner’s name off the loan and removing the cosigner’s responsibility to pay). As of now, EdvestinU has a strict cosigner release policy that is only available for borrowers who meet the following criteria:
The borrower has a credit score greater than 749
The borrower has a minimum gross income of $30,000
The borrower has made 36 months of consecutive & on-time payments
EdvestinU Student Loans: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.52% to 9.04%
Variable APR Range
8.12% to 11.02%
Loan Terms
7, 10, or 15 years
Loan Amounts
$1,000 up to the cost of attendance
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, five percent of your monthly payment.
Eligibility Requirements – Financial
Minimum Credit Score
750
Minimum Income
$30,000.
Typical Credit Score of Approved Borrowers or Cosigners
781
Typical Credit Score of Approved Cosigners
787
Typical Income of Approved Borrower
$59,000+
Typical Income of Approved Cosigners
$106,000+
Maximum Debt-to-Income Ratio
Not considered.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 10 years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or a permanent resident.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes.
School requirements
Borrowers must be attending an eligible Title IV or nonprofit school.
Percentage of borrowers who have a cosigner
90%+.
Repayment Options
In-school Repayment Options
Immediate repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Deferred repayment: EdvestinU does not offer full in-school deferment.
In-school Deferment
EdvestinU does not offer full in-school deferment.
Military Deferment
Yes.
Economic Hardship Deferment
Yes, borrowers are eligible for up to 12 months of economic hardship deferment over the life of the loan, given in 3 month increments.
Forbearance
Discretionary forbearance is available for twelve months.
Cosigner Release
Yes (after 36 consecutive on time payments). Borrowers must also have a credit score greater than 749 and a minimum gross income of $30,000.
Death or Disability Discharge
Yes. The loan will be forgiven if the borrower dies, but not in instances of total and permanent disability.
Loan discharge if cosigner dies or becomes disabled
Did not disclose.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No, but in-person one-on-one assistance is available.
Average time from application to approval
One week.
Before you take out a loan from EdvestinU…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is EdvestinU a legitimate lender?
Yes, EdvestinU is a legitimate lender that has nearly 60 years of experience lending and refinancing in higher education.
Is EdvestinU available in all 50 states?
Yes, EdvestinU is available in all 50 states. While the nonprofit is based out of New Hampshire, it will lend to students nationwide. EdvestinU also lends to international students with an eligible cosigner.
How long does it take to get an EdvestinU student loan?
Submitting an application through EdvestinU takes a few minutes. Once you’ve submitted your loan application, EdvestinU will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an EdvestinU student loan?
If you don’t qualify for an EdvestinU student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are EdvestinU student loans federal or private?
EdvestinU loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through EdvestinU hurt my credit score?
Yes. In order to check your eligibility and receive your rate, EdvestinU will conduct a hard credit check. A hard credit check may temporarily impact your credit score.
Edly IBR Student Loan, funded by FinWise Bank, Member FDIC Snapshot
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s lending bank FinWise Bank, Member FDIC, provide an alternative loan option for students. Degree-seeking students at an Edly-supported school currently have two loan options: the Edly IBR No Cosigner Student Loan (for university students without a cosigner) and the Edly IBR Cosigned Student Loan (for university students with a cosigner).
Students who are approved for an IBR No Cosigner Student Loan will not have to make payments while in school (borrowers with the IBR Cosigned Student Loan make modest in-school payments). After graduation, borrowers with either loan make payments based on their income. Due to the structure of IBR student loans, borrowers have a variety of benefits when it comes to repayment. An IBR Student Loan is best if you are seeking a loan option with no cosigner (the IBR No Cosigner Student Loan) and want competitive repayment terms and flexible repayment options.
APR: Borrowers will never pay more than 2.25x their borrowed amount (with the IBR No Cosigner Student Loan) or 2.5x their borrowed amount (with the IBR Cosigned Student Loan), which translates to a maximum 23% APR.
Loan Amounts: $5,000 to $15,000 per academic year, $ 25,000-lifetime maximum.
Minimum Credit Score: Yes, student borrowers without a credit score may also be considered and student borrowers must meet credit and underwriting requirements upon release of the cosigner
• Competitive repayment terms and few fees • Cap on how much you must repay • Hardship forbearance is available if you don’t meet the $30,000 annual gross income minimum threshold following graduation (interest will continue to accrue during the forbearance period) • Two product types available depending upon the borrower’s needs (a No-Cosigner IBR Loan and a Cosigner IBR loan) • No minimum credit score for student borrowers applying for the Cosigned product. Credit and underwriting requirements apply for both products
• Doesn’t offer a repayment term longer than 12 years • Hard to predict upfront how much you’ll owe over the life of the loan • Fewer schools are eligible for an Edly IBR Student Loan than traditional student loans
Compare Edly’s Rates:
Rather than searching for lenders one-by-one, we recommend comparing Edly’s rates with a student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Here are Edly’s rates in comparison to other top lenders:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Competitive effective annual percentage rates and few fees
The effective APR on an IBR student loan is based on your income after graduation. Depending on your income, you can score a pretty competitive effective annual percentage rate. Additionally, you won’t have to pay any origination, application, or prepayment fees. IBR student loans do have late fees, however.
Cap on how much you must repay
While IBR student loans can vary in terms of effective APR, you can rest assured knowing that there is a cap on how much you can owe. You will never have to pay back more than 2.25x what you borrowed (with an IBR No Cosigner Student Loan) or 2.5x (with an IBR Cosigned Student Loan) what you borrowed.
Hardship forbearance is available if you don’t earn above a minimum income threshold
While Edly’s 34-month post-graduation grace period (for the No Cosigner Student Loan) is shorter than the standard 6-month grace period on traditional student loans, you won’t actually have to start post-graduation repayment of your loan unless you meet their minimum income threshold. If you are in this circumstance, you may apply for hardship forbearance and defer repayment, although interest on the loan will continue to accrue. Note that with the IBR Cosigned Student Loan, however, borrowers will make modest in-school payments in addition to the post-graduation payments noted above.
No cosigner required for IBR No Cosigner Student Loan
Edly’s flagship product, the Edly IBR No Cosigner Student Loan, is a great option if you do not have a cosigner available to you. While the approval rate for students without a cosigner is typically around 8.84%, according to a LendEDU study, if you apply for an IBR No Cosigner Student Loan, your chances of approval are significantly higher. For borrowers who don’t qualify on their own or who want the flexibility of an IBR loan with the comfort of a cosigner, they may apply for the IBR Cosigned Student Loan.
Minimum credit score for student borrowers
IBR Student Loans do require the student borrower to have a minimum credit score to qualify for the IBR No Cosigner Student Loan but student borrowers without a credit score may still be considered. This makes the Edly IBR No Cosigner Student Loan a great option if you have no credit or no access to a creditworthy cosigner. If the student borrower does have a credit score, a minimum requirement will apply. Note that if you choose to apply with a cosigner for the Edly IBR Cosigned Student Loan, your cosigner will need to meet credit and underwriting requirements (credit is not run on student borrowers for the Edly IBR Cosigned Student Loan until they apply for the cosigner to be released).
Drawbacks ofIBR Student Loans
Doesn’t offer a maximum repayment term longer than 12 years
Unlike several other lenders, Edly does not offer a maximum repayment term longer than 12 years. While their 7-12 year repayment term offerings provide a decent variety of options, longer terms would be beneficial to borrowers looking to pay their loans off a longer period of time.
Hard to predict upfront how much you’ll owe over the life of the loan
Due to the nature of an income-based repayment loan, it’s hard to predict what your payments will be, and thus, how much you’ll pay by the end of your repayment term. When taking out a traditional student loan with a fixed interest rate, you can easily calculate how much you’ll end up paying overall. With an IBR loan, however, you cannot predict this in the same way.
Fewer schools are eligible for an Edly IBR Student Loan than traditional student loans
While most traditional student lenders work with a wide array of schools, Edly is much more selective about who they work with. Edly only works with schools and programs that they believe will give students the best chance for future success. Edly uses a variety of factors when determining which programs are eligible, such as performance statistics like graduation rates, placement rates, and certification exam pass rates. Due to Edly’s strict program eligibility criteria, your school may not be eligible to receive an Edly IBR Student Loan. Currently, Edly supports over 1,700 schools and programs. To see if your school is eligible, complete Sparrow’s 2-minute application.
Edly IBR Student Loans: The Nuts and Bolts
Interest Rates, Fees, and Terms
Effective APR
Variable based on borrowers’ projected income and IBR rate, but typically 9.4-23%.
Loan Terms
7-12 years (12-year maximum repayment window).
Loan Amounts
$5,000 to $15,000 per academic year, $25,000 lifetime.
Application or Origination Fee
None.
Prepayment Penalty
None.
Late Fees
The lesser of $25 or 6% of the past due amount.
Eligibility Requirements – Financial
Minimum Credit Score
580 or no score for student borrowers on the IBR Non-Cosigned Student Loan. No minimum for student borrower on the IBR Cosigned Student Loan.
Minimum Income
No set minumum.
Minimum Credit Score of Approved Cosigners
600
Typical Income of Approved Student to Release the Cosigner
$30,000
Maximum Debt-to-Income Ratio
25%
Ability to qualify if you’ve filed for bankruptcy
No
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Not available to residents of Colorado, Maine, Vermont, Iowa, and West Virginia.
Must be enrolled half-time or more
Yes.
School requirements
Must meet Satisfactory Academic Progress (SAP) requirements.
Percentage of borrowers who have a cosigner
Undisclosed.
Repayment Options
In-school repayment options
No in-school repayment for an IBR No Cosigner Student Loan; borrowers with an Edly IBR Cosigned Student Loan make modest, monthly in-school payments.
Grace period
Post-graduation repayment begins 4 months after graduation for an IBR No Cosigner Student Loan.
In-school Deferment
Yes (for an IBR No Cosigner Student Loan).
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Borrowers may apply for hardship forbearance.
Cosigner Release
After six successive in-full, on-time post- graduation payments, student borrowers will need to submit an application to release the cosigner; meet minimum credit requirement, and is subject to credit evaluation and worthiness.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
N/A.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark/Nelnet.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
3 minutes.
Before you take out an IBR Student Loan…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Are IBR Student Loans legitimate?
Yes, IBR Student Loans are legitimate. Edly IBR Student Loans are offered through FinWise Bank, an FDIC-insured bank. Since its founding in 2019, Edly has provided an alternative method of college funding to students.
Are IBR Student Loans available in all 50 states?
IBR Student Loans are not available to residents of Colorado, Maine, Vermont, Iowa, and West Virginia.
How long does it take to get an IBR Student Loan?
Submitting an application through Edly takes a few minutes. Once you’ve submitted your loan application, Edly will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time for your educational institution to receive your tuition. Your school must approve the loan which may take between four to six weeks. Upon certification, the funds are sent directly to your school.
What happens if I don’t qualify for an IBR Student Loan?
If you don’t qualify for an IBR student loan, the company will inform you why and may offer you the option to add a cosigner. Depending on the reason, you may also consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all ready to support you.
Is an IBR Student Loan federal or private?
IBR Student Loans are private student loans. Before you take on a private loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Edly hurt my credit score?
In order to estimate what rate you qualify for, Edly conducts a soft credit check — this does not affect your credit score. If you choose to accept the terms offered by Edly, the company will conduct a hard credit check to verify your information. A hard credit check may impact your credit score.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan.
The traditional cosigned loan is best for students who have a qualified cosigner and want to pay off their debt fast. The non-cosigned loan is best for borrowers with a strong credit score and stable income. Ascent’s non-cosigned outcomes-based loan is best for upperclassmen with limited credit and income and no access to a cosigner.
Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Ascent was named Best Private Student Loan for 2021 by Forbes Advisor, NerdWallet, and Money.com.
• Accessible to students who don’t have a cosigner or credit history • Competitive rates • Variety of repayment options • Accessible to international and DACA students • Offers 1% cash back after graduation • Cosigner release option after 12 months • Over $80,000 in scholarship opportunities • Provides engaging financial wellness courses
• Students enrolled less than half-time are not eligible • Cosigner release not available to international students
Accessible to students who don’t have a cosigner or credit history
Ascent distinguishes itself from other lenders by offering a traditional cosigned credit-based loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. In order to qualify for private student loans through Ascent, you must meet the following criteria:
Cosigned Credit-Based Loan
Non-Cosigned Credit-Based Loan
Non-Cosigned Outcomes-Based Loan
Citizenship
Must be a U.S citizen, permanent resident, or DACA recipient. Students who are not U.S. citizens, U.S. permanent residents, or DACA recipient may apply with a cosigner who is a U.S. citizen or U.S. permanent resident.
Must be a U.S citizen, permanent resident, or DACA recipient.
Must be a U.S citizen, permanent resident, or DACA recipient.
Enrollment
Must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Must be an undergraduate junior or senior enrolled full-time with a 2.9+ GPA.
Min. Income
Borrower or cosigner must have a minimum gross annual income of $24,000.
No income requirement.
No income requirement.
Credit
Student borrowers must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your cosigner.
Cosigners must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your borrower.
Minimum score required is subject to change, but must have at least two years of credit history.
No credit requirement.
Competitive interest rates
When looking for a student loan, finding a low-interest rate is typically a top priority. Ascent’s variable and fixed interest rates offer lower rates than typically provided for the lower credit scores. The ranges offered are:
Undergraduate, Cosigned
Undergraduate, Non-Cosigned Credit-Based
Undergraduate, Outcomes-Based
Graduate/MBA/Law
Dental
Medical
Fixed APR*
4.83% – 16.16%
10.01% – 16.16%
13.09% – 15.08%
5.83% – 16.16%
5.83% – 16.16%
5.61% – 16.16%
Variable APR*
6.15% – 16.08%
10.02% – 16.08%
13.07% – 15.02%
7.17% – 16.08%
7.01% – 16.08%
6.68% – 16.08%
*Rates as of November 01, 2023. Rates include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account. Borrowers with non-cosigned outcomes-based loans are eligible for an additional rate discount when you enroll in AutoPay.
Variety of repayment options
Ascent offers a range of repayment options depending on your financial situation. If you take out a credit-based loan, you will have access to all three repayment options. However, if you choose to take out a non-cosigned outcomes-based loan, you will only have access to the deferred repayment option.
Repayment Option
Terms
Pros
Cons
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Accessible to international and DACA students
Ascent prides itself on providing access to funding, regardless of your citizenship status. It is one of the few lenders helping DACA students with or without a cosigner.
Additionally, if you are an international student with a cosigner who is an American citizen or permanent resident, you are eligible to apply for a student loan through Ascent.
If you are an international student without a cosigner, check out MPOWER and Prodigy Finance, both of which offer private student loans to international students who do not have a cosigner.
1% Cash Back Graduation Reward Program
Ascent offers borrowers a 1% Cash Back Graduation Reward. In order to be eligible for the program, you will need to meet the following criteria:
Enrolled in autopay
No late history of payments
Graduated within five years of receiving your first Ascent student loan
If you are eligible, you will receive a one-time payment that is the amount of one percent of your loan balance. So, if you take out a $10,000 loan, you will receive $100. To learn more about Ascent’s Cash Back Graduation Reward program, visit Ascent’s website.
Cosigner release option after 12 months
If you need a cosigner for your student loan, Ascent might be a good option for you. Unlike several other lenders, Ascent allows you to release your cosigner after 12 months of timely payments. This can be helpful if you want to build credit in your own name.
Over $80,000 in scholarship opportunities
To demonstrate their commitment to students, Ascent gave away a $1,000 scholarship every weekday the summer of 2021. Ascent continues to give away scholarships on an ongoing basis. In order to qualify for one of these scholarships, you can visit Ascent’s Scholarship and complete the appropriate steps.
Provides engaging financial literacy courses
If you’re approved for a loan through Ascent, you’ll have access to additional resources to help you thrive throughout college and beyond. Ascent offers a suite of financial literacy courses that encourage awareness of the potential financial outcomes of your college choices (school, major, years in school, financing your education), helping you visualize where your career could go and what it could be – encouraging better decisions today to open up greater future opportunities. From learning how to find a cosigner and how to budget during school to how to find a mentor and secure a job after college, Ascent is committed to helping you on your journey to financial success.
Drawbacks of AscentStudent Loans
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through Ascent. If you’re studying less than half-time, you may want to consider College Ave for your private student loan.
Cosigner release not available to international students
Unfortunately, if you are taking out a student loan with Ascent as an international student, cosigner release is not available no matter how long payments have been made. For the remainder of your time making payments to Ascent, you must maintain a cosigner that is a citizen or a permanent resident in the United States.
Cosigned and Non-Cosigned Credit-Based Loans: • Fixed-rate: 5 or 10 years • Variable-rate: 5, 10, or 15 years
Non-Cosigned Outcomes-Based Loans: • Fixed-rate: 10 years • Variable-rate: 10 or 15 years
Loan Amounts
Cosigned and Non-Cosigned Credit-Based Loans: $2,001 to $200,000 over the lifetime of a borrower (individual loans cannot exceed total cost of attendance)
Non-Cosigned Outcomes-Based Loans: $2,001 to $20,000
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes. After the payment is 10 days late, a fee equal to 5% of the amount of the past due payment applies. The minimum late fee is $5; the maximum is $25, except where prohibited by law.
Eligibility Requirements – Financial
Minimum Credit Score
Cosigned Credit-Based Loan: Student borrowers must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your cosigner. Cosigners must have a minimum credit score. The minimum score required is subject to change and may depend on the credit score of your borrower.
Non-Cosigned Credit-Based Loan: Minimum score required is subject to change, but must have at least two years of credit history.
Non-Cosigned Outcomes-Based Loan: A credit score is not considered. Instead, Ascent takes into account a borrower’s future earnings rather than emphasizing current income or credit.
Minimum Income
Cosigned Credit-Based Loan: $24,000.
Non-Cosigned Credit-Based Loan: $24,000.
Non-Cosigned Outcomes-Based Loan: Not considered.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, after five years have passed.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen, permanent resident, or DACA recipient. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident. The same requirements apply to cosigners.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes. Non-cosigned outcomes-based borrowers must also have a 2.9 GPA or higher.
School requirements
Borrowers must be enrolled in a two year or four year degree-granting program at an eligible school.
Percentage of borrowers who have a cosigner
100% for cosigned loans. 0% for non-cosigned loans.
Repayment Options
In-school repayment options
Interest-only repayment: Only pay interest while you’re in school.
Partial repayment: Pay $25 a month during school.
Deferred repayment: Wait to make payments until you’re out of school.
Graduated Repayment
Yes, upon graduation, borrowers may be eligible for the graduated repayment option. This option requires monthly payment amounts that start with an amount that is less than a fully-amortizing payment amount. These payments get bigger over time so the loan will be fully paid within the original loan term.
In-school Deferment
Yes, students enrolled at least half-time are eligible for up to 24 months of deferment.
Military Deferment
Yes, active-duty service members can defer payments for a cumulative 36 months.
Disability Deferment
Did not disclose.
Reduced payments for medical and dental residents
Bachelor’s degree holders can defer payments for up to 24 months if accepted into a residency or internship program.
Forbearance
Postpone loan payments up to four consecutive periods lasting anywhere from one to three months. Borrowers have a 24-month limit on forbearance. Forbearance will not extend the loan’s repayment term, and interest will continue to accrue on the loan.
Cosigner Release
Yes, for the cosigned loan option.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
Launch Servicing LLC
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
Immediately for conditional approval, eight days for final approval.
Before you take out a loan from Ascent…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Ascent a legitimate lender?
Yes, Ascent is a legitimate lender that has been providing student loans since 2014. The company offers cosigned and non-cosigned private student loans to undergraduates and graduate students. Ascent also offers a forward-looking outcomes-based loan that is best suited for borrowers with limited credit history and no cosigner.
Is Ascent available in all 50 states?
Yes.
How long does it take to get an Ascent student loan?
Submitting an application through Ascent takes a few minutes. Once you’ve submitted your loan application, Ascent will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an Ascent student loan?
If you don’t qualify for an Ascent student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Ascent student loans federal or private?
Ascent loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through Ascent hurt my credit score?
In order to estimate what rate you qualify for, Ascent conducts a soft credit check — this does not affect your credit score. If you choose to accept the Ascent loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
*Ascent’s undergraduate and graduate student loans are funded by Bank of Lake Mills, or DR Bank, each Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentFunding.com/Ts&Cs. Rates are effective as of 11/1/2023 and reflect an automatic payment discount of either 0.25% (for credit-based loans) OR 1.00% (for undergraduate outcomes-based loans). Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. For Ascent rates and repayment examples please visit: AscentFunding.com/Rates. 1% Cash Back Graduation Reward subject to terms and conditions. Cosigned Credit-Based Loan student must meet certain minimum credit criteria. The minimum score required is subject to change and may depend on the credit score of your cosigner. Lowest APRs require interest-only payments, the shortest loan term, and a cosigner, and are only available to our most creditworthy applicants and cosigners with the highest average credit scores.
**The minimum amount is $2,001 except for the state of Massachusetts. Minimum loan amount for borrowers with a Massachusetts permanent address is $6,001.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA offers three types of student loans: undergraduate and graduate loans, family loans, and student loan refinancing. While ASLA’s student loan refinancing is only available to Arkansas residents or students attending a school in Arkansas, they do offer competitive interest rates and flexible terms to those who qualify. ASLA is best if you are an Arkansas resident or attending a school in Arkansas and want flexible repayment options.
• Competitive interest rates • Ability to refinance several types of loans • Variety of repayment options • Cosigner release option after 48 months • Offers 0.25% interest rate reduction for opting into auto-debit payments
• Strict residency requirements • Inaccessible for international students
When looking to refinance your student loan, finding a low-interest rate is typically a top priority. If you qualify for student loan refinancing through ASLA, you will have access to competitive rates.
ASLA’s Student Loan Refinance
Fixed APR*
3.50% to 7.48%
*Rates as of May 11, 2023. The lowest states rates include 0.25% auto-debit discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Ability to refinance several types of loans
ASLA allows borrowers to refinance several types of loans such as:
Federal Loans (Federal Direct Loans, Federal Family Education Loans (FFEL), and Federal Perkins Loans)
Undergraduate and graduate subsidized and unsubsidized student loans
PLUS Loans taken out by parents or graduate/professional students
Private education loans
Previously refinanced or consolidated education loans
Variety of repayment options
ASLA offers a range of repayment options depending on your financial situation. If you refinance with ASLA, you will have access to all three repayment options: standard repayment, graduated repayment, and ASLA’s unique Select 2 repayment option.
Repayment Option
Terms
Pros
Cons
Standard Repayment
Make minimum monthly payments for the entire duration of your repayment period.
Your monthly payment will remain the same over the course of your loan, making it easier to manage and budget for.
You will likely pay more in interest if you make only the minimum monthly payment.
Graduated Repayment
Begin with lower payments, then increase payment amount by 10% every two years.
Your monthly payments will be more manageable.
You will pay more interest over the life of the loan because the principal balance will decrease at a slower rate.
Select 2 Payment Plan
Make interest-only payments during the first two years of repayment, then increase to a standard payment amount for the remainder of the repayment term.
Your monthly payments will be more manageable in the beginning.
You will pay more interest over the life of the loan because the principal balance will decrease at a slower rate.
Cosigner release option after 48 months
If you need a cosigner to refinance your student loan(s), ASLA might be a good option for you. Unlike several other lenders, ASLA allows you to release your cosigner after 48 months of timely payments. This can be helpful if you want to build credit in your own name.
Offers 0.25% interest rate reduction for opting into auto-debit payments
Similar to other lenders, ASLA offers a 0.25% interest rate discount for borrowers who opt into auto-debit payments. This interest rate discount can save you thousands over the life of your loan.
Drawbacks of Refinancing with ASLA
Strict residency requirements
While most student lenders accommodate borrowers in all 50 states, ASLA refinance loans are only available to borrowers who are Arkansas residents. If you are not, you are not eligible to refinance with ASLA.
Inaccessible to international students
Due to ASLA’s strict citizenship and residency requirements, international students are ineligible to refinance with ASLA. If you are an international student without permanent legal residence, check out MPOWER and Prodigy Finance who offer student loan refinancing to international students.
Not an Arkansas resident? Complete our 2-minute form to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
Arkansas Student Loan Authority: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
3.50% to 7.48%
Variable APR Range
N/A
Loan Terms
5, 7, 10, or 15 years
Loan Amounts
$5,000 to $250,000
Ability to transfer a parent loan to the student
Did not disclose.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
670
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
40%; if mortgage or rent is not includes, DTI cannot exceed 25%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers who live in Arkansas.
Must have graduated
Did not disclose.
Must have attended a school authorized to receive federal aid
Did not disclose.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school Deferment
Yes.
Graduated repayment
Yes.
Military Deferment
ASLA offers an Armed Forces interest reduction program that allows service members to have 0% interest on their student loans while on federal active duty.
Disability Deferment
Did not disclose.
Forbearance
Did not disclose.
Cosigner Release
Yes, after 48 consecutive monthly principal and interest payments. The borrower must meet underwriting and credit criteria at the time of cosigner release.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Did not disclose. Allows for biweekly payments via autopay: Did not disclose.
Customer Service
Loan Servicer
Aspire Servicing
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Did not disclose.
Borrowers get assigned a personal customer service representative
Did not disclose.
Average time from approval to payoff
Did not disclose.
Before you take out a loan from Arkansas Student Loan Authority…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is ASLA a legitimate lender?
Yes, ASLA is a legitimate lender that has been supporting students pursuing higher education for over four decades. ASLA is a division of the Arkansas Development Finance Authority and is a state entity created to provide access to information about educational funding for all Arkansas students pursuing higher education. They offer a variety of educational support for students, from student loans to informational workshops.
Is ASLA available in all 50 states?
No. ASLA refinance loans are only available for borrowers that live in Arkansas.
How long does it take to get an ASLA student loan?
Submitting an application through ASLA takes a few minutes. Once you’ve submitted your loan application, ASLA will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for an ASLA student loan?
If you don’t qualify for an ASLA student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are ASLA student loans federal or private?
ASLA loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through ASLA hurt my credit score?
In order to estimate what rate you qualify for, ASLA may conduct a soft credit check — this does not affect your credit score. If you choose to accept the ASLA loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
See Arkansas Student Loan Authority’s disclosures here.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA offers three types of student loans: undergraduate and graduate loans, family loans, and student loan refinancing. The traditional undergraduate and graduate student loans are best for students who have a qualified cosigner and want a variety of repayment options. The family loan is best for family members or friends who want to help an undergraduate or graduate student with college costs. The refinance loan is best for students looking to refinance existing debt to simplify repayment and get a lower interest rate. Collectively, the three options provide a great selection for borrowers who are located in Arkansas, have a qualified cosigner, and want competitive interest rates.
Fixed APR Range: 3.20% to 6.34%
Variable APR Range: 6.06% to 10.61%
Loan Amounts: $1,001 to the cost of attendance minus other aid; $100,000 lifetime maximum
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for a student loan with ASLA, you’ll have access to some of the best rates in the industry. ASLA’s fixed and variable interest rates are typically lower than competing student lenders. The ranges offered are:
Undergraduate & Graduate
Family
Fixed APR*
3.20% to 6.34%
3.20% to 6.42%
Variable APR*
6.06% to 10.61%
N/A
*Rates as of July 23, 2023. The lowest states rates include 0.25% auto-debit discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Family loan option
Unlike many other lenders, ASLA offers a family loan designed for family members or friends looking to borrow a student loan on a student’s behalf. The family loan option is great for students who do not qualify for a loan on their own.
Variety of repayment options
ASLA offers a range of repayment options depending on your financial situation. If you take out an undergraduate or graduate student loan, you will have access to all three repayment options: immediate, interest-only, and deferred repayment. However, if your family member or friend opts for the family loan to fund your education, you will only have access to the immediate and interest-only repayment option.
Repayment Option
Terms
Pros
Cons
Immediate Payment Option
Make principal and interest payments while you’re in school.
You will make significant progress in paying off your student debt. This option will save you the most money in the long run.
It may be challenging to afford to make full payments while in school.
Interest-Only Payment Option
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Payment Option
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Cosigner release option after 48 months
If you need a cosigner for your student loan, ASLA might be a good option for you. Unlike several other lenders, ASLA allows you to release your cosigner after 48 months of timely payments. This can be helpful if you want to build credit in your own name.
Provides assistance with college planning
ASLA provides a wide variety of college planning resources, from checklists to workshops to college fairs. ASLA’s college planning services can help you find scholarships, save for college more efficiently, and make sure you’re completing financial aid forms on time.
Offers 0.25% interest rate reduction for opting into auto-debit payments
Similar to other lenders, ASLA offers a 0.25% interest rate discount for borrowers who opt into auto-debit payments. This interest rate discount can save you thousands over the life of your loan.
Drawbacks of Arkansas Student Loan Authority
Students enrolled less than half-time are not eligible
If you are not enrolled in school at least half-time, you are ineligible for student loans through ASLA. If you’re studying less than half-time, you may want to consider College Ave for your private student loan. To be eligible for a loan with ASLA, you must meet the following criteria.
Undergraduate and Graduate Student Loan
Family Loan
Citizenship & Residency
Must be a U.S citizen or permanent resident. You are also required to be an Arkansas resident or attend a school in Arkansas.
Borrower must be a U.S citizen or permanent resident. The borrower or the student must be an Arkansas resident, or the student must be attending a school in Arkansas.
Enrollment
Must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Student must be enrolled at least half-time or accepted for half-time enrollment at an eligible school.
Min. Income
Did not disclose. Borrowers must have a debt-to-income ratio that does not exceed 40% of their gross monthly income.
Did not disclose. Borrowers must have a debt-to-income ratio that does not exceed 40% of their gross monthly income.
Credit
Borrowers must have a credit score of 670 or a cosigner with a credit score of 670.
Borrowers must have a credit score of 670.
Strict residency requirements
While most student lenders accommodate borrowers in all 50 states, ASLA student loans are only available to borrowers who either live in Arkansas or are pursuing a degree at a school in Arkansas. If you are neither, you are not eligible for a student loan with ASLA.
Inaccessible to international and DACA students
Due to ASLA’s strict citizenship and residency requirements, international students are ineligible for student loans with ASLA. DACA students are only eligible for student loans with ASLA if they have also received permanent resident legal status. If you are an international or DACA student without permanent legal residence, check out MPOWER and Prodigy Finance who offer private student loans to international and DACA students.
Arkansas Student Loan Authority: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
3.20% to 6.34%
Variable APR Range
6.06% to 10.61%
Loan Terms
10 or 15 years
Loan Amounts
$1,001 to the cost of attendance minus other aid; $100,000 lifetime maximum
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
670
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
40%; if mortgage or rent is not included, DTI cannot exceed 25%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers who either live in Arkansas or are attending a school in Arkansas.
Must be enrolled half-time or more
Yes.
School requirements
Must attend an eligible nonprofit, Title IV eligible, degree-granting, accredited college or university.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
In-school repayment options
Immediate repayment: Make full principal and interest payments while in school.
Interest-only repayment: Only pay interest while you’re in school.
Deferred repayment: Wait to make payments until you’re out of school.
In-school Deferment
Yes.
Graduated repayment
No.
Military Deferment
ASLA offers an Armed Forces interest reduction program that allows service members to have 0% interest on their student loans while on federal active duty.
Disability Deferment
Did not disclose.
Forbearance
Did not disclose.
Cosigner Release
Yes, after 48 consecutive monthly principal and interest payments. The borrower must meet underwriting and credit criteria at the time of cosigner release.
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Did not disclose. Allows for biweekly payments via autopay: Did not disclose.
Customer Service
Loan Servicer
Aspire Servicing
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Did not disclose.
Borrowers get assigned a personal customer service representative
Did not disclose.
Average time from application to approval
Did not disclose.
Before you take out a loan from Arkansas Student Loan Authority…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is ASLA a legitimate lender?
Yes, ASLA is a legitimate lender that has been supporting students pursuing higher education for over four decades. ASLA is a division of the Arkansas Development Finance Authority and is a state entity created to provide access to information about educational funding for all Arkansas students pursuing higher education. They offer a variety of educational support for students, from student loans to informational workshops.
Is ASLA available in all 50 states?
No. ASLA is only available to borrowers living in or attending school in Arkansas.
How long does it take to get an ASLA student loan?
Submitting an application through ASLA takes a few minutes. Once you’ve submitted your loan application, ASLA will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an ASLA student loan?
If you don’t qualify for an ASLA student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are ASLA student loans federal or private?
ASLA loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through ASLA hurt my credit score?
In order to estimate what rate you qualify for, ASLA may conduct a soft credit check — this does not affect your credit score. If you choose to accept the ASLA loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
See Arkansas Student Loan Authority’s disclosures here.
In a sea of student loan companies, finding the best one for you may feel overwhelming. Each private student loan company will offer something different. Some elements may be right up your alley and others maybe not so much.
While the best student loan company for you will ultimately be the one that suits your needs and desires best, the following are our top picks for the best student loan companies.
Arkansas Student Loan Authority
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions.
What They Offer: ASLA offers three types of student loans: undergraduate and graduate loans, family loans, and student loan refinancing. The traditional undergraduate and graduate student loans are best for students who have a qualified cosigner and want a variety of repayment options. The family loan is best for family members or friends who want to help an undergraduate or graduate student with college costs. The refinance loan is best for students looking to refinance existing debt to simplify repayment and get a lower interest rate.
Best Features:
Competitive interest rates
A variety of loan options
Flexible cosigner release policy
A variety of repayment options
Offers 0.25% interest rate reduction for opting into auto-debit payments
Drawbacks:
Strict residency requirements (Borrowers must be residents of or students in Arkansas.)
Inaccessible to international students
ASLA is the best student loan company for borrowers who are located in Arkansas, have a qualified cosigner, and want competitive interest rates.
Ascent
Ascent is an online student lender offering a wide selection of student loan options. Ascent was named Best Private Student Loan for 2021 by Forbes Advisor, NerdWallet, and Money.com.
What They Offer: Ascent offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. The traditional cosigned loan is best for students who have a qualified cosigner and want to pay off their debt fast. The non-cosigned loan is best for borrowers with a strong credit score and stable income. The non-cosigned outcomes-based loan is best for upperclassmen with limited credit and income and no access to a cosigner.
Best Features:
Variety of loan options
Competitive interest rates
Accessible to international and DACA students
Flexible cosigner release policy
Drawbacks:
Unavailable to students enrolled less than half-time
Cosigner release is not available to international students.
Ascent is the best student loan company for borrowers who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos
Brazos is a non-profit lender that launched in 1975 with a focus on bringing transparency and low-cost loans to Texas residents.
Strict eligibility criteria (Only available to Texas residents.)
Brazos is the best student loan company for borrowers who are Texas residents with an established income and strong credit.
College Ave
College Ave is an online student loan company with the mission to make the student loan process more simple, clear, and personal.
What They Offer: College Ave offers both private student loans and student loan refinancing for undergraduates, graduate students, professional school students, career school students, and parents of students.
Best Features:
Strong customer experience
Competitive interest rates
Ability to choose your own loan term
Drawbacks:
Unclear forbearance policy
College Ave is the best student loan company for borrowers who want a more flexible repayment term that allows them to find a loan that matches their budget.
The Custom Choice Loan®
The Custom Choice Loan® is powered funded by Citizens. The loan option is designed to provide borrowers with greater flexibility and control when it comes to funding their college education.
What They Offer: The Custom Choice Loan is available for undergraduate and graduate students.
Best Features:
Competitive interest rates
Flexible repayment options
Strong customer service
Drawbacks:
Some Custom Choice Loans are not accessible to students enrolled less than half-time
No repayment plan shorter than 7 years or longer than 15 years
The Custom Choice Loan is the best student loan option for borrowers that want competitive interest rates, are seeking a flexible repayment term, and want strong borrower benefits.
Earnest
Earnest is an online student lender that was founded in 2013 with the mission to make the student loan process simpler for students and graduates.
No cosigner release option on traditional student loans; no option to add a cosigner on refinance loans
Loan products are unavailable in certain states
Earnest is the best student loan company for borrowers who want competitive interest rates, unique borrower perks, and flexible repayment options that allow them to find a loan that matches their budget.
Edly
Edly offers Income-Based Repayment (IBR) loans through FinWise Bank, an FDIC-insured bank. IBR loans create an alternative loan option for students by setting post-graduation payments based on income.
Students who borrow an IBR loan from Edly will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income.
Repayment begins when the borrower has an income of at least $30,000.
No cosigner required
Drawbacks:
The borrowing limit is capped at $15,000 per academic year, which may not cover all programs.
Only available for a select group of schools
Offers a 4-month grace period, which is shorter than the typical 6-month grace period offered by other private student lenders.
Edly is the best student loan company for borrowers who want a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at the borrower’s credit score or income, Funding U looks at non-traditional metrics such as GPA and estimated future income to assess creditworthiness.
What They Offer: Funding U offers non-credit-based student loans for undergraduate students.
Best Features:
No cosigner required
No credit history required
Variety of repayment options
Available to DACA students with a work-eligible Social Security card
Drawbacks:
Unavailable in 13 states
Maximum funding amount is $20,000, which is less than most other private lenders.
Unavailable to students enrolled less than half-time
Loan payments are required while in school
Funding U is the best student loan company for borrowers who are high-achieving undergraduate students with limited credit history and no access to a creditworthy cosigner.
INvestED
INvestED has been providing students in Indiana with higher education solutions for over 40 years.
INvestED is the best student loan company for borrowers who are residents of or students in Indiana who want competitive interest rates and a variety of repayment options.
ISL Education Lending
ISL Education Lending is a nonprofit student lender established in 1979 with the mission of supporting students and families who have exhausted other sources of aid.
What They Offer: ISL Education lending offers both private student loans and student loan refinancing.
Best Features:
Competitive interest rates
Zero fees
Drawbacks:
Limited repayment options
ISL Education Lending is the best student loan company for borrowers who want to work with a nonprofit lender and want competitive interest rates.
LendKey
LendKey is an institution that connects borrowers with a network of 100+ lesser-known credit unions and community banks, allowing borrowers to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions.
Allows borrowers to work with credit unions and community banks
Competitive interest rates
Variety of borrower benefits
Drawbacks:
Unavailable to part-time students, parents, and non-U.S. citizens/permanent residents
Unavailable in certain states
LendKey is the best student loan company for borrowers who want to work with a credit union or community bank, have strong credit, and have stable income.
MPOWER
MPOWER is an online lender that works with international and DACA students to provide affordable college financing.
What They Offer: MPOWER offers non-cosigned undergraduate and graduate student loans for international, domestic, and DACA students.
Best Features:
Available to international, domestic, and DACA students
Provides additional assistance such as scholarship opportunities
Borrowers can receive up to 1-1.5% in rate discounts depending on the loan type.
Drawbacks:
Only one repayment term of 10 years
Higher interest rates and fees than other lenders
MPOWER is the best student loan company for borrowers who are international or DACA students, don’t have a credit history, and can’t access a qualified cosigner.
Nelnet Bank
Nelnet Bank is an online student lender founded over 40 years ago with the mission to make educational dreams possible.
Unavailable to international students or student visas
No biweekly payment via autopay
Nelnet Bank is the best student loan company for borrowers who want competitive interest rates, a variety of repayment options, and a flexible forbearance policy.
Prodigy Finance
Prodigy Finance is an online student lender founded in 2007 to help international students find affordable college financing.
What They Offer: Prodigy Finance offers student loans for international students in master’s degree programs.
Best Features:
No cosigner required
No collateral required
No credit history required
Variety of repayment options
Drawbacks:
Not available in all 50 U.S. states
Limited interest and repayment options
Higher interest rates and fees than other online lenders
Prodigy Finance is one of the best student loan companies for international student borrowers with no credit history.
Sallie Mae
Sallie Mae is one of the largest online private student lenders and is committed to helping borrowers find affordable college financing.
What They Offer: Sallie Mae offers student loans for undergraduate, graduate, MBA, law, medical, dental, and career training programs.
Best Features:
Competitive interest rates
Strong customer experience
Various repayment options
Flexible cosigner release policy
Drawbacks:
No biweekly student loan payments via autopay
Unable to see what rate you qualify for before formally applying
Sallie Mae is the best student loan company for borrowers who want a more flexible repayment plan and competitive interest rates.
SoFi
SoFi is an online student lender founded in 2019 and is now one of the largest student loan companies in the industry.
What They Offer: SoFi offers both private student loans and student loan refinancing. SoFi’s student loan offering is available for undergraduates, graduates, law and MBA students, as well as parents of students.
Best Features:
Competitive interest rates
Variety of repayment options
Variety of membership perks such as career coaching, job search assistance, and more
Drawbacks:
Unclear credit requirements
High loan minimum
SoFi is the best student loan company for borrowers that have a high credit score and want competitive interest rates.
Final Thoughts from the Nest
When picking a student loan company to move forward with, make sure you compare options side by side. Start by using Sparrow. Our free student loan search tool will allow you to see what student loan rates you pre-qualify for in as little as 3 minutes. Then, we’ll help you compare loan rates side by side so you can pick the best option for you. Sign up today to get started.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
With the way prices are rising right now, it can be hard to make your monthly loan payments. In situations of severe financial distress, you can pause your monthly payments with student loan forbearance. At least for a little bit, giving you time to regain financial stability so you can start making payments again. If you do find yourself in a situation of financial hardship, here’s everything you need to know about student loan forbearance.
What is a Student Loan Forbearance?
Student loan forbearance is the ability to temporarily not make payments on your student loans. Forbearance can come in handy in times of financial distress. However, this won’t help you make any progress on your student loans. So, there are both benefits and disadvantages to forbearance that you need to know about.
Pros of Student Loan Forbearance
First off, forbearance is a better option than other alternatives like garnishment and student loan default. Garnishment refers to money being withheld from your paychecks to be sent to a third party. Defaulting on your loans means that you haven’t made payments on them in nearly 9 months, which can affect your credit score. Forbearance doesn’t do either of these things.
Additionally, interest that you accrue while you are in forbearance is going to be at a lower rate than other options like a payday loan or a personal loan. Those tend to have higher interest rates. So, student loan forbearance is going to be more affordable for you.
Finally, if you are experiencing financial hardship, forbearance frees up your money. You can use that extra money for more pressing matters.
Cons of Student Loan Forbearance
As good as it can be in the short run, forbearance is not something you can keep up for too long without consequences. It could end up costing you more money than before. For instance, although you’ll get lower interest with forbearance, it capitalizes. Capitalizing interest means that any unpaid interest you accrue on your loan is added back to the loan principal. This in turn makes paying back your loans take longer than originally planned.
Also, repeatedly choosing to go into student loan forbearance for a loan can cause it to default. Student loan default can be a more difficult situation to be in, and missing too many student loan payments is damaging to your credit score. It’s another reason why you don’t want to rely on forbearance for long periods of time.
When to Request a Student Loan Forbearance
Because student loan forbearance is a temporary strategy, only a few people should use it. You want to look at it as a way to avoid a student loan default. If your situation matches all of the following, then you can request student loan forbearance:
You can’t pay your loans.
You don’t expect it to be long until you can start repayment again.
You don’t qualify for deferment.
Is Student Loan Forbearance Bad?
Student loan forbearance isn’t necessarily bad. When compared to other alternatives like student loan default, it’s the better option. But, forbearance can have its consequences and become expensive if used for too long. It’s a last-resort solution that should only be used if you’re absolutely sure you need it and that you won’t need it for long.
Alternatives to Student Loan Forbearance
While forbearance can be helpful, there are some other options you’ll want to look at first, mainly deferment and income-driven repayment plans.
Deferment
Similar to student loan forbearance, deferment also pauses your student loan payments for a period of time. Normally, you can defer your payments for up to 3 years. Additionally, you might not get capitalized interest. So, you might not have to pay more than the original loan amount regardless of how long your loan is in deferment.
Income-Driven Repayment Plan
If you have federal student loans, you should consider an income-driven repayment plan. Income-Driven Repayment (IDR) plans base your monthly payment on a percentage of your income, so you may find the payments to be more affordable. Plus, there are different repayment options to choose from. So, you can choose the best plan for you.
Is Forbearance the Same as a Grace Period?
No. While you don’t have to make payments during either, they’re different concepts. Grace periods usually only occur after graduation, and they only last around 6 months on average. You might be able to get it extended to 9 months, but typically no longer than that.
A forbearance period, however, can last up to a year. You can get additional time depending on the type of loan you have.
Do Months in Forbearance Count Toward Forgiveness?
In order for a payment to count toward student loan forgiveness it must meet 3 requirements. It has to be on an eligible loan, an eligible repayment plan, and you must have an eligible employer. When you’re in forbearance, you’re not making any payments under an eligible repayment plan toward a loan at all. So, it won’t count toward student debt forgiveness.
Does Forbearance on Student Loans Affect Credit?
No. Student loan forbearance doesn’t directly affect your credit score. However, putting off your payments for too long can lead to you missing them, and missed payments do affect your credit score. That’s why you don’t want to be in forbearance for too long.
Final Thoughts from the Nest
Student loan forbearance is a temporary solution and is useful if implemented right. But don’t resort to using it as a long-term strategy. If you need more help, you can turn to Sparrow. Sparrow offers private student loan refinancing services that can help you make student loan repayment more manageable. So, just know that no matter what happens, we are always here to help.
While the average 4-year dental program could run you around $400,000 with all expenses included, the career trajectory is promising. Average dentist salaries outrank various other industries, putting newly graduated dentists in a fairly sound financial position.
Despite competitive salaries, the average dental student graduates with around $300,000 in student debt. While daunting, the significant earning potential makes you a great candidate for student loan refinancing.
Student loan refinancing can save you thousands, sometimes even tens of thousands, of dollars over the life of your loan, while also helping you pay off your student debt faster.
Let’s learn more about the average dentist salary, both by state and speciality, and how you save thousands by refinancing your dental school loans.
According to ZipRecruiter, the average dentist salary is $172,328 in the United States. However, similar to many other industries, the average salary varies significantly by state.
State
Average Annual Salary
Average Hourly Wage
Alabama
$136,021
$65.30
Alaska
$181,591
$87.30
Arizona
$155,451
$74.74
Arkansas
$158,376
$76.14
California
$162,841
$78.30
Colorado
$161,289
$77.54
Connecticut
$156,262
$75.13
Delaware
$163,128
$78.43
Florida
$132,191
$63.55
Georgia
$126,446
$58.59
Hawaii
$191,620
$92.13
Idaho
$161,924
$77.85
Illinois
$151,073
$72.63
Indiana
$149,400
$71.83
Iowa
$143,042
$68.77
Kansas
$164,718
$79.19
Kentucky
$154,002
$74.04
Louisiana
$121,872
$58.59
Maine
$153,137
$73.62
Maryland
$171,369
$82.39
Massachusetts
$189,612
$91.16
Michigan
$154,888
$74.47
Minnesota
$150,896
$72.55
Mississippi
$162,569
$78.16
Missouri
$147,227
$70.78
Montana
$156,848
$75.41
Nebraska
$162,841
$78.29
Nevada
$189,434
$91.07
New Hampshire
$164,088
$78.89
New Jersey
$157,906
$75.92
New Mexico
$137,189
$65.96
New York
$174,327
$83.81
North Carolina
$134,573
$64.70
North Dakota
$180,299
$86.68
Ohio
$143,233
$68.86
Oklahoma
$153,828
$73.96
Oregon
$182,096
$87.55
Pennsylvania
$144,297
$69.37
Rhode Island
$185,435
$89.15
South Carolina
$160,215
$77.03
South Dakota
$170,905
$82.17
Tennessee
$155,513
$74.77
Texas
$143,183
$68.84
Utah
$141,218
$67.89
Vermont
$161,517
$77.65
Virginia
$166,782
$80.18
Washington
$178,344
$85.74
West Virginia
$147,568
$70.95
Wisconsin
$143,486
$68.98
Wyoming
$152,992
$73.55
Average Dentist Salaries By Specialty in 2022
Similarly to state discrepancies, dentist salaries vary significantly by specialty. For example, while public health dentists make an average $102,320 per year, periodontists make a whopping $374,400 per year.
Keep in mind that these numbers are simply averages — there are dental professionals who make significantly more and significantly less.
Whether a career in dentistry is worth it is ultimately up to you. However, being a dentist is both a high-paying and growing career — two factors many job seekers heavily consider.
In fact, the U.S. Bureau of Labor Statistics says that employment of dentists is expected to rise 8% between 2020 and 2030. This is on par with the average for all occupations.
Here’s a few other statistics to consider:
Only 29% of dentists plan to look for a new job this year.*
Only 18% of dentists work more than 40 hours per week.*
Nearly 22% of dentists work less than 21 hours per week.*
Why Dentists Should Consider Student Loan Refinancing
The average dental student takes on nearly $300,000 in dental school debt. Combine that with the average private student loan interest rate of around 7% and a 15-year repayment term, and you’re looking at monthly payments of around $2,696. By the end of the repayment term, you will have paid roughly $485,367 — nearly $200,000 more than what you initially borrowed.
With such a large balance, the amount owed will grow fairly quickly, making your interest rate that much more important. This is precisely why dentists should consider student loan refinancing. Refinancing can help lower that interest rate, saving you thousands over the life of your loan.
Borrowers who use Sparrow to refinance reduce their interest rate by 2.29 percentage points, on average. In this same scenario, a 2.29 percent interest rate reduction would save you $369 on your monthly payments and $66,451 over the life of the loan.
Note that this interest rate reduction is only the average. As a dentist, your salary makes you a more competitive candidate for refinancing as lenders will view you as financially able to pay off your debt. Thus, you may score an even greater interest rate reduction when you refinance your dental school debt with Sparrow.
What Dentists Should Look for in a Refinance Loan
When looking for a lender to refinance your dental school debt with, you should consider the following factors:
Interest rate
Borrowing limit
Loan terms
Interest Rate
The purpose of refinancing is to save money, which is primarily done through a lower interest rate. Before agreeing to a refinance loan, be sure to compare loan options to see what interest rates you qualify for.
To compare refinance loans with 15+ lenders in one application, complete the Sparrow application.
Borrowing Limit
Due to the amount of student loan debt you may hold as a dentist, you’ll need to find a lender with a higher borrowing limit. For example, some lenders may allow you to refinance up to $500,000 while others may only allow up to $100,000.
If you plan to refinance the entirety of what you owe, make sure the lender you decide to work with will allow you to refinance your whole outstanding balance.
Loan Terms
Oftentimes, refinancing will allow you to extend your loan term. Extending your loan term will often lead you to pay more over the life of your loan, however, it can lower your monthly payments.
If your goal with refinancing is to lower your monthly payment, look for a lender that allows for a longer repayment term than what you currently have.
Best Student Loan Refinancing Options for Dentists
The best refinance loan will ultimately be the one that provides you with the best interest rate and terms. However, the following are our top picks for refinance loans for dentists, in order of borrowing limit from highest to lowest.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit if you have an associate’s degree or higher, a high income, and a strong credit score.
Borrowing Limit: Up to your total outstanding balance
Earnest offers both private student loans and student loan refinancing. With competitive interest rates, customizable repayment plans, and forward-looking eligibility criteria, Earnest is a good fit if you don’t have a cosigner but have a strong credit score.
Brazos is a non-profit lender that offers private student loans and student loan refinancing for Texas residents. While Brazos student loan refinancing is only available to Texas residents, the non-profit lender offers competitive rates and flexible terms to those who qualify. It’s best if you are a Texas resident with at least a bachelor’s degree and have an established income and strong credit.
Note: You are not required to have graduated from a Texas school in order to qualify.
Borrowing Limit: $400,000
Minimum Credit Score: 720, or 690 with a qualified cosigner
College Ave offers both private student loans and student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
ISL Education Lending is a nonprofit student lender offering both private student loans and student loan refinancing. ISL Education Lending refinance loans are best if you want to work with a nonprofit lender, want competitive interest rates, or want to refinance if you did not finish your dental degree.
LendKey offers both private student loans and student loan refinancing. By connecting you with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan refinance offering is best if you want to work with a credit union or community bank to access loan offers you otherwise might have overlooked.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides both private student loans and student loan refinancing for Arkansas students and graduates.
While ASLA’s student loan refinancing is only available to Arkansas residents or students who attended a school in Arkansas, they do offer competitive interest rates and flexible terms to those who qualify. ASLA is best if you are an Arkansas resident or attended a school in Arkansas and want flexible repayment options.
INvestED offers private student loans, parent loans, and student loan refinancing for residents of Indiana and students who attended a school in Indiana. INvestED’s student loan refinance offering is best if you are a resident of Indiana or student who attended school in Indiana seeking competitive interest rates, a variety of repayment options, and a flexible repayment option.
Nelnet Bank offers both private student loans and student loan refinancing. Nelnet Bank’s student loan refinance offering is best if you are seeking competitive rates, a flexible forbearance policy, and the ability to refinance both private and/or federal student loans, including parent PLUS Loans.
Borrowing Limit: $225,000
Minimum Credit Score: 640
Final Thoughts from the Nest
As a dentist, it’s fairly common to wind up with $300,000 in student loan debt. While it may feel overwhelming, the average dentist salary is high, which can help you pay off your student debt more easily.
Finding a state and specialty that provides you with a solid salary is a good start. If you find that your loan debt is still overwhelming, consider student loan refinancing with Sparrow. With Sparrow, you can see what rates you qualify for with 15+ premier lenders ready to help you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The Custom Choice Loan® is funded by Citizens. The Custom Choice Loan offers borrowers competitive rates, flexible repayment terms, and strong customer service. The loan is available for undergraduate and graduate students. It’s best if you want competitive interest rates, are seeking a flexible repayment term, and want strong borrower benefits.
Fixed APR Range: 4.43% to 14.65%*
Variable APR Range: 5.38% to 15.19%*
Loan Amounts: $1,000 up to 100% of the school-certified cost of attendance minus other aid; cannot exceed $99,999 annually; cannot exceed $180,000 in aggregate education debt
• Competitive interest rates and zero fees for qualified borrowers • Offers a variety of repayment options • Offers a 2% principal reduction with proof of graduation • Offers an autopay discount • Offers a 6-month grace period with flexible extension options • Strong customer experience
• No repayment plan shorter than 7 years or longer than 15 years
Rather than searching for lenders one-by-one, we recommend comparing Custom Choice’s rates with a student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for the Custom Choice Loan, you’ll have access to some of the best rates in the industry. The Custom Choice Loan’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
*Rates as of November 1, 2023. Lowest APR includes 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
Offers a variety of repayment options
While still in school, the Custom Choice Loan offers four repayment options, with terms ranging from 7, 10, or 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Flat Repayment
Pay $25 per month while you’re in school and during the grace period to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Offers a 2% principal reduction with proof of graduation
The Custom Choice Loan offers a unique 2% principal reduction for borrowers who are able to provide proof of graduation. The principal reduction is based on the total dollar amount of all disbursements made, excluding any amounts that were reduced, returned, or canceled. To receive the principal reduction, borrowers must request it with proof of graduation from a bachelor’s degree program or higher.
So, for example, if you borrowed a $30,000 loan and were eligible for the principal reduction, your balance would be lowered to $29,400. This is a unique borrower perk that competing lenders do not offer.
On top of its generous principal reduction offer, the Custom Choice Loan provides borrowers with a 0.25% interest rate discount for opting into autopay. Autopay requires borrowers to agree to make scheduled monthly principal and interest payments by an automatic monthly deduction (ACH) from a savings or checking account. This interest rate discount is in addition to other discounts offered to Custom Choice borrowers.
Offers a 6-month grace period with flexible extension options
After you are no longer in school at least halftime, you have a grace period before you begin making full principal and interest monthly payments. The grace period is six months for Custom Choice undergraduate and graduate loans. The loan also provides borrowers with flexible extension options, allowing you to extend one month at a time for an additional 6 months.
From loan application to loan disbursement and beyond, Monogram’s borrowing experience is done entirely online. The lender also offers excellent customer service that is available through email, chat, and phone. If you’re comfortable with an entirely virtual experience, Monogram’s seamless online borrowing process is a huge benefit.
Drawbacks of the Custom Choice Student Loan
No repayment plan shorter than 7 years or longer than 15 years
While the Custom Choice Loan offers 7-, 10-, and 15-year repayment terms, it could improve by offering repayment plans that are shorter and longer. Although the three repayment term options provide a decent selection for borrowers, it would be helpful to offer 5- and 20-year repayment options for borrowers who are looking to either pay off their loan faster or over a longer timeframe.
$1,000 up to 100% of the school-certified cost of attendance minus other aid; cannot exceed $99,999
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
660 without a cosigner; On a cosigned loan, 625 for the cosigner and 600 (or no score) for the student borrower
Minimum Income
Borrowers must demonstrate at least $1 income.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Typical Income of Approved Cosigner
Did not disclose.
Maximum Debt-to-Income Ratio
Less than or equal to 85%.
Ability to qualify if you’ve filed for bankruptcy
Yes, but not if you filed in the last 10 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
No. The Custom Choice Loan is available to students enrolled less than half time/part time during a given loan period. Only the Immediate Repayment option is offered for students enrolled less than half time
Percentage of borrowers who have a cosigner
Over 80%.
Repayment Options
In-school Repayment Options
Immediate Repayment: Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only repayment: Only pay interest while you’re in school.
Flat repayment: Pay $25 a month during school and the grace period. This repayment option is only available for loans with a balance of $5,000 or more.
Deferred repayment: Wait to make payments until you’re out of school.
Grace Period
6 months with an option to extend month-to-month for an additional 6 months.
Grace Period Extension
Yes, up to 6 additional months.
In-school Deferment
Yes, up to 48 months.
Military Deferment
Yes, up to 48 months if the borrower and cosigner cannot repay the loan while the borrower or cosigner is on active duty.
Disability Deferment
Did not disclose.
Forbearance
Up to 12 months available, in 2-month increments.
Cosigner Release
Yes, after 36 months of on-time payments.
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
American Education Services.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No
Average time from application to approval
Prequalifying takes less than a minute
Before you take out a student loan from Custom Choice…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
The Custom Choice Loan is funded by Citizens. Citizens is a legitimate lender that has been around for over 190 years. The company provides student loans to undergraduate and graduate students through the Custom Choice Loan.
Is Custom Choice available in all 50 states?
Yes, as of 6/1/2022, the Custom Choice Loan is available in all 50 states.
How long does it take to get a Custom Choice Loan?
Submitting an application for a Custom Choice Loan takes a few minutes. Once you’ve submitted your loan application, Monogram will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time for your school to receive the proceeds of your loan. Monogram estimates that the entire process from the school certification request to receiving the funds takes around 19 days.
What happens if I don’t qualify for the Custom Choice Loan?
If you don’t qualify for the Custom Choice Loan, Monogram will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or try with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all ready to support you.
Is the Custom Choice Loan federal or private?
The Custom Choice Loan is a private loan. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for the Custom Choice Student Loan hurt my credit score?
In order to estimate what rate you qualify for, Monogram conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the Custom Choice Loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Millions of students fill out the Free Application for Federal Student Aid (FAFSA) with the hope of scoring a portion of the $112 billion in available aid each year. However, depending on whether you meet the FAFSA requirements and eligibility criteria, you may not qualify for certain forms of aid. Here’s everything you need to know about the FAFSA requirements.
FAFSA Requirements and Eligibility
The FAFSA is your ticket to an array of federal financial aid programs such as Perkins Loans, the Pell Grant, and more. However, you may not qualify for some forms of aid. The following FAFSA requirements must be met to be eligible to receive federal financial aid:
1.) Have a high school diploma or equivalent (such as a GED), or completed an approved home-school high school program
2.) Be a U.S. Citizen or an eligible noncitizen
To be considered a noncitizen, you must either:
Have a green card
Have a T-visa
Have a parent with a T-1 visa
Have an Arrival/Departure record, or
Havebattered-immigrant-qualified alien status
3.) Have a valid social security number
4.) Be enrolled or accepted in a degree program at an eligible school or university
5.) If you are already a college student, maintain satisfactory academic progress. The standards for this vary depending on the school.
If you do not meet all of the above, then you are not eligible to receive federal student aid.
The FAFSA will ask you various questions to determine your financial situation. So, to meet the FAFSA requirements, you’ll need information from different documents. For the 2023-2024 school year, you will need access to the following documents:
Your social security card
Your driver’s license (if you have one)
2021 tax returns
2021 untaxed income records
2021 W-2 forms
Current bank statements
Your dependency status will also determine whose information you’ll need. As an independent student, you’ll only need your documents. But if you are a dependent student, then you’ll need both yours and your parent’s/parents’ documents to fill out the FAFSA.
There are certain things that can make you lose financial aid eligibility that you’ll want to be aware of. First, not meeting the above basic FAFSA requirements would disqualify you. For example, if your citizenship status changed because your visa expired or it was revoked, then you would be ineligible. Other reasons for financial aid disqualification include:
Not maintaining satisfactory progress at your college or degree program.
Not filling out the FAFSA each year you are enrolled in school.
The very first thing you’ll want to do is look for scholarships and grants. These forms of aid are essentially free money because you don’t have to pay them back.
We recommend starting your scholarship and grant search with external scholarship websites and search engines. These search engines compile thousands of scholarships in one place, which can help you find both need-based and merit-based scholarships and grants. Additionally, a lot of colleges have their own institutional scholarships and grants, too. Check with your school’s financial aid office for information about which ones you are eligible for.
Take Out a Private Student Loan
Private student loans can be a great help because you can take out larger quantities of money. Because you do have to pay this money back, you’ll want to use private student loans as a last resort method to fill in the gaps of what you can’t cover. That way you don’t bite off more than you can chew in student loans. When you’re ready to look for student loans, use Sparrow to help your search.
If you have a savings account, it can be a good idea to dip into your savings to help with college costs. While even a little bit of extra money will help, you should not deplete your savings or leave yourself with little savings for emergencies.
Only dip into your savings if doing so allows you to still have a decent amount saved after doing so. The more money you can put toward school, though, the less you’ll have to take out in loans.
Look for a Part-Time Job
A part-time job can help you come up with the income to pay for college expenses. Some companies will even offer to pay for part or all of your college costs if you work for them. These can be great opportunities that can get you both work experience and a way to pay for college.
Final Thoughts from the Nest
Filling out the FAFSA can provide you with access to a substantial bit of federal aid money. Knowing about the FAFSA requirements for aid eligibility can help you figure out what you need to do, whether that’s exploring other options or making some adjustments so you can be eligible. If you do not meet the FAFSA requirements and are unable to secure financial aid, consider exploring private student loan options with Sparrow. With the Sparrow application, you can get matched with private student loans you qualify for from 15+ lenders. This application can help expedite the private student loan search.
If you’ve filed the Free Application for Federal Student Aid (FAFSA) before, you know how tedious and time-consuming the process can be. From asking your parent(s) for tax documents they can’t find to double-checking your social security number even though you swear you have it memorized (which is good practice, so kudos to you), no one would want to repeat the process every year.
Lucky for you, you don’t.
The U.S. Department of Education offers a Renewal FAFSA option for students who have submitted their FAFSA the previous year, meaning that your FAFSA will have most of the questions pre-filled with answers you’ve already provided. All you need to do is update any information that has changed from the previous year (income, taxes, etc.).
Here are some tips to have an even faster FAFSA renewal process.
File the FAFSA Early
The FAFSA opens every year on October 1st and the federal deadline is June 30th at 11:59 CT, so mark those dates on your calendar.
We are currently in the 2022-23 FAFSA cycle. The application opened on October 1st, 2021 and the 2022-23 FAFSA is due on June 30th, 2023. You will be submitting your 2020 tax information for this application period.
The FAFSA deadline for states and institutions is different from the June 30th federal deadline, so you’ll have to find this information from your state and your school.
If you file your FAFSA early, you won’t have to go through the trouble of rushing to gather materials, submitting your application on a time crunch, or missing any state or institutional FAFSA deadlines.
More importantly, it’s in your best interest to submit your FAFSA as close as possible to the opening date so that you have better chances of receiving more financial aid.
Gather All the Necessary Documents
Here’s a handy list of all the documents you’ll need when filling out your FAFSA renewal. If you are a dependent student, you will need to input your parent(s)’ financial information. If you are an independent student, you only need to provide your personal financial information.
Your Social Security Number (never go off memory!)
Your parent(s)’ Social Security Numbers
Tax Information
Tax Returns
IRS W-2
Parent(s) tax information
Family income
Records of untaxed income. This includes the following (gather only what applies to you):
Child support
Veteran benefits
Information on any financial assets you have. This includes the following (gather only what applies to you):
Cash in your checking and/or savings account
Investments like stocks and bonds
Business assets
Mortgages
Log In to FAFSA.gov
When you first submitted your FAFSA, you had to create a Federal Student Aid (FSA) ID and password to go along with it.
You’ll need your credentials again when you are logging into your account at FAFSA.gov. Once you’re on the page, click the ‘Returning User’ option and log into your account.
If you’ve forgotten your FSA ID or password, there will be an option for you on the same page.
Once you’ve logged into your account, you will have to create a save key. You’ll need your save key to return to your application without having to log into your FSA account again, so it’s extremely important to remember. Your parents will also need the save key in order to access your application without your FSA ID and password.
Make Sure Pre-Filled Information is Correct
In your account, there will be a FAFSA Renewal option, along with other options to view your Student Aid Report (SAR) from the previous year or add a school to your application.
Click on the FAFSA Renewal option and you’ll be taken to your FAFSA that’s pre-populated with information you inputted from the previous year.
Even if you don’t have to input the information all over again, carefully look over the pre-filled information. Make sure that general information like your phone number, email address, mailing address, and permanent address is correct.
If you’ve moved, be sure to change your listed address. If you changed your phone number, address that accordingly in your FAFSA. If you’re transferring schools, you’ll need to add your new school so your FAFSA information is sent to the correct school.
Import Income Information Through the IRS
If you’ve filed a tax return through the Internal Revenue Service (more commonly known as the IRS) before, you’re even more in luck with streamlining the FAFSA renewal process.
FAFSA offers a tool called the IRS Data Retrieval Tool (DRT), which allows you to simply input your information and have your original IRS tax return information transferred onto your FAFSA.
This is a beneficial tool to use because:
You don’t have to send copies of your parent(s)’ tax returns to your school.
It ensures that your FAFSA has the most accurate tax information.
You don’t have to find your tax return forms (though you should have them on hand somewhere!)
The IRS DRT can only be used if you have filed your tax return for the previous year.
Sign and Submit Your FAFSA Renewal
You’re almost there!
Now that you’ve reviewed and updated all of your information accordingly, it is time to submit your FAFSA Renewal.
Do a quick run-through to ensure that all of the information is accurate.
Before you submit your application, the FAFSA will need an electronic signature from you, which is your FSA ID.
Press the ‘Submit’ button and you are done!
Closing Thoughts From the Nest
Submitting the FAFSA is a quick and easy way to earn financial aid for educational costs that every eligible student should take advantage of.
The FAFSA allows you to access federal student loans, work-study, and grants, which will help you make up the cost of college.
If you’ve submitted the FAFSA before, be sure to take advantage of the FAFSA renewal. You can save precious time and apply without having to fill out the entire application, making it easier for you to submit your application closer to the October 1st opening date.
This way, you also have more time to apply for scholarships and grants, which are basically free money for you to cover your tuition.
Every year, the Free Application for Federal Student Aid (FAFSA) opens so students can apply to receive federal student aid like work-study, grants, and federal loans.
It’s important that you stay on top of the FAFSA deadlines and submit your financial aid applications annually to maximize your chances of receiving federal student aid.
In this article, we’ll tell you everything you need to know about the FAFSA deadlines so you can make affording your college education easier.
When Does the FAFSA Open? What is the FAFSA Deadline?
There are two dates that you should remember as you file the FAFSA: June 30th and October 1st. Every year, the FAFSA opens on October 1st and is due on June 30th at 11:59 PM CT.
The FAFSA opens a year before the academic year you plan to file for. For example, the 2022-23 FAFSA has been open since October 1st, 2021 and is due on June 30th, 2023. The FAFSA for the 2021-22 academic year has been open since October 1st, 2020, and was due on June 30th, 2022.
However, there are different FAFSA deadlines for state and institutional aid. If you want to qualify for financial aid offered by your state like grants and scholarships, you must submit the FAFSA by your state’s application deadline. To receive financial aid from your school, you must submit your FAFSA by the deadline outlined by your institution.
What Tax Information Do I Submit On the FAFSA?
If you are a dependent student, you will submit your parent(s)’ financial information (family income, tax information, etc.) on the FAFSA.
Because the FAFSA for each school year opens one year before that school year, you report your tax information from the year before the current one.
Let’s clear that up a bit.
Let’s say that you are filing your FAFSA for the 2022-23 academic year. The application has been open since October 1st, 2021. You submit your income/tax information from 2020 because the 2021 tax has not been filed yet (the 2021 tax returns were due on April 18th, 2022).
The FAFSA opened for the 2021-22 academic year on October 1st, 2020. One year before 2020 is 2019, so you submit your 2019 tax information and income.
Academic Year
FAFSA Open Date
Federal FAFSA Deadline
Which Year’s Income/Taxes Needs to be reported
2025-26
October 1st, 2024
June 30th, 2026
2023
2024-25
October 1st, 2023
June 30th, 2025
2022
2023-24
October 1st, 2022
June 30th, 2024
2021
2022-23
October 1st, 2021
June 30th, 2023
2020
2021-22
October 1st, 2020
June 30th, 2022
2019
When Should You Actually File the FAFSA?
Even though the application window for the FAFSA is nearly two years, submitting your application as soon as possible is crucial.
Some financial aid is awarded based on a first-come, first-served basis, such as work-study aid, state aid, and institutional aid. So, you should file the FAFSA as close as possible to the October 1st opening date. This is crucial to receiving as much financial aid as you are eligible for.
All FAFSA Deadlines
State and Institutional FAFSA Deadlines
While the FAFSA is used to award federal student aid, institutions and states also use the FAFSA to award financial aid of their own.
Institutional and state FAFSA deadlines are usually earlier than June 30th, the federal FAFSA deadline. You will need to check the FAFSA deadlines of your state and the institutions you plan to apply to.
For example, the priority FAFSA deadline for the state of Connecticut was February 15, 2022 for the 2021-2022 school year. For Idaho, the FAFSA deadline was March 1st, 2022 to receive priority consideration for the state’s Opportunity Scholarship.
If you are going to attend a university outside of your home state, you may not qualify for state financial aid, though this depends on the state. For example, in California, undergraduate students who are attending university out-of-state are not eligible to receive the Cal Grant.
Federal FAFSA Deadline
The federal FAFSA deadline for the 2022-23 school year is June 30th by 11:59 PM CT. Any changes or errors that need to be addressed in the FAFSA must be submitted by September 10th, 2022 by 11:59 PM CT.
FAFSA Deadline Q&A
When Does the FAFSA Open?
The FAFSA opens every year on October 1st for all states.
Is FAFSA First-Come, First-Served?
While not all federal financial aid is given on a first-come, first-served basis, there is some federal financial aid that is awarded on a first-come, first-served basis like work-study.
When Should I Submit the FAFSA?
You should submit your FAFSA as soon as possible after October 1st so that you have a better chance of receiving more financial aid.
Do I Fill Out The FAFSA Before I Get Accepted?
Yes, you can and should submit your FAFSA before applying or being accepted to college. Even though you won’t receive a financial aid package until you are admitted to a school, it is best to fill out your FAFSA as soon as possible so that you do not miss out on financial aid that is awarded on a first-come, first-served basis.
Should I Fill Out the FAFSA If My Parents Make a Lot of Money?
Yes, you should fill out the FAFSA even if your parents make a lot of money. You never know what you’ll qualify for, and most schools use the information you provide on the FAFSA to determine what scholarships and grants are awarded to who.
Even if you don’t meet the financial aid eligibility requirements to receive aid, you can still find out what federal loans you qualify for.
When Is the FAFSA Due for the Next School Year?
The FAFSA is due by 11:59 PM CT on June 30, 2023 for the 2022-23 school year. Any corrections and/or updates must be submitted by 11:59 PM CT on September 10th, 2023.
Closing Thoughts From the Nest
If there’s anything to take away from this article, it’s these two dates: October 1st and June 30th. Remember to submit your FAFSA as soon as possible after the October 1st opening date so that you won’t have to worry about any federal, state, or institutional deadlines.
If you have already missed the FAFSA deadline, consider the following:
Apply for scholarships and grants. You can apply for state, institutional, and private scholarships at any time of the year. Scholarships and grants are essentially free money for college. Take advantage of this.
Consider private student loans. Student loans should be your last option if financial aid (federal student loans, work-study, etc.), scholarships, and grants don’t quite cover college costs. In order to see what private student loan options you qualify for, submit a free application with Sparrow today.
Appeal your financial aid award. If you don’t think you received as much aid as you qualified for or had any unusual financial changes, appeal your financial aid package to have your award reconsidered.
Around 1 in 5 Americans hold student loans, which is hardly a surprise. After exhausting your scholarship, grant, work-study, fellowship, and financial aid options, student loans are a plausible option for filling in the gaps in your education costs.
Given the nationwide student debt crisis, it’s more important than ever to secure a competitive student loan that offers quality terms, like low-interest rates, loan deferment/loan consolidation options, and an ample repayment period.
Typically, the parent/guardian of the student helps navigate through the process of securing student loans and paying for tuition. Going through the process alone, however, can be overwhelming and lonely, but we’re here to help.
If you’re a student who is looking to land a good student loan option without the help of your parent(s), continue reading this article.
Explore Federal Loan Options
The United States Department of Education offers student loan options for qualifying students in the U.S.
Federal student loans are usually the better option as opposed to private student loans because federal student loans come with a plethora of benefits that private loans do not offer, such as loan cancellation, fixed interest rates, interest rate reduction, income-driven repayment plans, etc. Most federal student loans also do not require a cosigner or a credit check, which most private student loans do.
Since you are applying for student loans without a parent or guardian, consider the Direct Unsubsidized Loans and the Direct Subsidized Loan options.
Direct Subsidized Loan
Direct Unsubsidized Loan
For undergraduate students with demonstrated financial need
For undergraduate and graduate students; do not need to demonstrate financial need
Your school determines how much you can borrow.
Your school determines how much you can borrow.
The U.S. Department of Education pays the interest on the loan • If you’re in school at least half-time • During deferment • During the first six months of a grace period
You must pay the interest on the loan at all times.
As you can see, the Direct Subsidized Loan is a far better option than the Direct Unsubsidized Loan. This is because you do not need to pay the interest on the loan if you’re in school half-time or more, during loan deferment (when you can temporarily stop making loan payments due to difficult financial circumstances), and during the first six months of your grace period (a period of time that allows the borrower to delay their payment for a short period of time).
Find a Friend or Other Relative to Cosign
91% of undergraduate loans are cosigned. When applying for private student loans, it’s extremely likely that you will need a cosigner, or an additional person who will take responsibility for the loan with you.
Anyone can be a cosigner, as long as they are 18-years-old or older and have a steady flow of income. It’s recommended to have a cosigner with an excellent credit score, however, to get you more favorable terms for your private student loan. Having a cosigner with adverse credit history can harm your chances of receiving a competitive student loan.
Having a cosigner tends to be necessary because most students don’t have a credit history and aren’t considered to be trustworthy borrowers; therefore, having two people responsible for a loan makes it more likely that the loan will be paid back.
More often than not, having a cosigner on your loan will be a make-it-or-break-it factor when it comes to being approved for a private student loan.
If your parents cannot or will not cosign a private student loan for you, consider asking a friend or other relative to cosign the student loan with you.
If someone cosigns a loan with you, their credit score and credit history are as on the line as yours is. Asking someone to cosign a loan with you is a very serious thing, so it should be done thoughtfully and communicatively.
Find a Private Student Loan Without a Cosigner
A private student loan that doesn’t require a cosigner comes with its own benefits and drawbacks. For example, the liability of the private student loan doesn’t lie upon two individuals. However, a private student loan without a cosigner will most likely have higher interest rates and less favorable terms in comparison to a private student loan with a cosigner.
According to the Wall Street Journal, undergraduates with a cosigner were offered interest rates of 5.37%, while private student loans without a cosigner offered interest rates of 7.46%.
However, it’s important to take advantage of the private student loan options you have that do not require a cosigner, especially if you do not have the assistance of your parents or others.
Best Student Loans With No Cosigner
Sparrow’s partners offer private student loans that do not require a cosigner. Here are some of the best student loans on the market that you can get without having a cosigner.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. To qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you are a Texas resident, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a College Ave student loan without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5- or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA, and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. MPOWER is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. Prodigy Finance is a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. SoFi does not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. If you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
To see what student loans you qualify for and at what rate, complete the Sparrow application.
Closing Thoughts From the Nest
Affording school is not easy, but it is definitely doable if you are a strategic, informed consumer.
Before anything, be sure to submit your FAFSA as soon as possible so that you can receive federal financial aid before it runs out.
Secondly, look into as many scholarships, grants, and fellowships as you can to pay for your education. You should exhaust your options to get free money for college as much as possible so that you won’t accumulate overwhelming amounts of student debt.
Read Sparrow’s articles on scholarships and grants to find the best search engines to streamline your application process.
Furthermore, consider picking up a side hustle to be able to save up money to afford college. Whether it be coaching at a local elementary school, writing blogs for companies, or working as a cashier, anything can help.
After completing all of these steps, start researching the private student loan options that you have. Sparrow’s free online tool can help you do that. If you submit an application with us today, we’ll show you some of the best student loan options on the market and let you compare cosigners so you can find the best rate.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Whether you plan to go to college, professional school, or graduate school, you will need to submit the Free Application for Federal Student Aid (FAFSA) to receive aid such as grants, work-study, and federal student loans.
Typically, the FAFSA requires you to submit details about both your and your parent(s)’ financial information if you are a dependent student. However, if you are an independent student, you will likely be submitting the FAFSA on your own.
Here’s how you can submit the FAFSA without the help of your parent(s).
Can I File the FAFSA Without My Parents?
Your ability to submit the FAFSA without your parent(s)’ information depends on your dependency status.
All FAFSA applicants are considered either independent or dependent students.
If you are an independent student, you only need to submit your own financial information (and your spouse’s, if you are married) and do not need your parent(s)’ information.
If you are a dependent student, you will need to submit both you and your parent(s)’ financial information.
What is the Difference Between an Independent Status and a Dependent Status?
You are considered a student with an independent status if you are one of the following:
At least 24 years old
A graduate/professional student
An orphan or ward of the court
An emancipated minor
Married
Someone who is homeless or at risk of being homeless
Have legal dependents (children)
Have a dependency override from a financial aid administrator with proper documentation
If you answered yes to any of the above questions, you can be considered as an independent student for the FAFSA.
If you answer no to all of the questions, you are considered a dependent student.
More information on specific circumstances and common questions can be found on this FAFSA worksheet on dependency status.
How to Fill Out the FAFSA Without Your Parent’s Help
If you are an independent student and answered yes to at least one of the questions above, you do not need your parent(s)’ help to fill out the FAFSA.
On the other hand, if you are a dependent student, you may not necessarily need help from your parent(s), but you will still need their financial information.
Make sure you have the following information at your disposal before filling out your FAFSA. Most of this information will need to be obtained from your parent(s):
Your Social Security Number (never go off memory!)
Your parent(s)’ Social Security Numbers
Tax Information
Tax Returns
IRS W-2
Parent(s) tax information
Family income
Records of untaxed income
Child support
Veteran benefits
Information on any financial assets you have
Cash in your checking and/or savings account
Investments like stocks and bonds
Business assets
Mortgages
What Do You Do if Your Parents Refuse to File the FAFSA With You?
If your parent(s) refuse to help you fill out the FAFSA and provide any of their financial information, you have several options at hand.
Convincing your parent(s) to give you their financial information is the most optimal situation so that you can receive as much money as you can for college costs, but we understand that this might not be possible in unusual or difficult circumstances.
If you are not submitting your FAFSA as an independent but are still in a situation that considers you as one that is not included in the U.S. Department of Education’s guidelines, take the following steps.
Reach Out to Your Financial Aid Office
If you do not meet the requirements to be an independent student and cannot access your parent(s)’ financial information for whatever reason, reach out to the financial aid offices of the schools that you hope to attend.
Explain your situation to the financial aid administrators and provide the appropriate documentation that legitimizes your situation (ex. A letter from a church member, a sibling, a teacher, etc.)
Doing so will call the attention of the university’s financial aid office to consider other financial options they can give to you and work with you to remedy the issue (ex. More work-study options, special loan options, etc.).
See If You’re Eligible for a Dependency Override
Financial aid offices can grant dependency overrides to students they believe qualify as an independent student without meeting the federal government’s outlined criteria.
This means that even if you do not qualify for FAFSA as an independent in technical terms, this dependency override considers you as an independent.
You can only receive a dependency override from a financial aid administrator, not the federal government.
A dependency override is extremely difficult to obtain; approximately, only 2% of undergraduates become independent because of a dependency override.
This should not hinder you from trying; every effort counts, especially if your extenuating circumstances are severe or unusual.
How to Obtain a Dependency Override
Determine if your circumstances are unusual or special. Your situation should be in a similar vein to the following:
Your parent(s) are incarcerated
You are fleeing an abusive household
You do not know where your parent(s)/guardian(s) are
Explain your situation to the financial aid office via email or phone (if possible).
Prepare the proper documentation to prove the validity of your situation.
Discuss a dependency override with your financial aid director.
Explore Scholarship and Grant Options
Scholarships and grants are a form of gift aid that are basically free money from federal, statewide, private, or institutional organizations.
Scholarships are issued based on need, merit, and special achievements. Grants, on the other hand, are only issued based on financial need.
Scholarships and grants can be used to cover all kinds of costs, such as the cost of tuition, the cost of books/school supplies, the cost of room and board, etc., depending on the amount of money you receive.
Be sure to take advantage of scholarship opportunities and grant offerings.
If you can demonstrate financial need through your FAFSA as an independent student or with a dependency override, apply for the Direct Subsidized Loan.
Direct Subsidized Loan
Direct Unsubsidized Loan
For undergraduate students with demonstrated financial need
For undergraduate and graduate students; do need to demonstrate financial need
Your school determines how much you can borrow
Your school determines how much you can borrow
The U.S. Department of Education pays the interest on the loanIf you’re in school at least half-timeDuring defermentDuring the first six months of a grace period
You must pay the interest on the loan at all times.
If you cannot demonstrate financial need because you did not submit your FAFSA with your parent(s)’ information, or if you could not obtain a dependency override, consider private student loans.
Private student loans are offered by private organizations, and these loans usually have independent terms and services.
Private loans should be your last option when it comes to exploring means to pay for your college education. Unlike scholarships and grants, loans need to be paid back on time, or they can harm your credit score and accrue overwhelming amounts of education debt.
If you are looking for competitive private student loan options, consider using Sparrow’s free online tool to find what loans are available to you on the market. After submitting an application with us, you can use our prequalification tools to determine whether or not you qualify for a loan before applying to it, explore cosigner options, and find the best repayment option and interest rates.
As Your Last Resort, Wait Until You Are 24
If all else fails, you still have the last resort option of waiting until you are 24 to submit your FAFSA as an independent.
In the meantime, you can attend college through private student loans, grants, scholarships, and savings. Furthermore, you should still receive some amount of financial aid despite not having any of your parent(s)’ information submitted in your FAFSA.
Another option is attending community college for two years so that you only have to pay for half of your college tuition costs.
Closing Thoughts From the Nest
Completing the FAFSA may seem daunting, but it takes an average of one hour for students to submit their FAFSA if they have all the necessary information on hand.
If you are a dependent student whose parent(s) are accessible to you, make sure to obtain your parent(s)/guardians’ financial information to expedite the process.
If you are a dependent student who is currently in extenuating circumstances that hinder you from applying with your parent(s)’ financial information, be sure to contact your school’s financial aid office.
Each year, college-bound students anticipate receiving their college financial aid award letters. Oftentimes, financial aid becomes a make-it-or-break-it factor in pursuing a higher education.
If your financial aid award is too small, it could put attending that university out of the question. But what if you receive nofinancial aid at all?
Before you throw your college dreams out the window, let’s break this down. Here’s what you can do to pay for college with no financial aid.
Opening a financial aid award letter only to see a series of zeros is both disappointing and uncommon. In fact, the vast majority of students do receive at least some sort of financial aid, whether that be scholarships, grants, work-study, or loans.
Financial aid is calculated based on a variety of factors, however, it tends to be either need-based or merit-based. Need-based financial aid is given based on your financial need, or how much you or your family is expected to be able to contribute to your college education. Merit-based aid, on the other hand, is given based on achievements, such as academic or athletic excellence.
Why Didn’t I Get Financial Aid?
How your financial aid is calculated is frankly a complex process. So, in theory, there are a variety of reasons you didn’t qualify for financial aid.
That said, there are seven common things that often disqualify students from receiving financial aid.
#1: You Didn’t Submit Your FAFSA
The FAFSA, or Free Application for Federal Student Aid, must be filled out for you to be considered for federal financial aid. Federal financial aid includes all federally-funded aid programs, such as federal grants, work-study, and federal student loans.
The FAFSA opens each year on October 1st and closes on June 30th of the following year. You should complete the FAFSA the year before you plan to enroll in college. For example, if you plan to attend college for the 2023-2024 academic year, you should complete the FAFSA during the October 1st, 2022-June 30th, 2023 cycle.
If you did not complete the FAFSA, you will not be eligible for federal financial aid.
#2: You Submitted the FAFSA Late
Federal financial aid is awarded on a first-come, first-served basis.
The later you submit your application, the lower your chances of receiving financial aid. Because of this, we recommend submitting your FAFSA as close to the October 1st opening date as possible.
Likewise, the June 30th deadline for submitting the FAFSA is firm. If you submitted the FAFSA past the deadline, you will be ineligible for federal financial aid for that academic year. You must wait until the next application cycle to fill it out again.
If helpful, put the FAFSA opening date and submission deadline in your calendar for future academic years so you don’t forget.
#3: You’ve Reached Your Financial Aid Limit
Certain financial aid has limits. For example, some grant programs award recipients with $20,000 and allow them to use the funds as they see fit. So, if the recipient had already used the entire $20,000 of that award to fund their freshman year tuition, they will not receive any additional grant funding from that program in following years.
If you have already met the maximum award or borrowing limits for the financial aid you have access to, you will not see more financial aid in your aid package.
Some of the most common financial aid programs with limits are:
6 years of funding. Recipients are eligible to receive 600% of their yearly award (over the course of a 6-year period). If recipients use 150% of their total 600% in their freshman year, they will have a remaining 450% for the rest of their college career.
The total Cost of Attendance minus your Estimated Family Contribution (EFC).
Federal Undergraduate Unsubsidized Loans (Dependent Students)
• First Year: $5,500 ($3,500 subsidized, $2,000 unsubsidized) • Second Year: $6,500 ($4,500 subsidized, $2,000 unsubsidized) • Third Year and Beyond: $7,500 ($5,500 subsidized, $2,000 unsubsidized) • Total Limit Over the Course of Your Entire Education: $31,000 ($23,000 subsidized, $7,000 unsubsidized)
Federal Undergraduate Unsubsidized Loans (Independent Students)
• First Year: $9,500 ($3,500 subsidized, $6,000 unsubsidized) • Second Year: $10,500 ($4,500 subsidized, $6,000 unsubsidized) • Third Year and Beyond: $12,500 ($5,500 subsidized, $7,000 unsubsidized) • Total Limit Over the Course of Your Entire Education: $57,500 ($23,000 subsidized, $34,500 unsubsidized)
Graduate Federal Student Loans
$20,500 in unsubsidized loans with a lifetime limit of $138,500, which includes undergraduate federal student loans.
If you have already reached your maximum award or borrowing limit, you may not receive more financial aid.
#4: You are Defaulted on a Federal Student Loan
Your federal student loans are considered defaulted after you’ve missed your scheduled loan payments for more than 9 months, which is around 270 days.
If you are defaulted on a federal student loan, you are ineligible for federal student aid, regardless of whether you submitted the FAFSA.
If your student loans are in default, or you believe they may be in default, contact your federal student loan servicer as soon as possible to discuss options such as loan rehabilitation.
You will not be eligible for any federal financial aid until the defaulted loan is paid off.
#5: You Did Not Meet the Income Threshold for Need-Based Aid
Need-based financial aid requires you to meet a certain threshold of financial need to be eligible. Information such as your expected family contribution (EFC), your school year, and the cost of attendance at your school will determine your eligibility for need-based financial aid.
#6: You Did Not Meet the Eligibility Requirements for Merit-Based Aid
When determining your eligibility for merit-based aid, your academic standing may be considered. If you are not making Satisfactory Academic Progress (SAP), you will be ineligible for merit-based federal financial aid.
To make SAP, you must have at least a 2.0 GPA on a 4.0 scale (a C average) and pass enough classes to make progress toward earning a degree.
#7: You Are Not a U.S. Citizen
When it comes to federal financial aid, only U.S. citizens and permanent residents with a green card are eligible. If you are neither, you will not be eligible to receive federal financial aid.
6 Ways to Pay for College Without Financial Aid
If you fall into one of the above categories, and thus did not receive financial aid, there are a few things you can — and should — do to pay for college.
Here are the top six things you can do to pay for college with no financial aid:
Write an Appeal Letter
While it may sound intimidating, appealing your financial aid package should be your first step. Before you write an appeal letter, though, you should consider the following:
Has your or your family’s financial situation changed since you submitted the FAFSA due to unexpected or special circumstances? (ie. medical expenses)
Did you make an error on your FAFSA that you believe impacted your financial aid package?
Did you receive a better financial aid package from another school that you’d like another school to match?
If any of the above circumstances are applicable to you, it is worthwhile to appeal your financial aid award.
When writing your appeal letter, be mindful of what you say and how you say it. Remember, their initial assessment granted you $0 in financial aid. They will need to spend time reevaluating your financial aid package, so be understanding and respectful of their time.
Look for Merit-Based Scholarships
Merit-based scholarships should be your next stop in paying for college without financial aid. Scholarships, unlike student loans, do not have to be paid back. (Yup, free money.)
We recommend starting your search with scholarship search engines. These sites compile thousands, sometimes even hundreds of thousands, of scholarship opportunities, making it easy for you to apply to several in one place.
For example, if you received your financial aid package of $0 on May 1st, 2023, you still have until June 20th, 2023 to complete the FAFSA. While you may not receive any financial aid due to submitting so late in the cycle, it is worth a shot.
To complete the FAFSA, start by gathering any necessary documents such as:
Your social security number
Your parents’ social security numbers (if you are a dependent)
Your Alien Registration Number (if you are not a U.S. citizen)
Tax information, such as tax returns
Records of any untaxed income
Information on cash you may have
After you have this information, fill out the FAFSA, and submit it before June 30th.
Look for Jobs that Offer Tuition Assistance
If receiving other financial aid is not an option, pursuing employment at a company with tuition assistance is another solid option.
There are a variety of companies offering both part-time and full-time employment with incredible tuition reimbursement benefits.
For example:
Starbucks offers both full-time and part-time employees up to 100% tuition reimbursement for courses taken through Arizona State University’s online program.
Target offers employees up to 100% tuition reimbursement for undergraduate degrees.
Papa John’s offers employees at corporate-owned locations up to 100% tuition reimbursement for undergraduate and graduate degree programs done through Purdue University Global.
Consider Private Student Loan Options
If you are unable to secure other forms of financial aid, private student loans can be a viable option. As with any loan, however, you should always compare interest rates and terms so you can get the best student loan possible.
The following are our top picks for private student loans:
Arkansas Student Loan Authority – Best if you are located in Arkansas, have a qualified cosigner, and want competitive interest rates.
Ascent – Best if you don’t have a cosigner, are an international or DACA student, or have a low credit score.
Brazos – Best if you are a Texas resident, have strong credit, and want competitive interest rates.
College Ave – Best if you are seeking competitive interest rates and a more flexible repayment plan that matches your budget.
Earnest – Best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options.
Funding U – Best if you are a high-achieving student with limited credit history and no access to a creditworthy cosigner.
INvestED – Best if you are a resident of or student in Indiana seeking competitive interest rates and a variety of repayment options.
LendKey – Best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER – Best if you are an international or DACA student, don’t have a credit history, or can’t access a qualified cosigner.
Nelnet Bank – Best if you are seeking competitive interest rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance – Best if you are an international student who doesn’t have a credit history and can’t access a qualified cosigner.
Sallie Mae – Best if you are seeking a more flexible repayment plan and competitive interest rates.
SoFi – Best if you are seeking competitive interest rates and have a strong credit history or a creditworthy cosigner.
Rather than completing an individual application with each lender to see what you qualify for, consider using Sparrow. The Sparrow application allows you to submit one single application to see what rates you qualify for at 15+ student lenders. Using Sparrow is also free and won’t impact your credit score.
Consider Community College
If your top choice school is simply out of reach due to a lack of financial aid, it may be worthwhile to consider a less expensive school, or even a year or two at a local community college. Community college is often far cheaper than traditional 4-year institutions.
Final Thoughts from the Nest
If you didn’t receive any financial aid, don’t lose hope. There are a variety of things you can do to still pursue a higher education. Start with appealing your financial aid award, then look for other avenues for aid, such as scholarships and private student loans.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
While having a college degree is extremely beneficial and advantageous in our modern world, many people don’t talk about how costly it can be.
Saving for college is in your best interest if you want to be able to pay for your education comfortably, but there are still many ways to make college affordable.
Let’s find out what these options are and how you can make your dreams of college more accessible.
How Much Does a 4-Year College Actually Cost?
College tuition has seen a notable increase in the past forty years due to inflation, growing disproportionately to other consumer goods in the economy.
The average cost of tuition, fees, and room/board at four-year public colleges increased by 179.2% over the past twenty years, with an annual average increase of 9%.
For private colleges, the average cost of tuition, fees, and room/board increased by 124.2% with an annual average increase of 6.2%.
Inflation rates and the severity of their growth depend on the type of school. Due to funding, the tuition for public schools usually increases more than the tuition for private schools on an annual basis.
In simple terms, inflation is the rate of increase in the prices of a specific consumer good (cars, loans, electronics, etc.) over a period of time. Inflation fluctuates in every aspect of our economy where things are being bought and sold, though the inflation rate for college tuition has grown exponentially over the years.
College rates have been increasing since the 1980s, and though there is no exact explanation behind this, researchers attribute the increase to the following factors:
More student support services: Since the 1980s, colleges have begun to offer more services to students like mental health services, health insurance, and college counseling, which costs more than just a standard college education.
Changes in state and local funding: Public institutions rely on state and local funding to operate, though state and local funding fluctuates based on the economy, market conditions, and tax revenue. If universities receive less public funding, tuition increases for students to make up the difference.
It’s crucial to start saving for college as early as possible so that you can combat the rising costs of college tuition.
How to Approach Rising College Costs
While the unyielding rising costs of college may seem overwhelming, being an informed consumer and exploring your financial options will mitigate the financial burden of a college education.
You can apply for federal financial aid, scholarships, grants, and loans to lower the cost of college. In addition, speak with your high school counselor or your college’s financial aid office for financial advice and knowledge.
Having a plan to save for college is imperative to meet your saving goals.
How Much Should I Have Saved Up for College?
As a Parent/Guardian
It’s never too early to start saving for your child’s college education. In fact, 42% of parents state they wish they would have started saving earlier.
Because of volatile market rates, unpredictable financial aid, as well as the uphill growth of college tuition, it can be difficult to determine whether or not parents have saved enough money to pay for their child’s college tuition.
The following ratios calculate the ideal amount of money that parents should have saved in their student’s college fund.
The ⅓ Rule
The ⅓ Rule dictates that parents should save for college by dividing the cost of tuition into thirds: ⅓ of the college tuition should be paid with savings, ⅓ of tuition should be paid with income, and the last ⅓ should be paid with loans/grants/scholarships.
According to the ⅓ rule, parents should save the average cost of college tuition for the year that their child was born.
For example, if a child was born in 2001 and the average cost of tuition that year was $23,528, parents should have $23,528 in their child’s college fund by the year their child goes to college. This way, the cost of inflation is accounted for, and the amount is roughly ⅓ of the child’s tuition when they are of age to attend college.
The 2k Rule
Fidelity’s 2k Rule assumes that parents are expecting to cover 50% of their child’s college tuition with their college savings and that the cost of tuition will grow 3% above the national inflation rate in a four-year period.
In order to calculate how much you should save for college, follow these steps:
Determine the average annual tuition for your student’s target college/type of college.
Multiply the average annual tuition by the percentage you plan to pay for with your college savings.
For every $10,000 you cover per year, multiply your child’s age by $2,000.
If you’re a college student paying for your education on your own, all the power to you. While there isn’t a textbook amount of money that you should have saved on your own, the ideal amount to have saved is the same as it is for parents: $2,000 per year.
This is not feasible for the vast majority of students, especially since you can’t begin to work legally until you’re 15 and ½ years old.
Your best option would be to save as much money as you can and make applying to scholarships and grants your first priority.
You can only apply for financial aid once a year, but there are always going to be scholarships and grants available to you. The more free money you can get, the better.
How to Get Extra Money for College
If you don’t have sufficient college savings, don’t lose hope! There are still other ways that you can save for college.
Pick Up a Side Hustle
Nearly 30% of high school students are employed during a portion of their schooling. Picking up a job or a side hustle is not only a great way to make extra money for college, but to explore your interests, pick up soft and hard skills, and develop a strong work ethic.
Whether you want to work part-time at Starbucks, tutor students after school at an hourly rate set by yourself, or intern at a law firm, having that flow of income will be extremely beneficial if you save your money wisely.
Many employers also offer tuition reimbursement programs. So, not only could you make an income from working, you could gain extra free money in tuition reimbursement.
Apply to Scholarships
A scholarship is a form of financial aid that is awarded to students to support their college expenses. Scholarships are usually awarded based on merit, financial need, or other significant achievements.
Scholarships come in all shapes and sizes: some scholarships are one-time checks, and others cover your school supplies for your four years at college.
There are three types of scholarships: statewide scholarships, private scholarships, and institutional scholarships.
Statewide scholarships are offered by the state. This can either be the state you plan to attend college in or your native state. For example, California offers the Association of California Water Agencies Awards scholarship and Utah has the Utah Promise Scholarship.
Private scholarships are sponsored by private or non-profit organizations. These scholarships can be offered by professional organizations, ethnic organizations, community centers, etc.
Institutional scholarships are offered by the college you plan to attend. Be sure to do research on what specific scholarships are offered at your institution, and contact your school’s financial aid office for more information.
Scholarships are your best option when it comes to saving for college because you can apply to as many scholarships as you want, whenever you want. Whether you’re a freshman or senior in high school, there are many scholarship options available to you.
Look for Grants
Grants will be your second best option to save for college.
While scholarships can be awarded based on merit, achievement, and/or financial need, grants are only offered to students who demonstrate financial need.
Grant aid is also a form of financial aid that does not need to be paid back and can come from the federal government, state governments, institutions, and private organizations.
For example, the federal government offers grants like the Pell Grant, while the state of Michigan offers the Michigan Tuition Grant.
If you want to receive grants, you’ll need to demonstrate financial need. In order to do this, you need to submit your Free Application for Federal Student Aid (FAFSA) so that the federal government’s student aid agency can calculate how much aid you need and your expected family contribution.
Most grants will ask you to send a copy of your FAFSA to determine your financial standing, so submitting your application is a crucial step if you want to receive grants.
Search engines such as CollegeGrants.org and CollegeGrant.netare great places to begin your private grant search to pay for your college tuition.
Explore Loan Options As a Last Resort
Once you’ve exhausted your scholarship and grant options, consider applying for student loans if you still need more financial aid.
Unlike grants and scholarships, student loans need to be paid back and are given out based on your credit history, your cosigner, as well as your financial status.
Federal loans are student loans that are offered by the government and should be the first option that you should consider. Federal loans are usually more forgiving than private loans and offer loan consolidation and forgiveness options, and don’t require a cosigner.
On the other hand, while private loans are more varied and numerous, they can be trickier and more difficult to navigate than federal student loans. Because most students don’t have a credit history, they will most likely need a cosigner to originate a private loan. Without a cosigner, student borrowers tend to have slimmer chances of acquiring a student loan with competitive repayment options or interest rates.
While taking out a student loan is not the most optimal way to pay your college tuition, due to interest accretion and repayment contracts, student loans are a great way to start building your credit history as a student.
Usually, private student loans have a prequalification option to determine whether or not you would be eligible for the student loan. Most private student loans require you to submit an application and undergo a hard inquiry, or a credit check, which lowers your credit score temporarily.
Sparrow offers a free, online tool that allows you to see which loans you qualify for without any cost or impact on your credit score. Submit an application with us today to find the best student loan options you are eligible for on the market.
Closing Thoughts From the Nest
Choosing a school and getting into college is already difficult enough, but saving for college and paying for it is a whole other battle.
While affording college might seem like an impossible task that has no gain for a seemingly substantial financial loss, attending college is not a futile attempt and students/parents should not be discouraged due to costs.
Students can always apply for grants and scholarships. Picking up a side hustle is a great way to earn money as a student, and institutional work-study is an option as well. Unless the student’s family is making an annual income of $250,000 or more, the family can qualify for federal financial aid. Student loans can also significantly cover the cost of tuition.
Being an informed consumer is crucial to saving for and affording college, so make sure to explore all of the options available to you.
Filling out the Federal Application for Federal Student Aid (FAFSA) is crucial to getting you federal aid. But it can be a tricky document to fill out and relies heavily on your parents’ financial information. So, what happens if you don’t have any parental support for college? What does filling out the FAFSA as an independent student mean? And how will it impact your federal aid? If you’re wanting to file as an independent but have no idea where to start, here’s all you need to know.
What is an Independent Student on the FAFSA?
An independent student is someone who will report their own information on the FAFSA. So, instead of providing both your’s and your parents’ financial information, you will only enter your own. As a result, your financial situation will determine how much financial aid you get.
The answers you provide on the FAFSA will ultimately determine your dependency status for federal student aid purposes. This will include details on income and finances, which can typically be found on your income tax return.
Can I Claim Myself as an Independent?
You cannot simply claim yourself as an independent student for financial aid purposes. To be an independent student, you would have to meet one of the following dependency criteria.
At least 24 years old (This can look different on the FAFSA from year to year. For example, in the 2019-2020 financial aid award year, the FAFSA asked if you were born before January 1, 1996. On the 2022-2023 Application, they’ll ask if you were born before January 1, 1999.)
Married
A graduate or professional student
An emancipated minor
A homeless youth or a youth at risk of being homeless
A veteran or in active duty
An orphan
A ward
Someone with other legal dependents
The Federal Aid website offers a dependency fact sheet. The sheet is helpful in determining your financial aid dependency status. The sheet has dependency questions similar to what you’ll see on the FAFSA. If you answer yes to one or more of these questions, you are considered an independent student. If you answer no to all of them, you are not.
How to File as an Independent Student on the FAFSA
Your ability to file as an independent depends on your dependent student status. Most students will be classified as dependent students, and if you are considered one, you cannot simply file as an independent because you would like to.
If you meet one of the above independent student criteria, then you will be considered an independent student on the FAFSA. You can proceed by filling out the FAFSA per usual.
However, if you do not meet one of the criteria, but believe you should be considered an independent student, you can file a dependency override.This is when unusual circumstances allow a dependent student to fill out the FAFSA as an independent. You can get a dependency override for the following reasons:
An abusive family environment (ie. sexual, mental, physical, or other forms of domestic violence)
Abandonment by parents
Incarceration or institutionalization of both parents
Parents lacking mental or physical capacity to raise child
Parents cannot be located
Unsuitable household (ie. child is removed from the home and placed in foster care)
A married student’s spouse dies or gets divorced
It’s important to note that there are certain situations that do not merit an override. These include:
Self-sufficiency
Parents refusing to contribute money for school
Parents not providing information for the FAFSA or for verification
Parents don’t claim you as a dependent for income tax purposes
Even in combination with each other, you still can’t get an override for these reasons. But, in combination with the list above, you can get an override.
Will I Get More Financial Aid as an Independent Student?
The amount of financial aid you get will be impacted by your dependency status. Independent students have a higher maximum limit for federal student loans. For example, the annual limit for a dependent student is $5,500. But, independent students can take out up to $9,500 in federal loans. Additionally, as an independent student, you may have a lower Expected Family Contribution (EFC), which can help your eligibility for federal loans, scholarships, and certain grants like the Pell Grant.
However, in the end, the amount of award money you get depends on your finances. A lower EFC than what you had with your parents can help get you a bigger financial aid award. On the other hand, a higher EFC means a lower aid award. So, while the chance for more financial aid is there, your aid award will be largely dependent on your income and financial information.
If you’ve used up your federal aid resources, look towards student loans.
At the end of the day, your dependency status is just used to figure out how much you can contribute. From this, they’ll figure out how much aid you should be given. Independent students are not necessarily guaranteed to get more federal student aid, but they do have higher limits.
Once you’ve used up your federal aid resources, turn to Sparrow if you need more money. Sparrow helps you access private student loans. You can get matched with what you qualify for at 17+ lenders by filling out our application.
Navigating adult life is easier with a good credit score. This three-digit number affects nearly every facet of your financial life, from paying for college, to renting an apartment, to buying a car.
In this article, we’ll go over everything you need to know about credit, focusing on how your credit score impacts your ability to get a student loan.
What is a Credit Score?
A credit score is a number that represents an individual’s creditworthiness. In other words, it reflects the willingness of a lender to trust you to pay back your debts.
Credit scores are important because lenders use them to determine whether they’ll grant you credit and at what cost. The higher your credit score, the more a lender will consider you able and responsible enough to repay your debt.
Where Do Credit Scores Come From?
There are three main credit bureaus: Experian, Equifax, and TransUnion. Each of these credit bureaus obtain individual credit information through lenders. They then keep track of all the information and store it until requested to release it in the form of a credit report.
Some lenders don’t report information to all three credit bureaus. Thus, not all three credit bureaus will have all of your financial information. This means that your credit report from Experian may look different than your credit report from Equifax, which may look different than your credit report from TransUnion…(you get the idea).
Check-in: Credit bureaus essentially keep track of your financial information. Then, when requested, they provide this information to lenders and creditors, in the form of a credit report, so they can determine your credit score and decide whether to lend to you.
Each credit report includes information about your financial history. Lenders use this information to determine your credit score. Let’s break this down.
Lenders and creditors calculate individual credit scores through credit scoring models. A credit scoring model is a framework or equation used to calculate a credit score. There are two main credit scoring models: FICO and VantageScore. You can think of them as the Walmart and Target of the financial world – they’re similar, yet slightly different.
Let’s use an example to illustrate this concept.
If you asked 10 people to go bake a vanilla cake, they would all come up with a vanilla cake. However, each one would be slightly different. Everyone will have access to a different recipe and use slightly different ingredients to make their final product.
The same goes for lenders and creditors.
Each lender or creditor will use the information they have access to about your finances, along with the credit scoring model they prefer to use, to generate a credit score. Thus, while all lenders and creditors will generate the same final product (a credit score), it may vary based on which credit bureau they got your information from and which credit scoring model they used to calculate the score.
Currently, around 90 percent of top lenders use the FICO scoring model, while less than 10 percent use VantageScore. However, there are hundreds of credit scoring models lenders can choose from. So, you can theoretically have hundreds of credit scores.
This doesn’t mean you need to go calculate every single credit score you might have. It just makes understanding your credit score, how it’s calculated, and why it matters incredibly important.
Check-in: If this is still seeming a bit fuzzy, let’s try to put all the pieces together here. Credit bureaus collect and store information about your finances. The credit bureaus use this financial data to create a credit report that sums up your credit history. Then, when a lender wants to assess your creditworthiness, they pull information from these credit bureaus and the credit reports they generate to create an individual credit score. To create the score, they will use a credit scoring model. Different lenders will prefer different credit scoring models.
Why the Credit-Scoring Model Matters
If you checked your FICO credit score based on information from your Experian credit report, it will likely be different from your VantageScore credit score based on your Experian credit report. Even though both credit scoring models are factoring in information from the same credit report, they are two separate formulas and will thus generate different results.
When a lender wants to evaluate your creditworthiness, they will select the credit scoring model they want to use. You do not get to choose which model a lender uses. This is important to note because you may, for example, think you will qualify for a certain loan because you have a decent FICO score. Butif a lender uses the VantageScore model and your VantageScore is lower, they may deem you not creditworthy enough to borrow.
So, while the bureaus collect the information and create the credit reports, it’s the lenders that choose which model they’d like to use to assess your credit. This means that the lender who issues you your student loan will probably look at a different credit score than the lender who issues you your auto loan or your mortgage.
Check-in: Okay. Let’s put this all together again. Credit bureaus collect and store information about your finances. Then, when a lender wants to assess your creditworthiness, they pull information from these credit bureaus in the form of a credit report. Lenders use the information in your credit report in combination with the credit scoring model of their choice to generate a credit score. They then use that credit score to assess your creditworthiness.
How is My Credit Score Calculated?
Your credit score is calculated using many different pieces of credit data in your credit report. This data is grouped into five categories, each of which is weighted differently. FICO, the most common credit score provider, uses the following information on your credit report to determine your FICO score.
Payment History (35%): How you’ve repaid your credit in the past
Credit Utilization (30%): How much of your available credit you’ve used
Length of Credit History (15%): How long your credit accounts have been in use
New Credit (10%): The number of credit accounts you recently opened
Credit Mix (10%): The different types of credit accounts you have
Each of these is important for a different reason.
Payment History (35%)
What it means: Your payment history shows how you’ve repaid your credit in the past. It often includes your past payments on credit cards, installment loans, auto loans, student loans, home equity loans, and mortgage loans.
Why it matters: Payment history is the most important factor in a credit score. When a lender looks at your credit score to determine whether to lend you money, they are trying to answer the question “If I give this person money, will they pay me back on time?” This helps a lender figure out the amount of risk they will take on when extending credit. Having a few lines of credit and paying them back on time can help you look more reliable to a lender.
For example, if you had 8 accounts and you had a late payment on 6 of them, your payment history wouldn’t look so great to the lender. This makes this section of your credit score very important.
Credit Utilization(30%)
What it means: Your credit utilization shows how much of your available credit – the “credit limit” – you are using. The ratio is calculated by dividing the total revolving credit you are currently using by the total of all your revolving credit limits.
For example, if you have a credit limit of $3,000, and you’ve only used $1,000 of it, you’d have a 30% credit utilization ratio.
Why it matters: Your credit usage is the second most important factor in your credit score. Lenders and creditors like to see that you are responsibly able to use credit and pay it off regularly. Experts recommend using no more than 30% of your available credit.
Length of Credit History (15%)
What it means: Length of credit history is all about how long your credit accounts have been in use. This includes the age of your oldest credit account, the age of your newest credit account, and the average age of all your accounts.
Why it matters: Length of credit history is the third most important factor in your credit score. Lenders want to know you’ve been in the credit game for a while — the longer your credit history is, the better. Having a history of responsibly paying your credit accounts shows lenders that you are capable of doing the same for them.
If you are just getting started with building your credit, this may be the area that hurts your credit score the most. Only time will be able to boost this section as you prove over time that you’re able to pay off your credit.
New Credit (10%)
What it means: New credit refers to the number of credit accounts you recently opened. When you apply for new credit, lenders will conduct a hard inquiry. A hard inquiry is essentially a peek into your credit report to examine your financial history. A hard inquiry can lower your credit score, but typically only by 0-5 points.
If you choose to accept the offer and open a new line of credit, it could also lower the average age of your total accounts. This, in effect, lowers your length of credit history and subsequently, your credit score.
Why it matters: The number of credit accounts you’ve recently opened, as well as the number of hard inquiries lenders make when you apply for credit, accounts for 10% of your credit score. Too many accounts or inquiries can indicate increased risk and hurt your credit score.
Credit Mix (10%)
What it means: Credit mix refers to the different types of credit accounts you have, including revolving debt (such as credit cards) and installment loans (such as mortgages, home equity loans, auto loans, student loans, and personal loans). Credit scoring models consider the types of accounts and how many of each you have as an indication of how well you manage a wide range of credit products.
Why it matters: Lenders like to see a healthy credit mix that shows that you can successfully manage different types of credit. People with top credit scores often carry a diverse portfolio of credit accounts, which might include a car loan, credit card, student loan, mortgage, or other credit products.
For example, responsibly managing a credit card, student loans, and a mortgage may demonstrate a significant level of responsibility in the eyes of a lender. Thus, diversifying your credit accounts can help demonstrate greater creditworthiness. It’s important to note that there is a “limit” to this, so to speak. Having 30 retail credit accounts probably wouldn’t be a great idea.
What is a Good Credit Score?
Credit scores range from 300-850. Generally speaking, FICO credit scores are ranked as follows:
Below 630: Bad
Between 630 and 689: Fair
Between 690 and 719: Good
Above 720: Excellent
It’s important to note that each student loan lender is different, and therefore, there is no “magic number” that will guarantee you a lower interest rate or better terms. However, there is a general principle for credit scores: “the higher, the better.”
Your Credit Score’s Impact on Student Loans
You don’t need to have a credit history to secure a federal student loan, however, private lenders may use your credit score to determine whether or not you’re eligible and at what terms. Most private lenders will look for a credit score of 670 or higher on the FICO scale (the one discussed above).
Your credit score will impact your ability to take out a private student loan and may also impact the interest rate assigned to that loan. Of course, over time this impacts how much you obtain in student debt and how much you pay for your education in the long run.
If you have a low credit score (or none at all), you should consider applying with a cosigner, such as a parent or guardian, who can help you qualify for a student loan with better terms. If that isn’t an option for you, there are specific private lenders that are known for lending to people with bad credit.
Final Thoughts from the Nest
While not the end-all-be-all, your credit score is an important factor in determining your ability to get a student loan. Don’t worry if your credit score isn’t up to par though, there are ways you can improve it.
College is a great way to expand your education and go into a career you love. But, it’s also really expensive. According to U.S. News Data, in-state tuition has risen 79% over the last 14 years. And that’s only in-state.
The truth is the cost of your college education depends on where you go. That’s why it’s more important now than ever to be well-informed about the cost of college.
What is Included in the Total Cost of College?
Although tuition makes up a very big part of the cost of college, there are many other things that go into it. You’re also looking at paying for room & board, books, supplies, and other expenses like food, gas, and leisure.
Average Cost of Tuition
Tuition makes up the largest portion of college costs. The average cost of tuition at a 4-year public college is $28,7751 per year. Across 4 years, this adds up to over $100,000. The price of tuition also includes fees. Universities will present the fees in different ways. Some may include it in the tuition while others mark it as a separate fee. You can find this information on their website.
To reduce the amount you’ll have to pay, look into scholarships and grants. You can start your search by using scholarship search engines like FastWeb or Niche. Also, make sure to fill out the FAFSA for each year you’re in school. This will help you get federal grants like the Pell Grant or the Cal Grant. Be sure to check out institutional grants and scholarships that your school offers as well. Finally, check if you can transfer your AP credits. This might save you money and time. Check with your school and the College Board for more information.
Average Cost of Room & Board
The average price of room and board is anywhere between $9,395 to $12,5401 per year. This is dependent on whether you go to a public school or a private school. On average, a public four year institution will be $9,395. A private institution will be $12,540. These prices sometimes can cover your dining or meal plan, too.
To reduce these costs, think about living off-campus and commuting. If you can find roommates to split the cost of an apartment, you’ll be able to bring down your housing expenses. This will often be a lot cheaper than living on campus. Then, all you have to do is commute to school. If you don’t have a car, you can carpool or take public transportation to campus. Many city transit systems offer bus and train passes at a reduced price to college students.
Average Cost of Books & Supplies
Books and supplies make up the smallest portion of the total cost, but they can still get pricey. On average, books and supplies will cost you $1,2911 per year. The cost of this category will depend on your classes. Some may require buying textbooks while others offer textbooks for free.
To get that price down, looking into buying used books. You can get these from sites like Chegg and SlugBooks. You can also rent your textbooks or borrow them from a friend. Online books may even be cheaper than physical textbooks, and you won’t have to carry them around.
You’ll also want to look into scholarships and grants for books and supplies, too. You want to get as much financial aid as you can to bring down the tuition price. But, you can use the smaller scholarships and grants for books and supplies.
Average Cost of Additional Expenses
Additional expenses can range anywhere from $2,733 to $6,0221. A lot of the cost for this category will be dependent on you and the cost of living in your area. After all, you now have personal and daily living expenses to pay for. Learn to be more mindful and intentional with your money. Budgeting can help you do this.
Additionally, some businesses and services offer reduced prices and deals to college students. Look into those to save money while still having fun. There’s nothing wrong with spending or having fun, but be mindful about where your money is going.
Average Cost of Different Programs
The overall cost of college will also depend on the type of school you choose to attend, as well as the length of the program you choose. From least to most expensive, there’s community college, public college, and private college. Typically, 2-year institutions will be cheaper than 4-year institutions. When it comes to private schools, for-profit schools cost less than nonprofit schools. While all the different programs and schools are great options, knowing the cost is key to making a decision.
Average Cost Per Year
How Long the Program is (In Years)
Total Cost Over Time
Community College
$3,7302
2 years
$7,4602
Associate’s Degree
$10,9503
2 years
$21,900
Bachelor’s Degree
$35,331
4 years
$152,9221
How Do I Use a Tuition Calculator?
Usually, the school’s sticker price isn’t what you end up paying. You’ll pay the net price. The net price is how much you owe after financial aid. Until you get that information, it can be hard to figure out what you will actually pay. That’s why tuition calculators are such great tools. They estimate what your net price will be. You can find tuition calculators on the College Scorecard. Simply search for the school you plan to attend to view the tuition information.
Final Thoughts from the Nest
College can get really expensive, really quick. That’s why it’s important to know the cost of college. Although your net price can come out to be a lot of money, there are plenty of ways to reduce the costs. If you still need help paying what you owe, turn to Sparrow for help in finding private student loans. Just fill out the applicationto see what you can qualify for at 15+ lenders.
According to a reportdone by the Education Data Initiative, one year of college is currently $35,331, on average. Saving for college, then, is more important than ever. As parents, you want to make sure your child gets a college education with little student loan debt. The best way to do that is to start saving money for their college. How? Let’s get into it.
How Much Does 4 Years of College Really Cost?
Four years of college can cost well over $100,000, and it’s only expected to go up. To give you a better idea of how expensive it can get, right now the cost of tuition at a public, 4-year, in-state school is $22,690 per year. By 2035, it’s projected that it will rise to $32,572 per year.
How much you’ll pay for college will also be dependent on several other factors. For example, like whether your child decides to go to a public or private school. Private colleges usually cost more. Another factor is how much financial aid they can get like scholarships, grants, and loans.
When Should I Start Saving for College?
Our advice? Right now. College prices are only going to get higher, so it’s better to start saving for college sooner rather than later. It doesn’t matter if your child is a newborn, in elementary school, or already in high school. Starting now and having some money saved is better than having nothing. Lucky for you, there are plenty of ways to start your college savings plan.
5 Ways to Save for College
There are many different ways to start saving for college. Here is a list of 5 ways we think could be great options for you.
Open a 529 Plan
A 529 Plan is an education savings account, meaning it’s a type of savings account for college. It offers both federal and state tax benefits when you use the money for education-related expenses.
Pros
Earnings and withdrawals are tax-free when used for education-related expenses.
Depending on your plan, investments can grow to $500,000 over the life of the account and deposits up to $16,000 per person can qualify for gift tax exclusion.
You can treat a contribution of up to $80,000 made in one year as made over five years to shelter a larger amount from taxes.
529 Plans are treated as parent assets and don’t have to be reported on the FAFSA when taking out money for school.
Cons
There are penalties and withdrawals if the money is used for non-educational costs.
These programs offer limited investment options.
Withdrawals from the account by someone other than you or your child will be added to their income on the FAFSA. This can reduce their financial aid eligibility.
Consider Mutual Funds
Mutual funds are diversified investment portfolios. This means that instead of investing in only one stock or bond, you’ll invest in multiple. These investment plans are managed by financial advisors or banks.
Pros
The money can be used on anything, so you don’t have to limit yourself to using it just for college expenses (say, for example, your child decides not to go to college).
You don’t have any limits to how much you can invest.
Cons
The earnings are subject to annual income tax.
Any earnings transferred to your child are viewed as income on the FAFSA. This can impact their financial aid eligibility.
Capital gains are taxed when the shares are sold.
Open a Custodial Account
A custodial account is a brokerage account that you’ll open on behalf of your child and then transfer to them once they’re either 18, 21, or 25 years old. The account will invest in several securities including stocks, bonds, and mutual funds.
Pros
The money can be used on anything, so you don’t have to limit yourself to just college expenses.
You don’t have any limits to how much you can invest.
The value of the account can be removed from your gross estate.
Cons
Once your child receives the money, they may be subject to the kiddie tax. The kiddie tax is a tax on any unearned income they receive at or before they’re 23 that’s over $2,300.
These accounts are viewed as student assets on the FAFSA. This can reduce your child’s financial aid eligibility.
Consider Savings Bonds
Savings Bonds are securities backed by the U.S. Government. It’s one of the safest ways to invest, and you’re guaranteed to get money back since it’s a low-risk investment.
Pros
These are federally tax-deferred and state-tax free.
Certain bonds, like the Series EE and I bonds, purchased after 1989 can be redeemed federally tax-free if used on higher education expenses.
Cons
The maximum amount you can invest is $10,000 on your own and $20,000 as a married couple per year, per owner, per bond.
If earnings are not spent on higher education expenses, then any interest earned will be counted as income and taxed.
Compared to other options, you’ll receive lower returns.
Open a Roth IRA
A Roth IRA is an individual retirement account that you can contribute to and earn interest on tax-free. You can even withdraw the money tax-free once you are 59 years old.
Pros
You can withdraw for any reason.
If the money withdrawn is used for higher education expenses, the penalty is waived.
There is a range of investment options.
These are not counted as assets on the FAFSA.
Cons
The maximum annual contribution allowed is $6,000 or, if you are over 50, $7,000.
Individuals earning more than $144,000 per year or married couples earning more than $214,000 per year are ineligible to contribute.
Withdrawals for your college student are counted as untaxed income. This can reduce their financial aid eligibility.
Withdrawing money from a Roth IRA account can delay your retirement.
How Much Should I Save for College?
Depending on when your child is heading to school, it can be hard to figure out how much money you should be saving for college. There are projections of how much prices will go up, so those can help give you an idea of the cost. Additionally, there are also college savings calculators. They can give you projection costs, let you know how much you’ll cover, and how much more you might need to save.
Final Thoughts from the Nest
Saving for college can seem like a mountain that’s hard to climb. It’s a very big goal and is extremely intimidating. But the important thing is making sure your child has something to help them through college. No matter how much that is. Start saving now and consistently, and you’ll be just fine.
You can even use Sparrow to help pay for your child’s education. If you have exhausted all other financial aid resources, Sparrow is a great way to look for private student loans. Fill out the applicationto see what you can qualify for at 15+ lenders.
If you’re familiar with the U.S. education system, you’ve probably heard about the dreaded AP exams that come around every spring and the notorious College Board that administers them.
Depending on your AP exam score, AP courses can count as college credit. But is taking AP classes really worth it, and how do you decide which AP classes are worth taking?
In this article, we’ll tell you everything you need to know about AP credits, from what they are, to what they do, and to how much they could potentially save you in college.
What are AP Credits?
AP, or Advanced Placement, is a program that was created by the College Board to allow high school students to take introductory, college-level courses in high school and earn course credit for these exams in college.
The AP Program is nationally accepted and recognized in high schools and colleges across the United States.
The range of Advanced Placement courses that are offered differs from school to school, but the most popular Advanced Placement subjects are AP Language and Composition, AP United States History, AP Literature and Composition, AP World History, and AP Psychology. Students learn the course material year-long and are offered the option to take the AP exams in May.
If a student takes the AP exam and scores sufficiently on it, the score could allow them to skip the equivalent course in college and earn college credit before even taking a course at the institution they are attending.
If a student does not take the AP exam but still does well in the class, the course can boost the student’s overall high school GPA, making them a more competitive college applicant.
The Advanced Placement program should not be confused with the IB, or International Baccalaureate, program that was created in Switzerland and is offered by secondary education schools globally. While IB is similar in theory to AP, the content, curriculum, and rigor of these two programs differ greatly.
Do AP Credits Really Save You Money in College?
The College Board encourages students to take multiple AP courses in high school to earn AP, or college-level credit, and save “hundreds, if not thousands of dollars.” The reasoning behind this is that if you do well on an AP Exam, the score can substitute as credit for the equivalent course offered, meaning you don’t have to take the course in college.
Each AP test costs $92, and the average number of AP courses taken among high school students is eight. That’s $736 sans tax, which is pricey. Multiple college courses and your college tuition, however, are pricier.
So here’s the big question: Does taking multiple AP courses in high school give you the bang for your buck?
Let’s find out.
Common Misconceptions
Many high school students infer that if they take an AP course and its adjoining exam in the spring, they will automatically receive college credit.
This is not true.
The College Board’s AP exams are graded on a scale of 1-5, with 1 being a fail and 5 being “extremely well-qualified.”
A student must receive an AP exam score of 3 or higher to pass the AP exam, and colleges usually only take high-achieving scores (4s or 5s) as credit. Just taking the AP exam won’t do anything when it comes to receiving college credit.
The Real Answer? It Depends on a Variety of Factors.
The policy for using Advanced Placement credit differs from college to college, which means that the matter of saving money with AP credit differs from college to college as well. Public universities are usually more lenient with accepting AP credit while selective private universities are more inflexible with accepting AP credit.
Most colleges only accept AP scores of 4 or 5 to count as college credit, but earning a 4 or a 5 on an AP exam doesn’t mean that the credit will count as a class exemption. This depends on your institution’s AP credit policy.
For example, if you took the AP Psychology exam and received a 5, you may earn 2 credits but still be required to take the institution’s Introductory Psychology class.
In another case, however, it is also possible that the AP Psychology exam credit could count as credits toward graduation and allow you to skip the introductory Psychology course at the institution.
Some schools could only accept two high-level AP exam scores to count as credit, and others could accept all of your AP credit. It truly depends on the school, and it’s important to research your school’s AP credit policy to determine whether or not you are really saving money in college with your AP credit.
While AP courses can potentially help you graduate early and save some money in college, the true benefit of the AP Program is to boost students’ GPAs, expose students to rigorous content, earn college credit before taking a course in college, and demonstrate a student’s knowledge and willingness to be challenged to the admissions committee through AP scores and courseloads.
Do AP Credits Help You Graduate Early?
In theory, yes, but the ability to use your AP credits to graduate early depends on the school you are attending. In college, you need to meet a required number of credits to graduate. For example, at Duke University, you need 34 credits to graduate.
Let’s say that you’re attending Duke University and you’re planning to major in Biology. Duke only allows you to use two of your AP credits to substitute for certain classes and count for graduation credits if you meet the score requirement.
You received a 4 on the AP Biology exam, so you are eligible to take Biology 201L or 202L and skip Biology 101. You also receive two credits for this AP score.
You received a 4 on the AP Spanish Language and Composition exam, but Duke’s AP requirement for AP Spanish Language is a 5 for you to take a high-level course or receive graduation credits. Therefore, you must take an intermediate Spanish course at Duke before you can take the high-level course, and you do not receive any graduation credit.
You have 2/34 credits fulfilled at Duke University, so it might take less time for you to finish your degree in Biology, but graduating early usually requires enough AP credit for an entire semester. In fact, at Duke, graduating early due to AP credits is not possible because the institution only accepts two passing AP exam scores, which isn’t a whole semester’s worth of credits.
Graduating early with AP scores is tricky, and it really all depends on the school that you are attending and the school’s AP credit policies.
Is It Better to Take AP Classes or Do Dual Enrollment?
If you can take both AP Classes and do dual enrollment (taking college courses at a local community college and earning college credit directly), taking many AP courses should be your priority and dual enrollment should be an additional supplement to your education if your circumstances allow.
The AP Program is nationally recognized by higher education institutions, and taking many AP classes is an unspoken norm among high school students and college admissions. You should not refuse to take any AP classes because you are taking dual enrollment classes.
Taking AP classes is the safer option when debating between doing dual enrollment. It’ll be easier for you to have transferable credits because it is a widely recognized program, it boosts your GPA if you do well in the course, and it doesn’t involve the hassle of accepting credits because your school is administering the course.
Public colleges are very lenient in accepting AP credit, and while private colleges have stricter policies, you can still earn credit for a specific number of AP scores if you received qualifying scores.
Dual enrollment, however, is more undependable. You’ll need to check whether or not your school accepts dual enrollment credits from the community college you plan to study at, you need to get approval for taking the course, and it’s not definitive that the university you will attend will accept the credits.
You’ll want to demonstrate your willingness to take rigorous courses to college admissions committees by taking more and more AP classes each year.
If you already are taking sufficient AP classes and want to challenge yourself further, this is when you should consider doing dual enrollment. Let’s say that your school doesn’t offer AP Computer Science and coding is something that you want to learn; then you should look into what CS courses are being offered at local community colleges and go through the proper means to enroll in the course.
Closing Thoughts From the Nest
Navigating through Advanced Placement classes, exams, and college admissions may seem overwhelming, and we hope that this article helped clear up some confusion about the AP Program.
Remember to prioritize taking AP classes over doing dual enrollment and try your best on the AP exams. Even if your exams won’t be considered as credit in college, you still have the option to impress admissions committees by sending your official AP score report to universities to demonstrate mastery and understanding of a certain topic (this is if you did well on your AP exams). Earning an ‘A’ in an AP course can also boost your GPA, which is an important consideration for the admissions process. Be sure to weigh all of your options as you enroll in AP courses and look into dual enrollment options at your local community college.
At the core of it all, these opportunities are for your academic exploration and enrichment, so take advantage of the options you have!
Whether you’re the parent, aunt, or friend of a student who is planning to pursue a higher education, chances are that the student will need a cosigner to be approved for a private student loan.
Students usually don’t have long enough credit histories in order to be deemed reliable borrowers. So, most private student lenders will require borrowers to have a cosigner as a form of insurance that the loan will be paid back in full.
Cosigning on a student loan is a big deal – not only can it have an impact on the student’s credit score, but it can also impact yours as well.
In this article, we’ll tell you what you need to know to make an informed decision when cosigning a student loan.
What is a Private Student Loan Cosigner?
A cosigner is an individual who “signs” the student loan with the borrower, becoming contractually obligated to pay off the loan or any missed payments if the student is unable to do so. This means that whatever payments the student borrower cannot make, you must take responsibility for. Cosigners are usually parents, extended family members, or close friends, though anyone can cosign for a private student loan.
What Are the Requirements for a Cosigner?
Cosigners must be a minimum of 18 years old, be a U.S. citizen, and have cosigned the student loan without coercion, manipulation, or force.
Principally, it is ideal for the cosigner to have an excellent credit score and a steady income to improve the primary borrower’s chances of qualifying for the private student loan. This is because a cosigner who demonstrates creditworthiness, or the reliability to pay off payments on time, increases the chances for the student loan being approved.
Pros and Cons of Cosigning a Student Loan
It’s important to preface this conversation by saying that you should only consider cosigning a private student loan after you’ve exhausted all other options.
Whether it be scholarships, grants, federal student aid, or federal loan options, be sure that you know what options are available (or not) to the student on the market.
Pros of Cosigning a Student Loan
You Can Help the Borrower Get Approved
Only 8% of students get approved for private student loans without a cosigner. So, without a cosigner, the chances are incredibly slim that the student borrower will get approved for the private student loan on their own. In the case that the private loan is even approved, the student will most likely have unfavorable interest rates and inflexible repayment options.
On the other hand, having a cosigner improves the chances of the student being approved for a private loan with adequate terms. Having a cosigner adds an additional amount of security for private lenders, as the chances of the loan being paid back in full increases with two signers.
Some private student loans require a cosigner when issuing loans, while others highly recommend the option.
You Can Help the Borrower Get a Lower Interest Rate
With or without a cosigner, student borrowers still need a way to pay for their education costs, so they end up signing private loans with disadvantageous terms (higher interest rates, shorter repayment periods, limited loan options). This often results in student borrowers racking up overwhelming amounts of education debt (hence the student debt crisis in the United States). Currently, over 3 million people in the United States have more than $100,000 in student debt.
Cosigning for a private student loan can help your student land a private loan with lower interest rates, more so if you have a strong credit history. This will help the borrower save money in the long run.
You Can Help the Borrower Build Credit
Cosigning a student loan can allow a borrower to get approved more easily. Once the student borrower is approved for the private student loan, the borrower can begin to build their credit history as they make payments for the loan. The lender reports the student borrower’s payment activity to major credit bureaus, and this information is utilized to calculate a portion of the student’s credit score.
Payment history makes up 35% of the student borrower’s FICO score, a numerical score that assesses their credit based on five components. Payment history is how well you’ve paid for your lines of credit over time, and if the student stays on top of the payments, their credit score can improve.
This couldn’t be possible without having a cosigner on the loan, and paying off student loans is a great way for students to start building their credit history.
Cons of Cosigning a Student Loan
Your Debt-to-Income Ratio Can Be Impacted
Your debt-to-income ratio is one way that lenders measure your creditworthiness, which is your reliability to pay back a loan on time.
What is a Debt-to-Income Ratio?
Your debt-to-income (DTI) ratio is the ratio between your monthly debt expenses (payments that show up on your credit report) and your monthly gross income (this is an odd way to say pre-tax income). In order to calculate your DTI, you divide your monthly debt expenses by your monthly pre-tax income, and your DTI ratio will be in the form of a percentage. The lower the DTI ratio, the better (this makes mathematical sense because your monthly debt expenses make up a smaller percentage of your income).
Within debt-to-income ratios, there are front-end ratios and back-end ratios. The front-end ratio is also called the housing ratio. It calculates what percentage of your monthly pre-tax income goes to all housing-related debt payments, like homeowner association fees, rent, mortgages, homeowners insurance, etc.
The back-end ratio calculates what percentage of your monthly pre-tax income goes to all of your monthly debt payments, meaning housing-related debt payments + payments like credit card bills, auto loans, student loans, etc.
For example, let’s say your monthly debt expenses consist of the following:
Car payment: $200
Homeowners Association fees: $300
Credit card payments: $542
Student loan payment: $321
Hospital bill: $120
This adds up to a total of $1,483 of monthly payments. Let’s say your monthly pre-tax income is $6,249.
What is a Good Debt-to-Income Ratio?
A good DTI ratio is lower than 36% for the back-end ratio (which measures what percentage of all your monthly debt payments make up of your monthly pre-tax income) and no more than 28% for the front-end ratio (which measures what percentage of only your housing expenses make up your monthly pre-tax income).
The DTI ratio for the example above would be 23% because $1,483 divided by $6,249 is .23. This is an excellent DTI ratio as it is lower than 28% overall.
Does Cosigning for a Student Loan Affect Your Debt-To-Income Ratio?
Yes, cosigning for a student loan will impact your debt-to-income ratio. If you cosign for a student loan and are approved, the amount of the loan is added to the back-end ratio of your debt-to-income ratio and to your credit report. This means that your DTI will increase.
Take this fact into consideration before you cosign for a student loan and do the calculations beforehand.
If your DTI ratio goes beyond 36% when you factor in the private student loan, it is probably best for you to not cosign the student loan. Having a DTI ratio that is higher than the ideal ratio can harm your likelihood of being approved for favorable mortgages, auto loans, and new lines of credit. However, if cosigning the borrower’s student loan is the only way they can get approved, then you will need to weigh the pros and cons and determine if it is worth it for you individually.
That said, if your DTI ratio safely remains under the threshold, you do not need to worry.
The Loan is Technically Your Responsibility
If you cosign for a student loan, any amount that the student borrower does not pay falls into your hands. You are legally obligated to pay any missed payments or even the full amount of the loan if the student borrower does not.
It Could Hurt Your Credit
While being a cosigner in itself does not hurt your credit score, your credit score will be negatively impacted if the primary student borrower misses any payments. Not only will it negatively impact your credit score, but any missed or late payments will also show up on your credit report (and cannot be removed for seven years).
Whether you are financially challenged or comfortable, there is no margin for error for the student borrower when cosigning a student loan. Any missed or late payments will become your responsibility and can even put a strain on your current bills.
It Could Strain Your Relationship with the Borrower
Student loans can get messy, fast.
For one thing, the student will be financially linked with you until the entire loan is paid off, unless there is a cosigner release policy. If there isn’t, it could be quite a bit of time until you are off the hook in regards to the loan.
Even worse, if the student defaults on the private student loan or is late/completely misses a payment, these actions will have severe implications for the both of you.
Be sure to cosign a student loan with someone that you know to be trustworthy and responsible. Cosigning a student loan isn’t a lighthearted decision, and you need to know what you’re getting into before you sign anything.
How Long Does a Cosigner Have to Stay On a Student Loan?
Be sure to consider cosigner release terms before cosigning a student loan. While some student loans do not have any cosigner release options and the cosigner remains linked with the student loan until it is completely paid off, other student loans have cosigner release options.
Cosigner release, as the name implies, releases the cosigner from a loan if the student borrower makes a certain number of payments on time and also meets the credit requirements.
If cosigner release is not an option, consider refinancing the student loan. Refinancing is when you can trade in your current loan for a more favorable one with lower interest rates, longer repayment plans, etc. If the primary borrower, the student, refinances the student loan under their name, you are no longer contractually linked to the student loan. This is only an option if the student has a strong credit history.
Is It a Good Idea to Cosign for a Student Loan?
Cosigning is common in the United States. In fact, 91% of undergraduate student loans have a cosigner. However, the decision is ultimately up to you. It is crucial to consider the pros and cons before agreeing to cosign for a student loan.
Before you cosign for a student loan, make sure you have a serious discussion with the student. Outline what you expect from the student, whether it be a minimum GPA, expectations for graduation, and repayment responsibilities.
It’s crucial for you and the student borrower to both know what is expected of one another.
Closing Thoughts From the Nest
Non-cosigned loans are a great option to explore if cosigning does not seem like a plausible option for you. Sparrow offers services that can help you and the student explore private student loan options. By submitting a free application with us, you can see which student loans the student can qualify for on their own (and the lowest interest rate on the market) and also compare loan options with alternative cosigners. Most loans do not offer this precheck, so be sure to take advantage of this tool.
About 30-40% of undergraduate students take out federal student loans each year. Over the years, these loans can start to pile up, making for a hefty monthly payment once repayment starts. If you are in the market for a more affordable repayment plan for your federal student loans, consider an income-driven repayment plan.
In this blog, we’ll dive into what an income-driven repayment plan is, the four different options, and the pros and cons of opting into it.
What Is An Income-Driven Repayment Plan?
An income-driven repayment (IDR) plan is a federal loan repayment option. Unlike the standard repayment plans, IDR bases your monthly payment on your income instead of how much you owe.
How Is Income-Driven Repayment Calculated?
Along with your income, the federal government will look at other factors. They will look at the specific repayment plan you choose, your family size, and your location. If applicable, they’ll also look at your tax status with your spouse and your spouse’s federal student loan debt. The combination of these factors is what determines your payment amount.
The 4 Income-Driven Repayment Options
There are four different income-driven repayment plans to choose from. Each repayment option has its own terms and requirements to qualify. Here is a quick overview of each one.
Income-Based Repayment (IBR)
Income-Based Repayment is one of the more flexible options. You can get it regardless of when you received your loans, but you will have to demonstrate financial need. The payment amount is 10-15% of your discretionary income. The repayment period is about 20-25 years.
Pay as You Earn (PAYE)
The Pay As You Earn plan is one of the newer IDR plans, coming into effect in 2012. To qualify, you must be a borrower from after October 1, 2007 with a disbursement date on or after October 1, 2011. You must also demonstrate financial need. The payment amount is 10% of your discretionary income. The repayment period is about 20 years.
Revised Pay as You Earn (REPAYE)
The Revised Pay As You Earn plan is the newest plan, coming into effect in 2015. You’re eligible regardless of when you first got the loan, and you don’t have to demonstrate financial need. The REPAYE plan payment amount is 10% of your discretionary income. The repayment term is about 20-25 years.
Income-Contingent Repayment (ICR)
The ICR plan is a good option if you want to lower your monthly payment but don’t qualify for the other IDR plans. For an ICR plan, you don’t have to demonstrate financial need, which makes it easier to qualify for. Additionally, the ICR plan payment amount is either 20% of your discretionary income or what you would pay monthly on a 12-year fixed repayment plan, whichever is lesser. The repayment period is about 25 years.
Pros and Cons of an Income-Driven Repayment Plan
Income-driven repayment plans are great, but they may not be right for everyone. Here are some things to consider when deciding if an income-driven repayment plan is right for you.
Pros of Income-Driven Repayment Plans
Good if You are Unemployed
An income-driven repayment plan is a good option if you are unemployed. Since the payment is based on your income and financial situation, it will be adjusted to something that you can afford while unemployed.
Lower Monthly Payments
Monthly payments on an IDR plan are much more likely to be lower. In fact, IDR plans offer the lowest monthly payments out of all repayment options. As long as your student debt exceeds your income, you’ll qualify for lower monthly payments.
Payments Can Be $0
If you are a low-income borrower, you can qualify for a $0 student loan payment. This is done by comparing your income with the poverty line. Generally, if your income is between 100-150% less than the poverty line relative to your location and family size, you will qualify for $0/month payments.
Remaining Balance is Forgiven
After 20-25 years of repayment on an IDR plan, your remaining student loan balance can be forgiven. There’s even the Public Service Loan Forgiveness (PSLF) program, which, if you qualify, will grant you loan forgiveness after only 10 years.
Your Credit Score Isn’t Negatively Impacted
IDR plans won’t hurt your credit score. Since the monthly payment amount is based on your financial situation, they’ll be a lot more affordable. This means it’ll be easier to make the monthly payment. And as long as you make the payments, even if it’s $0, your credit score won’t be affected.
Cons of Income-Driven Repayment Plans
You May Not Qualify
There are certain eligibility requirements to access IDR plans. For one, IDR plans are only available for federal student loans. Even then, eligible loans are largely only Direct Loans. If you don’t have a Direct Loan, you may have to consolidate to qualify. Additionally, each individual plan may have its own requirements to qualify.
Your Overall Balance Could Increase
Although a big advantage of an IDR plan is that your payments might decrease, it could cause your overall balance to increase. This is called negative amortization. Negative amortization happens when your monthly loan payment isn’t enough to cover the interest that accrues each month. So, while you may be making monthly payments on an IDR plan, your total loan balance may still increase in the meantime.
You’ll Have to Pay Taxes on the Forgiven Balance
Unless you qualify for PSLF and choose to do that, your forgiven balance from an IDR plan is taxable. This is because the IRS treats this canceled debt as income. Under law, then, you’ll have to pay taxes on any forgiven balance.
Payments Can Increase
Generally speaking, if your income increases, your monthly payment will too. Additionally, there is no standard cap for income-driven repayment plan loan payments. This means that there is no limit on how much your monthly payment can be.
You Need to Recertify Your Income Every Year to Qualify
You will need to recertify your income and family size every year to continue on an IDR plan, which includes filling out annual paperwork. There is also a strict deadline, and if you miss it, you will be placed back in the standard repayment plan.
Commonly Asked Questions About Income-Driven Repayment
Will Income Driven Repayment Hurt My Credit Score?
Switching to an income-driven repayment plan won’t directly affect your credit score. But, a lowered monthly payment will lower your debt-to-income ratio. That can be good for your credit. On the other hand, you will get an extended loan term, so you’ll have the debt for longer. You can see these changes on a credit report.
How Long Can You Stay on Income-Driven Repayment?
Right now, the maximum repayment period is 25 years. After 25 years, any remaining loan balance will be forgiven.
How Long Does an Income-Driven Repayment Plan Last?
It depends on the plan that you have. For example, the Income-Contingent Repayment Plan has a repayment period of 25 years. Meanwhile, the Pay As You Earn Plan only has a repayment period of 20 years. Generally, it’ll be anywhere from 20-25 years.
Can I Make Extra Payments on an Income-Driven Repayment Plan?
Yes, you can make extra payments. Making an extra payment won’t lower your monthly payment. But, it will save some interest and help you to pay off your loans sooner.
Why Did My IDR Payment Go Up?
Because your IDR payment is based on your income, the payment may increase as your income does. Each year, you have to recertify your income in order to continue to qualify. So, if you got a promotion, a new job, or took on a second job and your income increased, then so will your payment.
Final Thoughts from the Nest
IDR plans are a great option if you’re struggling to make loan payments. They adjust to your financial situation, making it a more affordable repayment option. Of course, these plans are only available for your federal student loans. If you have private student loans, talk to your lender about repayment options. Many of our partnering lenders offer a wide variety of payment options. Sign up with Sparrow and fill out the free applicationto see what you qualify for with any of our 15+ lenders.
Throughout your time at college, you’ll probably take out multiple student loans, which can easily pile up. Then, you’ll have to keep track of all the different payment dates, interest rates, and loan amounts for each loan. A way to make this simpler is through student loan consolidation.
What Is Student Loan Consolidation?
Student loan consolidation is the process of combining some or all of your federal student loans into one new loan. That way, it’s easier to manage and you only have one payment instead of several. However, Direct Consolidation Loans are only available for federal student loans. If you have private student loans and you’d like to do the same, you can refinance your private student loan.
Commonly Asked Questions About Student Loan Consolidation
There’s a lot you need to know about student loan consolidation before deciding if it’s the best move for you. Here are some commonly asked questions to look over and think about before making a decision.
What is the Difference Between Refinancing and Consolidating Student Loans?
The biggest difference is that you can consolidate only federal student loans. Meanwhile, you can refinance both federal and private student loans. Here are a couple of other differences to be aware of.
Refinancing
Consolidating
How will it affect my interest rate?
You can get a lower interest rate as long as you have good finances. Or, at least better finances than when you first took out the loan. This includes a good credit history and income.
Your interest rate will either stay the same or go up. They’ll average all your loan interest rates together and then round up to the nearest ⅛ of a percentage.
Will I save money?
Yes. Generally, refinancing helps you save money because you can negotiate better loan terms.
You might be able to get a lower monthly payment. Yet, in the long run, it won’t save you money because you might get an extended loan term and pay more interest over time.
Can I keep my access to federal benefits?
No. Refinancing your federal loans means turning them into a new private student loan. Doing so will result in you losing your borrower benefits.
Yes. Because it’s done through the federal government, you’ll keep access to your benefits. In fact, in some cases, you might need to consolidate to access certain federal benefits.
To qualify for a Direct Consolidation Loan, your student loans need to be in the repayment period or, at least, the grace period. This can be as a result of graduating, dropping out, or falling below half-time enrollment. If you’re still in school, you cannot consolidate your student loans.
There are a couple of other things you should consider when deciding. First, you should consider consolidating your student loans if you want to have one payment instead of many. If it’s currently too hard to make all your monthly payments, then consolidating is a good idea. Also, consider consolidating if you want to qualify for federal benefits. These include benefits like income-driven repayment plans and possible loan forgiveness. Some loans like the Perkins Loan or a Parent PLUS Loan need to be consolidated to access those benefits.
Does it Cost Money to Consolidate Student Loans?
No. There are no costs associated with applying for or going through the process of consolidating. So, you don’t have to worry about spending any more money to be able to simplify your loan payments.
Does Student Loan Consolidation Affect Your Credit Score?
No. Most federal student loans don’t have any kind of credit requirement. This includes Direct Consolidation Loans. So, consolidating your loans won’t need any kind of credit check, and your credit score will remain the same as before.
How Long Does it Take for Student Loan Consolidation?
You start the whole process by filling out the application, which will take about 30 minutes. From there, hearing back or getting approved can take anywhere from a few weeks to a few months. Typically, you’re looking at around 30-45 days.
Until you get the green light from both your old and new lender, you need to keep on making regular payments in the meantime.
Can Direct Consolidation Loans Be Forgiven?
Yes. One of the biggest federal benefits you can receive is loan forgiveness. If you consolidate, you’ll still have access to federal benefits including loan forgiveness. As mentioned earlier, there are even loans that you have to consolidate to qualify.
Final Thoughts from the Nest
Now that you know more about consolidation, you can use this information to help you make a decision. Consolidation can help simplify payments and, in some cases, qualify you for certain federal benefits. On the other hand, it won’t bring down your interest rate or save you money in the long run. It’s really up to you, your situation, and whether you think consolidation is the right move for you. If it is, head over to the Direct Consolidation Loan Application online to get started.
If you also have private student loans and want to know if you should refinance your student loan, you can get started by filling out the Sparrow Application. It will help match you to what you qualify for at 17+ lenders through a single application. From there, you can compare your options before making a final decision.
In today’s job market, employee retention is dwindling by the minute. In an effort to keep up, companies are offering more robust benefits, including substantial tuition assistance programs.
If your eyes are set on pursuing a higher education, consider working for one of the following companies to help reduce the amount you pay out-of-pocket or in student loans.
FedEx reimburses employees up to $1,500 per year for eligible education programs. The courses you take doneed to be related to advancing your career within the company.
Home Depot offers employees up to 50% of the cost of tuition, books, and class registration fees as well as 50% of mandatory fees. More specifically, salaried employees are eligible for up to$5,000 per year in tuition reimbursement, full-time employees are eligible for up to $3,000 per year, and part-time employees are eligible for up to $1,500 per year.
To qualify, employees must be pursuing an associate’s, bachelor’s, master’s, doctoral, or technical degree.
Both full-time and part-time Intuit employees are eligible for tuition reimbursement if taking courses related to careers within the company. Full-time Intuit employees are eligible for up to $5,000 per year in tuition reimbursement, while part-time employees are eligible for up to $2,500 per year.
KFC offers tuition reimbursement through their REACH Educational Grant Program. Managers are eligible for up to $3,000 in tuition reimbursement grants. First-time winners that are not managers are eligible for up to $2,000 in tuition reimbursement grants.
Kroger offers both full-time and part-time employees up to $3,500 per year, or up to $21,000 over the course of their employment with the company, in tuition reimbursement.
McDonald’s Archways to Opportunities program is more challenging to qualify for than others as only some franchise locations participate in the program. If your location does participate, you can be eligible for up to $3,000 per year in tuition reimbursement if you are a full-time restaurant manager. If you are a crew member, part-time manager, or part-time office staff member, you must be working at least 15 hours per week to receive the $2,500 per year tuition reimbursement benefits.
Publix offers up to $3,200 per year for college and university courses and up to $1,700 per year for other courses of study. However, there are a variety of eligibility criteria employees must meet, such as working with the company for at least 6 months and working an average of 10 hours per week.
Ticketmaster reimburses employees up to $5,000 for graduate courses, up to $3,000 for undergraduate courses, and up to $500 for non-accredited business-related courses.
Allstate employees that have been with the company for at least one year are eligible for up to 100% tuition reimbursement, with an annual limit of $5,250.
Both part-time and full-time employees at AT&T are eligible for up to $5,250 per year in tuition reimbursement, as long as they have worked at least 6 months with the company.
Best Buy offers employees up to $3,500 per year in tuition reimbursement for undergraduate courses and up to $5,250 per year for graduate-level courses.
Bank of America offers employees $7,500 per year for tuition expenses for job-related courses and certifications through their Tuition Assistance and Academic Support Program.
Blue Shield of California offers full-time employees up to $5,250 in tuition reimbursement per year. Part-time employees are eligible for up to $2,625 per year.
Carmax reimburses up to $5,250 per year in eligible tuition expenses for full-time employees and up to $2,500 per year for part-time employees. For a course to be eligible, it must be a GED, ESL, or literacy course going towards a degree-granting program.
While you can’t necessarily save 50% or more on tuition, GEICO does reimburse full-time employees up to $5,250 per year for undergraduate educational expenses. GEICO allows employees to use this money towards application fees, textbook costs, and course-related expenses.
Both full-time and part-time Marco’s Pizza employees are eligible for up to $5,250 per year in tuition reimbursement if they attend a program with the company’s partner school, Bellevue University.
Taco Bell reimburses up to $5,250 per year for employees pursuing college degrees, professional certificates, high school diplomas, and Master’s degrees.
Full-time T-Mobile employees are eligible for up to $5,250 per year in tuition reimbursement, while part-time employees are eligible for up to $2,500 per year. To qualify, employees have to work at T-Mobile for at least 90 days, and courses must be related to jobs within the company.
Amazon’s Career Choice program reimburses employees up to 95% of their tuition and fees for courses going towards a certificate or diploma in a related field of study.
Boeing offers up to $25,000 per calendar year in tuition reimbursement for eligible programs.
BP
BP reimburses up to 90% of employees’ eligible expenses for both traditional educational courses and vocational schools. The courses must be related to your role at BP and completed at an eligible institution.
Chevron’s tuition reimbursement program is a bit unclear, however, employees have reported on Glassdoor that the company offers up to 75% tuition reimbursement for programs related to career development within the company.
Chipotle covers 100% of tuition for specific degrees, high school diplomas, and college prep courses. If the program you’d like to pursue does not fall within the specified list of degrees, Chipotle also offers up to $5,250 per year in tuition assistance for other programs.
Deloitte reimburses the full tuition cost for employees pursuing a graduate school degree. To qualify, you must agree to work with Deloitte for at least two years after graduating school.
Discover offers all employees, regardless of how long they’ve been with the company, 100% tuition reimbursement for select bachelor’s degree programs. Employees who would like to pursue a degree outside of the eligible programs can still receive up to $5,250 per year for bachelor’s degree programs or up to $10,000 per year for graduate degree programs.
To add even more magic to working at the Most Magical Place on Earth, Disney offers both full-time and part-time employees 100% of tuition paid upfront if the degree is pursued through a Disney Aspire network school. The network schools cover a variety of courses at both undergraduate and graduate levels, and the courses do not need to relate to your role at Disney.
Full-time Fidelity employees who have worked within the company for at least 6 months are eligible for up to 90% tuition reimbursement, with a maximum of $10,000 per year. The courses must be within a work-related program.
Gap’s Tuition Reimbursement Program offers employees looking to advance their career-related skills up to 100% of tuition for up to two classes per term, 100% of up to two books per term, and any additional approved fees. This program includes employees of Gap’s sister companies, Old Navy and Banana Republic.
Genentech reimburses employees up to $10,000 per year. To qualify, employees must be attending an accredited college or university and taking courses for company-related positions.
Papa John’s Dough & Degrees program offers employees at corporate-owned locations up to 100% tuition reimbursement for undergraduate and graduate degree programs done online through Purdue University Global. Employees at franchise locations are ineligible for 100% tuition reimbursement, however, they can qualify for reduced tuition.
For eligible full-time and part-time employees, Starbucks will reimburse 100% of tuition for courses taken through Arizona State University’s online program. To qualify, employees must be pursuing a first-time bachelor’s degree and in one of the 100 eligible degree programs.
Full-time Verizon employees are eligible for up to a whopping $13,520 per year in college tuition reimbursement, and part-time employees are eligible for up to $8,000. To qualify, employees must attend Verizon’s partner school, Bellevue University.
Rather than offering employees a set amount, Chick-Fil-A partners with over 100 colleges and universities through Scholarship America and provides a different amount of tuition assistance based on the school.
Comcast reimburses up to 20% of tuition costs. To qualify, you must be afull-time employee who has been with the company for at least six months. You must also be pursuing one of the 50+ associate’s, bachelor’s, or master’s degree programs that Comcast’s partner school, the University of Arizona Global Campus, offers.
CVS’s tuition reimbursement program is unclear, however, some sources report that the company will reimburse up to 25% of tuition costs for job-related programs.
Pizza Hut employees are eligible for up to 51% tuition reimbursement if enrolled in an eligible program at the company’s partner school, Excelsior College.
Procter & Gamble offers full-time employees up to 80% tuition reimbursement for pre-approved college costs related to advancing their career within the company.
While not technically reimbursement, Walmart provides employees with a variety of course opportunities for certificate programs, career diplomas, and college degrees at just $1 per day.
Does Tuition Reimbursement Affect Your Financial Aid?
While tuition reimbursement funds are not considered taxable income, it could be considered gift aid when filling out the FAFSA. The more gift aid, or free money, you have, the less you may qualify for in other sources of financial aid. However, if your employer is offering you free money, we do recommend that you accept it regardless.
Final Thoughts from the Nest
Regardless of your desired career path, obtaining higher education can open the door to a wide variety of additional career opportunities. Whether you’re interested in a vocational course or a doctoral degree, there’s a company out there ready to offer you tuition reimbursement to pursue it. That said, if you’ve already graduated and need help paying off student debt, consider refinancing or looking for an employer with debt payoff benefits.
If you didn’t receive as much financial aid as you expected or need to pay for your education costs, do not panic. Contrary to popular opinion, your financial aid package is not set in stone. You can send a financial aid appeal letter to your institution and have your financial aid package reconsidered.
Getting approved for a new financial aid package depends on your specific set of circumstances. Writing a financial aid appeal letter is the first step you need to take.
First and foremost, let’s cover the basis of this process: Is it reasonable for you to appeal your financial aid package?
Examine your financial aid application and consider whether or not the financial aid package that you have received reflects your financial circumstances. Ask yourself the following questions:
Has you or your family’s finances changed since you submitted your Free Application for Federal Student Aid (FAFSA) due to unexpected or special circumstances? This might include new financial burdens like medical expenses, unexpected expenses, or other additional expenses.
Did you make an error on your FAFSA that you think could have affected your financial aid package?
Did you receive a better financial aid package from another competitive school and want the school to match the price?
If any of these circumstances are applicable to you, then yes, you should appeal your financial aid package.
If your appeal is reasonable, there is no harm in asking for a larger financial aid package. It can significantly improve your financial situation and reduce the burden of educational expenses.
Be sure to check your financial aid award letter to see if the school has highlighted any steps you should take for the appeals process. Some schools may provide a specific financial aid appeal form.
What to Say in a Financial Aid Appeal Letter
When you’re writing your letter of appeal, keep in mind that financial aid offices are busy throughout the year, and even more so during pre-admissions and post-admissions seasons.
You’ll want to be direct and straight to the point, but also respectful and considerate of their time.
Here are some important things to consider when writing your financial aid letter of appeal.
#1: Address the director of the financial aid office by name.
While beginning a letter with “To the Financial Aid Office at x School ” or “To the Financial Aid Director” is adequate, addressing the director by name is a great way to stand out and be more polite. It doesn’t take much time to do a quick search and find out who the Director of Financial Aid is at your institution, but it shows interest and effort!
#2: Be polite!
Introduce yourself! Say thank you more than once in the email, and acknowledge the effort the financial aid office is making. You’ll want to set a tone that is courteous throughout the email. After all, the financial aid office ultimately determines whether or not your request is approved.
#3: Get straight to the point. What do you need? A larger financial aid package. Why? X, y, and z.
You don’t want to write a long, extensive paragraph about your situation. While details are great, being thorough and concise is the best strategy when writing a financial aid appeal letter. Include information that is only necessary, nothing more.
#4:Provide appropriate documentation.
Every school will ask you to provide documentation if you are submitting a financial aid appeal. It is best to submit everything that is needed when you are submitting the appeal letter. Doing so will make the process easier for yourself and the office. Check your school’s website to see their requirements. For example, if your dad lost his job, you’ll want to send proof of his unemployment. If your grandmother is in the hospital, send the office an itemized hospital bill. If you received a competitive financial aid offer from another school, provide the financial aid package that you received.
#5: Be specific about how much you are asking for.
The FAFSA agency has their own tools for calculating how much aid is awarded to each student. Nonetheless, you should provide a rough estimate of how much financial aid you need.
Let’s say your school’s tuition is $80,000 and you received $70,000 in aid. Your parents can only pay $5,000 out of pocket, so you should ask for an additional $5,000 in aid. If you’ve received a competitive offer from another university, include the numbers. Then, you should ask the university to match the price or provide a better offer.
#6: Ask what the next steps are in the appeals process.
You’ll want to know what to do after you send your financial aid appeal letter. Be sure to ask what steps to take next so that there isn’t any miscommunication, confusion, or staggered response times.
#7: Add your school-specific reference number.
Most schools will assign a unique reference number to your financial aid application. Provide this number in your email/letter so the school can easily find your application.
#8: Proofread, proofread, proofread.
You do not want to send an appeal letter that is full of grammatical and spelling errors. It demonstrates carelessness and haste. Accordingly, this is not the impression that you want to make when you are the inquirer in the situation.
Financial Aid Letter of Appeal Templates
Here are some of Sparrow’s financial aid appeal letter samples that can help guide you when writing your letter.
Sample #1: Asking the School to Reconsider Changes in Income
To Mr. Kevin Jensen, Executive Director of Financial Aid,
My name is Henry Baker, and I am a senior at Academy High School who was recently admitted to Cornell University. First and foremost, I would like to say that I am incredibly honored to have been admitted to this distinguished institution.
Cornell Engineering is my top choice program and while I would love to attend, I am having financial difficulty that is preventing me from accepting this once-in-a-lifetime offer. I am writing to you to respectfully appeal my financial aid award.
My father is the breadwinner for my family of four. Unfortunately, he was recently laid off from his job at Delta Airlines in March due to downsizing in the company. Luckily, he was able to find a new job at Tessan. Nonetheless, he is making substantially less than stated on my FAFSA. I’ve attached his last pay stub at Delta and his most recent pay stub at Tessan to this email.
My father makes an average monthly income of $5,000. Athough, household expenses like car payments, rent, electricity bills, groceries, and gas bills add up to $1,205 per month. While we were previously able to afford our expenses comfortably with his previous job, we are currently living on a tight budget.
I was hoping that the financial aid office could take this new information into consideration and readjust my financial aid award. It would be an honor to be a part of Cornell Class of 2027 to learn about mechanical engineering. Therefore, I hope that the financial situation can be appropriately addressed.
I appreciate your time in reading this email and reconsidering my financial aid award. Please let me know the next steps to proceed from here. Thank you very much.
Sincerely,
Henry Baker
Senior at Academy High School
San Francisco, California
Cornell Reference Number: 123456
Sample #2: Asking the School to Reconsider Merit
To Mr. Brian Hill, the Director of Student Financial Services at Carnegie Mellon,
My name is Virginia Valli, and I was recently accepted to the Mellon College of Science. I am extremely thrilled and honored to have been given an opportunity to attend Carnegie Mellon and want to thank you for all of the hard work you do for your recent admits!
I am reaching out with the hope that my financial aid award could be reconsidered. Specifically, I would love to attend Carnegie Mellon but would be unable to do so with the financial aid package that I received. I am trying my best to make the cost of tuition affordable for my parents and I and would hate to lose this opportunity.
I’d like to share new updates and additional details to my application that demonstrate my worthiness as a student.
In January, I started the Youth Democrat Leaders Club at my high school in order to promote civic engagement and youth voter participation in Atlanta, Georgia. We are working to institutionalize youth voter registration through the public education system and just hosted our 7th youth mobilization drive at a local high school.
Since the approval of the Covid-19 vaccinations, I have been volunteering with the Atlanta Community Center to help Spanish-speaking elders register online to receive their vaccinations. I am currently translating important documents, managing appointments, and interacting with elders over the phone.
I was nominated by my biology teacher for Freeside High School’s prestigious ‘Scientist Award’ that is only awarded to select seniors in the entire graduating class. Selected students are usually individuals in the top of the class who have demonstrated knowledge, excellence, and passion for science. Currently, I am in the process of interviewing for the award and will let the office know if I do receive the award.
I hope these new updates demonstrate my strength as not only a student, but a community activist and scientist. At Carnegie Mellon, I plan to study Biology and minor in Political Science and hope I will be afforded the opportunity to do so.
Finally, I’ve attached a substantial merit award that I received from Washington University in St. Louis that I hope the financial aid office at Carnegie Mellon could match. Carnegie Mellon is my first choice university and I will absolutely attend if I am able to afford the tuition more comfortably.
Thank you so much for your time, and please let me know if you need any additional documents.
Sincerely,
Virginia Valli
Freeside High School
Atlanta, Georgia
Carnegie Mellon Reference Number: 678901
Sample #3: From the Parent/Guardian
To Mr. Phil Asbury, University Director of Financial Aid at Northwestern University,
My name is Michael Sterner. My son, Joey Sterner, is a sophomore at Northwestern University and recently received his financial aid package. I am writing to you because I noticed that the office was using the same tax year (2019) that was used in Joey’s freshman year to calculate his financial aid award.
Specifically, I wanted to inform the office that around seven months ago, the company that I work for had a budget deficit and my income has significantly decreased. I will be making an estimate of $6,000 less this year than the previous. I would like to request a reexamination of Joey’s financial aid award due to this.
I’ve attached a pay stub from this January and August to demonstrate this change in circumstance. I hope this is taken into consideration when reexamining Joey’s financial aid award.
Thank you very much.
With regard,
Michael Sterner
How Long Does it Take to Hear Back For a Financial Aid Appeal?
There is no exact answer, as the time period to hear back for a financial aid appeal differs from school to school based on their aid appeal process, staff numbers, and the point in time you sent the appeal. Some schools might respond in a few days, and others might respond in a few weeks.
You can speed up the aid award appeals process by attaching any necessary documentation to the email/letter you submit to the school to make the process easier.
What Happens if Your Financial Aid is Denied?
Approval for students depends on the school and your unique circumstance. If your financial aid appeal is denied, this unfortunately means that the school will not be issuing any more financial aid to you. There are a couple of things you can do:
Look for Grants, Scholarships, and Loans
Grants and scholarships are a great way to earn free money to pay for your academic expenses. Both are a form of gift aid, so they do not need to be paid back or accumulate any interest.
Loans need to be paid back and will accumulate interest, so you’ll want to find the best option available for you. Submit a free application with Sparrow to see what rates you get with 17+ lenders, so you can find the best student loan option for you.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Consider your other options. If you received a more competitive financial aid offer from other schools, accepting their offer might be the smarter choice if financial aid is a large consideration.
Closing Thoughts From the Nest
Whether your financial circumstances have changed significantly or you’ve received a higher financial aid package from a different school, appealing your financial aid package is definitely an option you should consider to better afford the cost of attendance.
Use Sparrow’s aid appeal letter templates as a starting point. Remember to be polite and direct in your letter and include all the necessary financial documents to expedite the financial aid appeal process.
Nelnet Bank offers both private student loans and student loan refinancing. Nelnet Bank’s student loan offering is available to undergraduate, graduate, MBA, law, and health professional students. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Fixed APR Range: 4.49% to 15.47%*
Variable APR Range: 6.29% to 15.51%*
Loan Amounts: $1,000 with an aggregate loan limit of $125,000 for undergraduates; $1,000 with an aggregate limit of $500,000 for graduate students
Minimum Credit Score: 680 individually, 640 with a qualified cosigner
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify for a Nelnet Bank student loan, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate, Graduate, MBA, Law, and Health Professional Students
Fixed APR*
4.49% to 15.47%*
Variable APR*
6.29% to 15.51%*
*Rates as of November 1, 2023. Rate ranges listed include a 0.25% ACH deduction on the lower boundary only, not the upper boundary.
Variety of repayment options
While still in school, Nelnet Bank offers you three repayment options for your student loans, with terms ranging from 5 – 15 years. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Deferred Repayment
Don’t make any payments while you’re in school for up to 78 months. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Offers a six-month grace period
Similar to federal student loans, Nelnet Bank offers a six-month grace period before you are required to begin making full principal and interest monthly payments. The grace period is available if you are no longer in school at least halftime – because you’ve graduated, left school, or dropped below half-time enrollment.
Allows up to 12 months of forbearance due to economic hardship or natural disaster
Nelnet Bank offers up to 12 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability). Nelnet Bank’s forbearance is offered in increments of two or three months, with a maximum of 12 months available over the life of the loan.
While Nelnet Bank handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship. If you find yourself in need of forbearance, contact Nelnet Bank directly to check your eligibility.
Drawbacks of Nelnet Bank Student Loans
Strict eligibility criteria
In order to qualify for a private student loan through Nelnet Bank, borrowers must meet the following criteria:
U.S. citizenship or permanent residency status and possession of a valid U.S. Social Security number. Nelnet Bank Student Loans are currently available in all U.S.
At least half-time enrollment at a Nelnet Bank eligible school for the loan period in question.
Have a credit score of 680 or more, or 640 with a qualified cosigner
Neither borrower nor cosigner can have previously defaulted on a student loan
Neither borrower nor cosigner can have filed for bankruptcy in the past seven years
If you do not meet Nelnet Bank’s criteria for a student loan, you should try applying with a cosigner who does meet the criteria. If you don’t have access to an eligible cosigner, you may want to look elsewhere for your private student loan
Don’t meet Nelnet Bank’s eligibility criteria? Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through Nelnet Bank, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Nelnet Bank, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Not accessible to international students
Nelnet Bank does not offer loans to students who are not U.S. citizens or permanent residents. If you are an international student, check out MPOWER and Prodigy Finance both of which offer private student loans to international students. In addition, Earnest, College Ave, and Ascent all offer private student loans to international students who have a U.S. citizen as a cosigner.
Nelnet Bank: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.49% to 15.47%*
Variable APR Range
6.29% to 15.51%*
Loan Terms
5, 10, or 15 years.
Loan Amounts
$1,000 with an aggregate loan limit of $125,000 for undergraduates; $1,000 with an aggregate limit of $500,000 for graduate students.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is either 5% of the unpaid amount of the monthly payment or $10, whichever is less).
Eligibility Requirements – Financial
Minimum Credit Score
680 individually, or 640 with a qualified cosigner.
Minimum Income
N/A.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
Yes.
School requirements
Any school authorized to receive federal aid. Most four-year public and private schools are accepted.
Yes, hardship and natural disaster forbearance for up to 12 months.
Cosigner Release
Yes (requires 24 months of timely repayments).
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services.
In-house Customer Service Team
Yes. Firstmark Services (a division of Nelnet, Inc.)
Process for Escalating Concerns
Yes. Complaints are addressed internally by Nelnet Bank and the Customer Service Team.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
5 minutes.
Before you take out a loan from Nelnet Bank…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Nelnet Bank a legitimate lender?
Yes, Nelnet Bank is a legitimate lender. Nelnet Bank is backed by Nelnet Inc, which is one of the largest federal student loan servicers. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
What is Nelnet Bank?
Nelnet Bank is a lender that offers its own private student loans and refinancing loans. Backed by a company that’s helped over 30,000,000 students successfully navigate repayment, Nelnet Bank was established to help make your educational dreams a reality. This strong background helps Nelnet Bank offer expert help and educational funding solutions that give you an advantage at every step.
Is Nelnet Bank available in all 50 states?
Nelnet Bank is available to borrowers in all 50 states.
How long does it take to get a Nelnet Bank student loan?
Submitting an application through Nelnet Bank takes a few minutes. Once you’ve submitted your loan application, Nelnet Bank will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Nelnet Bank student loan?
If you don’t qualify for a Nelnet Bank student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Nelnet Bank student loans federal or private?
Nelnet Bank offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
*Note: Nelnet, NOT Nelnet Bank, services federal loans.
Does applying for a loan through Nelnet Bank hurt my credit score?
In order to estimate what rate you qualify for, Nelnet Bank conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the Nelnet Bank loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Fixed APR Range: up to 13.74% (14.75% APR)*
Variable APR Range: N/A
Loan Amounts: $2,001 up to $50,000 per semester with an annual limit of $100,000
• Offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students • You can get up to 0.25% in rate discounts • Three unique scholarship opportunities for international students
• Only available to students within two years of graduation • Higher interest rates and fees than other online lenders • You have to make loan payments while you’re in school • Offers only one repayment term of 10 years
Offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students
International and DACA students studying in the U.S. often struggle to finance their education because they do not have access to federal student loans and are not eligible with most private lenders.
Luckily MPOWER has given international and DACA students an option. MPOWER offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students.
MPOWER considers dozens of data points, such as future income potential, to determine creditworthiness and make a lending decision. The company reviews credit history, but credit scores are not a factor in its decision since most international students do not have U.S. credit scores.
The non-cosigned loan offer is available to borrowers from more than 190 countries and 400+ schools.
In order to be eligible for MPOWER’s student loan, you will need to meet the following criteria:
You must be admitted to or enrolled in an eligible school in the U.S. or Canada
You must be within two years of graduating from your program
Your program must start within 12 months
You must live in either the U.S. or Canada while you’re in school
Your program must be degree-granting
If you qualify for a student loan through MPOWER, you’ll get a fixed-rate loan with flexible loan amounts ($2,001 to $100,000 total) that can cover tuition, school supplies, and living expenses for future semesters or past due balances. Check out the table below for more information:
MPOWER Student Loans
Fixed APR*
up to 13.74% (14.75% APR)*
Variable APR*
N/A
*Rates as of January 08, 2023.
You can get up to 0.25% rate discounts
MPOWER rewards you for borrowing responsibly by offering up to a 0.25% rate discount on student loans. You can qualify for these rate discounts by enrolling in autopay.
Autopay will automatically debit your loan payment each month. When you enroll, MPOWER gives you a 0.25% deduction on your interest rate for as long as you remain enrolled.
Your discount will remain if you make on-time payments via autopay. An invalid payment, hardship (i.e., forbearance) request, or entering into a modified payment plan may reset your discount, so you may need to enroll again to earn your interest rate discount.
If you take advantage of the autopay discounts, you could save yourself hundreds, and maybe even thousands, of dollars throughout the lifetime of your loan.
Three unique scholarship opportunities for international students
MPOWER offers three unique scholarship opportunities for international students.
Global Citizen Scholarship: One grand prize winner will get a $5,000 scholarship, while four regional winners will get $3,000 each. To be eligible, you must be an international student studying at an eligible school in the U.S. or Canada.
Women in STEM Scholarship: Female international and DACA students who are enrolled in or accepted to an eligible full-time STEM degree program can receive $5,000, $3,000, or $2,000.
MBA Scholarship Program: MBA students pursuing an MBA at one of MPOWER’s supported schools will be awarded up to $10,000.
In order to be eligible for MPOWER’s scholarships, you must meet the following criteria:
Accepted at, or enrolled in, a full-time degree program at a U.S. or Canadian school that MPOWER supports
An international student allowed to legally study in the U.S. or Canada.
Drawbacks of MPOWER
Only available to students within two years of graduation
If you want to take out a private student loan through MPOWER, you must be within 2 years of graduating from your program. For example: if your anticipated graduation date is May 2023, then your program must have started in May 2021 or later.
Higher interest rates and fees than other online lenders
MPOWER is unique in that it does not require a cosigner, collateral, or credit history. With that said, its rates are quite high compared to other lenders. Depending on your citizenship status and degree type, you will get the following rates:
International undergraduates: 14.75% APR
International graduate students: 13.72% APR
DACA undergraduates: 10.91% APR
DACA graduate student: 8.89% APR
MPOWER also charges a 5% origination fee that is added to your loan balance. You can spread the origination fee across the lifetime of the loan. So for example, if you borrow $10,000, you will have to pay a $500 fee as part of your monthly loan payments after graduation.
You have to make interest-only loan payments while you’re in school
While many lenders offer a variety of payment options that allow you to postpone repayment until after you’ve graduated, MPOWER requires all borrowers to make interest-only payments starting 45 days after loan funds have been disbursed.
Although in-school payments can be difficult for some borrowers, it is the best way to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Interest-Only Repayment
Pay only interest starting 30-45 days after loan funds have been disbursed.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
MPOWER: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
up to 13.74% (14.75% APR)*
Variable APR Range
N/A.
Loan Terms
10 years.
Loan Amounts
$2,001 up to $55,000 per semester with an annual limit of $100,000.
Application or Origination Fee
Yes, 5% origination fee added to the loan balance.
Prepayment Penalty
No.
Late Fees
Yes.
Eligibility Requirements – Financial
Minimum Credit Score
N/A.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers
N/A.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Did not disclose.
Ability to qualify if you’ve filed for bankruptcy
Did not disclose.
Eligibility Requirements – Personal
Citizenship
International students must be from one of the 180 countries MPOWER works with. DACA students do not need a Social Security number to qualify.
Location
Available to international borrowers attending eligible schools in all 50 states, Washington, D.C., and Puerto Rico.
Must be enrolled half-time or more
Yes.
Types of schools served
Borrowers must be attending an eligible Title IV that MPOWER works with.
Percentage of borrowers who have a cosigner
N/A.
Repayment Options
In-school Repayment Options
Interest-only repayment: Pay only interest starting 30-45 days after loan funds have been disbursed.
Grace period
6 months. Interest-only payments are still required.
In-school Deferment
Students enrolled at least half-time are eligible for up to 24 months of deferment while continuing to make interest-only payments.
Military Deferment
Active-duty service members can defer payments for 24 months, in 12-month increments. Interest still accrues, but during the period of active service, interest on loans will be reduced to 6%.
Disability Deferment
Did not disclose.
Forbearance
Available if you have a late payment or are about to miss a payment. Borrowers have a 24-month limit on forbearance, available in six-month increments. During forbearance, interest will continue to accrue on the loan.
Cosigner Release
N/A. No cosigner is required.
Death or Disability Discharge
Yes.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Launch.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
Yes.
Average time from application to approval
10 days.
Before you take out a loan from MPOWER…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is MPOWER a legitimate lender?
Yes, MPOWER is a legitimate lender that offers private student loans to international and DACA students.
Is MPOWER available in all 50 states?
Yes, MPOWER is available in all 50 states.
How long does it take to get an MPOWER student loan?
Submitting an application through MPOWER takes a few minutes. Once you’ve submitted your loan application, MPOWER will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for an MPOWER student loan?
If you don’t qualify for an MPOWER student student loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are MPOWER student loans federal or private?
MPOWER’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through MPOWER hurt my credit score?
It is unclear whether it will hurt your credit score. MPOWER conducts a soft credit check to determine your eligibility. While soft credit checks typically don’t hurt your credit score, MPOWER has stated that “Any potential lender pulling your credit may slightly lower your overall credit score temporarily.” Therefore, it isn’t totally clear whether or not applying for a loan with MPOWER will hurt your credit score or not.
Although MPOWER doesn’t use your FICO score to make loan decisions, the lender does review your credit history. If you have documented credit issues (missed payments, collection items, charge offs, etc.), these will negatively impact your chances to be pre-approved for a loan.
*MPOWER Financing Disclosure
Subject to credit approval, loans are made by Bank of Lake Mills or MPOWER Financing, PBC. Bank of Lake Mills does not have an ownership interest in MPOWER Financing. Neither MPOWER Financing nor Bank of Lake Mills is affiliated with the school you attended or are attending. Bank of Lake Mills is Member FDIC. None of the information contained in this website constitutes a recommendation, solicitation or offer by MPOWER Financing or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.
Prodigy Finance is an online lender that offers non-cosigned graduate student loans to international students. It is best for international students who don’t have a credit history and can’t access a qualified cosigner.
Fixed APR Range: N/A
Variable APR Range: 6.7%+
Loan Amounts: $10,000 ($35,000 in specific U.S. states) to $220,000
Minimum Credit Score: N/A – No credit score required.
• Offers non-cosigned graduate student loans for international students • A variety of repayment options • No prepayment penalties or hidden charges
• Limited interest and repayment options • Higher interest rates and fees than other online lenders • Only available to graduate students • Not available in all 50 U.S. states • Limited grace period for part-time students
Offers non-cosigned graduate student loans to international students
International students studying abroad often struggle to finance their education because they do not have access to federal student loans and are not eligible with most private lenders.
Luckily, Prodigy Finance has given international graduate students an option. Prodigy Finance offers non-cosigned graduate student loans to international students.
Prodigy Finance uses information such as future income potential and credit history to determine your creditworthiness and make a lending decision. While the company reviews credit history, credit scores are not a factor in its decision since most international students do not have U.S. credit scores.
A variety of repayment options
Prodigy Finance provides its borrowers with repayment terms ranging from 7-20 years. Borrowers can choose between 7, 10, 15, or 20-year repayment terms.
Borrowers can also choose between immediate and deferred repayment. If the borrower selects immediate repayment, they will be required to make full monthly payments as soon as the loan is disbursed. If the borrower selects deferred repayment, they will not be required to make full monthly payments until after the grace period.
No prepayment penalties or hidden charges
While Prodigy Finance does have a single 5% origination fee, you will not face any prepayment penalties or hidden charges if you borrow a loan with them.
Drawbacks of Prodigy Finance
Limited interest and repayment options
Prodigy Finance, unlike many other private lenders, does not offer a fixed interest rate option. If you are comfortable with your interest rate changing throughout the life of your loan, this may be a good option for you. If not, you may want to look at other lenders.
Additionally, Prodigy Finance only offers immediate and deferred repayment options. So, borrowers either have to (1) begin making loan payments immediately after disbursement or (2) defer repayment until after the grace period. It would be nice to see Prodigy Finance offer more in-school repayment options for borrowers such as interest-only repayment.
Higher interest rates and fees than other online lenders
Prodigy Finance is unique in that it does not require a cosigner or collateral. With that said, its rates are slightly high compared to other lenders. Additionally, due to not having fixed interest rates, your interest rate could get higher over time.
Unlike most private lenders, Prodigy Finance also charges a 5% origination fee that is added to your loan balance. You can spread the origination fee across the lifetime of the loan. So for example, if you borrow $10,000, you will have to pay a $500 fee at the end of the loan term.
Only available to graduate students
Prodigy Finance’s student loans are only available to students pursuing graduate degrees. If you are an undergraduate international student, you will want to look elsewhere for your private student loans.
Not available in all 50 U.S. states
Prodigy Finance offers private student loans to students studying at over 850 schools across 18 different countries. When it comes to the United States, Prodigy Finance loans are available to borrowers in all 50 states except Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Montana, Nevada, North Dakota, Oregon, Rhode Island, South Dakota, Vermont, Washington and Wyoming.
If you are an international student planning to attend school in one of these states, you may want to check out loan options with MPOWER who lends to international students in all 50 states.
Limited grace period for part-time students
Prodigy Finance offers a standard 6-month grace period for full-time student borrowers. Meaning, repayment will begin 6 months from the class end date. For part-time student borrowers, however, Prodigy Finance only offers a 3-month grace period, with repayment beginning 3 months after the final disbursement date. So, in a typical spring semester, with the final loan disbursement being in January, repayment will begin in April for part-time student borrowers. Knowing that most college programs end in May, it would be nice to see Prodigy Finance extend the grace period for part-time student borrowers.
Prodigy Finance: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
N/A
Variable APR Range
6.7%+
Loan Terms
7, 10, 15, or 20 years.
Loan Amounts
$10,000 ($35,000 in specific U.S. states) to $220,000.
Application or Origination Fee
Yes, 5% origination fee added to the loan balance.
Prepayment Penalty
No.
Late Fees
No.
Eligibility Requirements – Financial
Minimum Credit Score
N/A.
Minimum Income
N/A. Future earnings are considered.
Typical Credit Score of Approved Borrowers
N/A.
Typical Income of Approved Borrower
N/A. Future earnings are considered.
Maximum Debt-to-Income Ratio
Not based on current income. Future earnings are considered.
Ability to qualify if you’ve filed for bankruptcy
Yes, on a case-by-case basis.
Eligibility Requirements – Personal
Citizenship
International students.
Location
Available to borrowers in all 50 states except Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Montana, Nevada, North Dakota, Oregon, Rhode Island, South Dakota, Vermont, Washington and Wyoming.
Must be enrolled half-time or more
Most of Prodigy Finance’s borrowers are full-time students, however, they do support part-time students on a course-by-course and case-by-case basis.
Types of schools served
No specific type of school. Prodigy Finance supports over 850 schools in 18 different countries.
Percentage of borrowers who have a cosigner
N/A.
Repayment Options
In-school Repayment Options
Immediate: Start making full monthly payments as soon as the loan is disbursed.
Deferred: Borrowers are not required to make any payments until the grace period ends.
In-school Deferment
Reviewed on a case-by-case basis.
Military Deferment
Reviewed on a case-by-case basis.
Disability Deferment
Did not disclose.
Forbearance
Reviewed on a case-by-case basis. The length of forbearance given ranges depending on the circumstances.
Cosigner Release
N/A.
Death or Disability Discharge
Reviewed on a case-by-case basis.
Loan discharge if cosigner dies or becomes disabled
Did not disclose.
Autopay
Allows for surplus payments via autopay: No. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Prodigy Finance.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
3 weeks.
Before you take out a loan from Prodigy Finance…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Prodigy Finance a legitimate lender?
Yes, Prodigy Finance is a legitimate lender that offers private student loans to international students.
Is Prodigy Finance available in all 50 states?
No, Prodigy Finance is not available in Alabama, Arizona, Arkansas, California, Delaware, Hawaii, Idaho, Indiana, Louisiana, Maine, Montana, Nevada, North Dakota, Oregon, Rhode Island, South Dakota, Vermont, Washington and Wyoming. Prodigy Finance is available in all other U.S. states.
How long does it take to get a Prodigy Finance student loan?
Submitting an application through Prodigy Finance takes a few minutes. Once you’ve submitted your loan application, Prodigy Finance will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Prodigy Finance student loan?
If you don’t qualify for a Prodigy Finance student loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you get the best rates. And best of all, it won’t impact your credit score.
Are Prodigy Finance student loans federal or private?
Prodigy Finance’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, as well as grants and scholarships.
Does applying for a loan through Prodigy Finance hurt my credit score?
Yes, it may temporarily hurt your credit score. Although Prodigy Finance doesn’t use your FICO score to make loan decisions, the lender does review your credit history. If you have documented credit issues (missed payments, collection items, charge offs, etc.), these will negatively impact your chances to be pre-approved for a loan.
College Ave offers both private student loans and student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Fixed APR Range: 6.99% to 11.99%*
Variable APR Range: 6.99% to 11.99%*
Loan Amounts: $5,000 to $300,000 (depending on degree type)*
• Strong customer experience • Competitive rates • Choose any loan term between five and 15 years including nonstandard terms such as 6 or 9 years
• Limited eligibility criteria • Unclear forbearance policy • Not available to borrowers without a degree, visa holders, or those with parent PLUS loans • Doesn’t allow spousal consolidation loans
From loan application to loan disbursement and beyond, College Ave’s borrowing experience is done entirely online. The lender also offers excellent customer service that is available through email, chat, and phone. If you’re comfortable with an entirely virtual experience, College Ave’s seamless online borrowing process is a huge benefit.
Competitive interest rates and zero fees for qualified borrowers
When looking to refinance existing student loans, finding a low interest rate is typically a top priority. If you qualify for a refinance loan through College Ave, you will have access to some of the best rates in the industry. College Ave’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
College Ave’s Student Loan Refinance
Fixed APR
6.99% to 11.99%*
Variable APR
6.99% to 11.99%*
*Rates as of September 01, 2023. May include 0.25% AutoPay Discount, which requires you to agree to make your scheduled monthly payments by an automatic monthly deduction (ACH) from a savings or checking account.
You can choose any loan term between 5 and 15 years*
College Ave prides itself on allowing you to choose from a wide range of loan terms (up to 11 options) to make repayment as easy as possible. If you are looking for a lender that offers flexibility to match your monthly payments to your budget, College Ave is an excellent option for you.
Drawbacks of Refinancing with College Ave
Limited eligibility criteria
In order to refinance with College Ave, you will need to be a U.S. citizen or permanent resident who has graduated from a participating school. You will also need to have a credit score around 680 and $50,000 of annual income.
Not a U.S. citizen or permanent resident?SoFi allows you to apply to refinance your student loan if you do not have a U.S. citizen as a cosigner.
Didn’t graduate? EDvestinU allows you to refinance your student loans without a degree.
Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
Unclear forbearance policy
While College Ave does offer up to 18 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability), it is unclear who qualifies and under what circumstances. Although many borrowers don’t end up needing forbearance, it can be a helpful safety net if you were to fall into financial hardship.
Not available to borrowers without a degree, visa holders, or those with parent PLUS loans
While College Ave offers some of the best rates in the industry, its refinance loans are not available to everyone. Borrowers without a degree or those who are visa holders will have to look elsewhere to refinance their student debt.
If you are a student looking to take over your parent’s PLUS loans under your name, you will need to consider another private student lender.
With that said, if you are a parent with parent PLUS loans, you can refinance your loans under your name with College Ave.
No spousal consolidation loans
College Ave does not provide people who are married with the opportunity to combine student loan debt which many see as a simpler route to paying off their debt.
College Ave: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
6.99% to 11.99%*
Variable APR Range
6.99% to 11.99%*
Loan Terms
Choose a term between 5 and 15 years.*
Loan Amounts
$5,000 – $150,000, or up to $300,000* for borrowers with medical, dental, pharmacy, or veterinary degrees.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes (If payment isn’t made within 15 days of the due date, the fee is either 5% of the unpaid amount or $25, depending on whichever is less).
Eligibility Requirements – Financial
Minimum Credit Score
Upper 600s.
Minimum Income
$50,000 per year.
Typical Credit Score of Approved Borrowers or Cosigners
Mid 700s.
Typical Income of Approved Borrower
$100,000k+ per year.
Maximum Debt-to-Income Ratio
50% (in other words, this means that the total monthly debt payments must not exceed 50% of income).
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident.
Must have graduated
Yes, with an associate degree or higher.
Must have attended a school authorized to receive federal aid
Yes.
Repayment Options
Military Deferment
Yes.
Disability Deferment
Yes.
Forbearance
Up to 18 months available, in either 3 or 6-month increments.
Death or Disability Discharge
Yes, if the primary borrower dies or becomes totally and permanently disabled.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
College Ave.
In-house Customer Service Team
Yes (call center staffed by a third-party company).
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
Two to three weeks.
Before you take out a loan from College Ave…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is College Ave a legitimate lender?
Yes, College Ave is a legitimate lender that has been providing student loans since 2014. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
How long does it take to get a College Ave student loan?
Submitting an application through College Ave takes a few minutes. Once you’ve submitted your loan application, College Ave will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a College Ave student loan?
If you don’t qualify for a College Ave student loan, the company will inform you why. Depending on the reason, you may consider reapplying later on or applying with a different lender altogether. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you get the best rates. And best of all, it won’t impact your credit score.
Are College Ave student loans federal or private?
College Ave loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through College Ave hurt my credit score?
In order to estimate what rate you qualify for, College Ave conducts a “soft credit check” — this does not affect your credit score. If you choose to accept the College Ave loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
College Ave offers both private student loans and student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan offering is available for undergraduates, graduate students, professional school students, career school students, and parents of students. It’s best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Fixed APR Range: 5.05% to 16.99%*
Variable APR Range: 5.59% to 16.99%*
Loan Amounts: $1,000 up to the total cost of attendance*
• Strong customer experience • Competitive interest rates • Offers flexible repayment plans to match monthly payments to your budget • Choose your loan term • Allows a six-month grace period on undergraduate loans • Available to international, community college, and part-time students
From loan application to loan disbursement and beyond, College Ave’s borrowing experience is done entirely online. The lender also offers excellent customer service that is available through email, chat, and phone. If you’re comfortable with an entirely virtual experience, College Ave’s seamless online borrowing process is a huge benefit.
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low interest rate is typically a top priority. If you qualify for a College Ave student loan, you’ll have access to some of the best rates in the industry. College Ave’s variable and fixed interest rates are typically lower than competing student lenders. In addition, you won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Undergraduate
Graduate
MBA
Law
Medical/Dental
Parent
Fixed APR
5.05% to 16.99%*
5.05% to 14.49%*
5.05% to 14.49%*
5.05% to 14.47%*
5.05% to 14.47%*
5.05% to 16.99%*
Variable APR
5.59% to 16.99%*
5.59% to 14.49%*
5.59% to 14.49%*
5.59% to 14.47%*
5.59% to 14.47%*
5.59% to 16.99%*
Rates as of October 4, 2023.
Offers flexible repayment plans to match monthly payments to your budget
While still in school, College Ave offers you four repayment options for your student loans, with terms ranging from 5, 8, 10, or 15 years for undergraduate loans, and up to 20 years on some graduate loans. If possible, it’s beneficial to make in-school loan payments in order to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after your grace period ends.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Note:Parents borrowing on behalf of students are limited to interest only and immediate repayment options.
You can choose your loan term
College Ave prides itself on allowing you to choose from a wide range of loan terms (5, 8, 10, or 15 years on undergraduate loans; up to 20 years on some graduate loans) to make repayment as easy as possible. If you are looking for a lender that offers flexibility to match your monthly payments to your budget, College Ave is an excellent option for you.
Allows a six-month grace period
After you are no longer in school at least half-time – because you’ve graduated, left school, or dropped below half-time enrollment – you have a grace period before you begin making full principal and interest monthly payments. The grace period is six months for College Ave undergraduate loans.
Available to international, community college, and part-time students
Beyond offering loans to undergraduate, graduate, professional, and career school students, and parents of students, College Ave also offers student loans to international, community college, and part-time students.
International students: As long as you have a Social Security number and a U.S. citizen or permanent resident cosigner, you’re eligible to apply for a student loan through College Ave. (If you don’t have a Social Security number and/or a cosigner, consider MPOWER or Prodigy Finance, which do not require a cosigner on student loans for international students.)
Community college students: Unlike some other private lenders, College Ave offers student loans to borrowers pursuing a career program. Part-time students: While most private lenders require borrowers to be enrolled at least half-time, College Ave makes its loans available to part-time students seeking a degree at eligible schools.
Drawbacks of College Ave Student Loans
Strict cosigner release policy
According to College Ave, 93% of all student loans are cosigned. This means that the cosigner (often a parent) will be responsible for repaying the loan in the event that you cannot. Given the prevalence of cosigned loans, it would be nice to see College Ave offer more flexibility with cosigner release (i.e. taking the cosigner’s name off the loan and removing the cosigner’s responsibility to pay). As of now, College Ave has a strict cosigner release policy that is only available for borrowers who meet the following criteria:
The borrower must be a U.S. citizen
More than half of the repayment period has elapsed
The most recent 24 consecutive payments were made on-time
The borrower has earned income for the previous two years that is more than twice the outstanding balance
The borrower’s credit report shows no late payments on any other obligations for the past 24 months
This means that for a standard 10-year repayment term, the borrower would need to make at least 5 years of payments before the cosigner is released — this is a longer term than other lenders require to release a cosigner. Given that many borrowers benefit by including a cosigner on their loan, it’s important that you and your cosigner are well-aware of College Ave’s strict cosigner release policy.
Need a loan that offers more flexible cosigner release policies? Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
Unclear forbearance policy
While College Ave does offer up to 12 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability), it is unclear who qualifies and under what circumstances. Although many borrowers don’t end up needing forbearance, it can be a helpful safety net if you were to fall into financial hardship.
If you find yourself in need of forbearance, call College Ave’s loan servicer, University Accounting Services (UAS), to check your eligibility. UAS awards this forbearance on a case-by-case basis, unlike other lenders with more definitive and transparent practices.
College Ave: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
5.05% – 16.99%*
Variable APR Range
5.59% – 16.99%*
Loan Terms
5, 8, 10, or 15 years for undergraduate loans; up to 20 years on some graduate loans*
Loan Amounts
$1,000 up to cost of attendance
Application or Origination Fee
No
Prepayment Penalty
No
Late Fees
Yes (If payment is not made within 15 days of the due date, the late fee is either 5% of the unpaid amount of the monthly payment or $25.)
Eligibility Requirements – Financial
Minimum Credit Score
Mid 600s.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Mid 700s.
Typical Income of Approved Borrower
About $65,000 per year.
Typical Income of Approved Cosigner
About $120,000 per year.
Maximum Debt-to-Income Ratio
Can be up to 80% in some cases, but depends on credit characteristics.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident. International students are eligible if applying with a cosigner who is a U.S. citizen or permanent resident. DACA borrowers are eligible with a valid social security number.
Location
Available to borrowers in all 50 states.
Must be enrolled half-time or more
No.
School requirements
Borrowers must be enrolled in a degree-granting program at an eligible school.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re in school.
Interest-only Repayment
Only pay interest while you’re in school.
Partial Repayment
Pay $25 a month during school.
Deferred Repayment
Wait to make payments until you’re out of school.
Grace period
6 months for undergraduates, 9 months for graduate students.
Grace period extension
Yes, up to 6 additional months.
In-school Deferment
Yes.
Military Deferment
Yes.
Forbearance
Up to 18 months available, in 3 or 6-month increments.
Natural disaster forbearance
Borrowers can postpone payments if they’re involved in a natural disaster, as determined by FEMA.
Cosigner Release
Yes (requires timely repayments of at least half of the loan term).
Death or Disability Discharge
Yes, if the borrower dies or suffers a permanent disability.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: Yes.
Customer Service
Loan Servicer
University Accounting Services (UAS).
In-house Customer Service Team
Yes (call center staffed by a third-party company).
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
No.
Average time from application to approval
3 minutes.
Before you take out a loan from College Ave…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is College Ave a legitimate lender?
Yes, College Ave is a legitimate lender that has been providing student loans since 2014. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
Is College Ave available in all 50 states?
Yes.
How long does it take to get a College Ave student loan?
Submitting an application through College Ave takes a few minutes. Once you’ve submitted your loan application, College Ave will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. College Ave estimates that the certification process takes around ten days.
Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a College Ave student loan?
If you don’t qualify for a College Ave student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are College Ave student loans federal or private?
College Ave loans are private loans. Before you take on a private loan, we recommend that you exhaust your federal loan options.
Does applying for a loan through College Ave hurt my credit score?
College Ave offers a prequalification tool which utilizes “a soft credit check” – this does not affect your credit score – which can help you understand if your credit qualifies and what interest rates you can expect. If you choose to apply for a student loan with College Ave, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
The cost of college has been going up for many years, making financial aid incredibly important. In fact, to afford college, most students use a combination of financial aid. The term “financial aid,” though, is broad and can refer to many different things. So, what exactly is financial aid? And how does it really work? Let’s get into it.
What Is Financial Aid?
Financial aid is money that you use to pay for college. More specifically, money that doesn’t come from personal savings or parent contributions. This means scholarships, grants, student loans,work-study, and other aid programs. Financial aid typically falls into one of two categories: need-based or merit-based.
Need-Based Financial Aid
Need-based financial aid is money only available to you if you demonstrate financial need. This means your income level is deemed not high enough to contribute to college expenses. Your level of financial need is usually based on the information you provide on the FAFSA. The FAFSA opens every October for the following school year. For example, in October of 2021, the 2022-2023 FAFSA application opened for students. After submitting the FAFSA, you’ll get a financial aid award letter from each school you were accepted to where you can accept or deny aid awards you received.
Examples of need-based aid would be thePell Grant and Direct Subsidized Loans. Both your grant and Subsidized Loan eligibility are dependent on your financial situation. They are only available to undergraduate students with financial need.
Merit-Based Financial Aid
Merit-based financial aid is awarded based on achievements, such as academic or athletic achievements. Since these are not based on financial need, more people tend to qualify. When it comes to merit-based aid, each award will have its own application process. So, you’ll have to do your research online to find them.
The most popular example of merit-based aid would be scholarships. Scholarships usually have their own individual requirements. To find merit-based scholarships, we recommend utilizing search engines dedicated to helping you find aid like FastWeb and Niche.
What Does Financial Aid Cover?
Your financial aid awards can cover a range of things depending on the financial aid you receive. You can use financial aid to pay for tuition, books, room and board, and other college expenses. There are times, however, when the financial aid you receive comes with conditions. For instance, they may tell you to only use your grant money for room and board. However, as long as you are using the money for college costs and any other related expenses, you’re typically in the clear.
How Your Financial Aid Is Determined
Depending on the type of aid, there are different ways the amount you receive is determined
Need-Based Aid From Your University
When you fill out the FAFSA, you get to choose a list of schools to send it to. Individual schools will use the information you provide on the FAFSA to determine how much money you get. They’ll look at things like your annual income or your family’s income, and based on that, they’ll determine how much they think you/your family can provide. They’ll then offer financial aid to try to make up the difference.
Merit-Based Aid
Merit-based aid is usually scholarships, but can also be grants and other programs as well. The amount of money that you can receive will depend on each award and is set by the aid provider. For instance, you may find a scholarship for $5,000 and then find another one for $500. It really just depends on the amount that they set.
How Much Financial Aid Does the Average Student Receive?
Research done by the College Board shows that on average, full-time undergraduate students receive about $14,800 in financial aid in one year. Meanwhile, full-time graduate students receive around $26,920 for one year.
Does Financial Aid Have To Be Paid Back?
It depends on the type of financial aid. Loans have to be paid back, usually with interest. Your loan servicer or provider will work with you to provide a timeline on which you’ll pay back the money. Scholarships and grants are seen as free money because you typically don’t have to pay them back. Grants may have to be paid back under certain circumstances. But if that happens, your school will let you know and help you set up a payment plan. Finally, work-study and other similar programs don’t have to be paid back. Since it’s money that you earned, it’s yours.
Final Thoughts from the Nest
Financial aid is an extremely important part of the process of paying for college. So, it’s important that you understand it. Hopefully, with all this information, you’re in a better position than you were before. Sparrow is a great resource to help you with financial aid. More specifically, with private student loans. When it comes to private student loans, you usually have to research and apply to each one separately. But with us, you only have to fill out one application to see what rates you can qualify for with 15+ lenders. To get started, sign up.
The idea of an employer giving you extra money to pay off your student loan debt may seem too good to be true. But in fact, around 17%1 of employers offer student debt assistance and another 31% plan to offer it in the future.
Regardless of how much you owe, an employer throwing extra cash towards your debt is quite a compelling employee benefit.
So, we’ve partnered with Dwindle Student Debt to help you find just that. Dwindle is focused on helping you find a job that helps you pay down your student debt or lower the cost of your education.
With the help of Dwindle’s robust job page, we’ve compiled the top 30 companies offering student loan repayment assistance to help get your job search started.
30 Companies Ready to Help Pay off Your Debt
#1: Aetna
Who they are: Aetna is a well-known, American healthcare company that sells health insurance to individuals, families, employers, and healthcare providers.
What they offer: In addition to a strong tuition reimbursement program, Aetna also helps employees during debt payoff by matching employees’ student loan payments.For full-time employees, Aetna will match up to $2,000 per year in student loan payments, for a lifetime maximum of $10,000. For part-time employees, Aetna will match up to $1,000 per year with a lifetime maximum of $5,000.
Who is eligible: To be eligible, employees must have earned a U.S.-based undergraduate or graduate college degree from an accredited program within 3 years of applying to the program.
#2: Abbott
Who they are: Abbott is an American medical device and healthcare company.
What they offer: Abbott typically requires all employees to contribute, at minimum, 2% to their 401(k). However, Abbott’s Freedom 2 Save program allows employees with student debt to divert the 2% minimum 401(k) contribution to their student loan payments, and in return, Abbott will contribute 5% to the employee’s 401(k). While Abbott’s contribution doesn’t go directly to the employee’s student debt, it allows employees to pay off their debt faster while keeping their 401(k) in check.
Who is eligible: Full-time Abbott employees are eligible.
#3: AlloSource
Who they are: AlloSource is a healthcare company with a mission to help patients heal through innovative cellular and allograft research.
What they offer: AlloSource partners with Tuition.io to contribute a percentage to the principal balance of the loan.
Who is eligible: To qualify, employees must have worked with AlloSource full-time for at least a year.
#4: Ally Financial
Who they are: Ally Financial is a leading digital financial services company offering a wide variety of education benefits for its 8,500+ employees.
What they offer: Ally offers employees $100 a month towards an eligible 529 College Savings Plan and $100 per month towards student loans, with a combined lifetime maximum of $10,000.
Who is eligible: All Ally employees are eligible.
#5: Andersen Global
Who they are: Andersen Global is a financial consulting company for both individuals and businesses.
What they offer: Andersen Global partners with Gradifi to provide employees up to $12,000 toward student loan repayment. The amount is contributed in monthly stipends of $100, followed by a $6,000 lump sum payment after five years.
Who is eligible: Employees must have been with the company at least one month and working at least 20 hours per week to be eligible.
#6: American Family Insurance
Who they are: American Family Insurance (AmFam) is a mutual insurance company offering personal and business insurance.
What they offer: AmFam offers $100 per month towards student loan repayment, with a lifetime maximum of $10,000.
Who is eligible: AmFam employees who have graduated with an associate’s degree or higher are eligible.
#7: Atticus
Who they are: Atticus is a Public Benefit Corporation with a mission to improve the legal system by offering online legal advice from experts.
What they offer: Atticus offers up to $1,200 per year in student loan repayment assistance.
Who is eligible: It appears as though all Atticus employees are eligible, however, there may be additional eligibility requirements.
#8: Carhartt
Who they are: Carhartt is a men’s and women’s apparel company.
What they offer: Carhartt partners with Tuition.io to provide employees with $50 per month towards student loan repayment, with a lifetime maximum of $10,000.
Who is eligible: It appears as though all Carhartt employees are eligible, however, there may be additional eligibility requirements.
#9: Carvana
Who they are: Carvana is an online used car retailer.
What they offer: Carvana partners with Gradifi to provide employees with $1,000 per year towards student loan repayment.
Who is eligible: It appears as though all Carvana employees are eligible, however, there may be additional eligibility requirements.
#10: Chegg
Who they are: Chegg is a well-known education technology company.
What they offer: Chegg offers employees up to $6,000 per year in student loan repayment assistance.
Who is eligible: All Chegg employees with student debt are eligible for their $1,000 per year student loan repayment assistance. Additionally, employees that have been with Chegg for at least two years are eligible for up to an additional $5,000 per year in student loan repayment assistance.
#11: Connelly Partners
Who they are: Connelly Partners is an advertising agency.
What they offer: Connelly Partners teamed up with Gradifi to provide employees with up to $100 per month toward their student loan payments. This benefit is in addition to Connelly Partners’ $1,000 signing bonus, which can be used toward student loans. Employees who reach a five-year anniversary with Connelly Partners will also receive another $1,000 cash bonus toward their student loans.
Who is eligible: All Connelly Partners employees are eligible for the $100 per month assistance and the $1,000 signing bonus. Employees must have been with the company for five years to qualify for the $1,000 cash bonus.
#12: Estée Lauder
Who they are: Estée Lauder is a well-known American manufacturer of makeup, skincare, fragrance, and hair products.
What they offer: Estée Lauder provides employees with $100 per month in student loan repayment assistance, with a lifetime maximum of $10,000.
Who is eligible: Employees of Estée Lauder, including its subsidiaries Clinique, MAC Cosmetics, and Origins, are eligible for student loan repayment assistance.
#13: Fidelity Investments
Who they are: Fidelity Investments is an American financial services corporation.
What they offer: Fidelity Investments offers employees student loan benefits through their Step Ahead Student Loan Assistance Program, which provides up to $2,000 per year in student loan repayment assistance, with a lifetime maximum of $10,000.
Who is eligible: Employees who have been with the company for at least six months are eligible.
#14: First Republic
Who they are: First Republic is a private bank and wealth management company.
What they offer: First Republic partners with Gradifi to offer their employees a tiered student loan repayment assistance program. Employees are initially eligible for $100 per month towards their student loans. This amount increases each month the employee utilizes the benefit, with a maximum of $200 per month. There is no lifetime maximum contribution.
Who is eligible: It appears as though all Carvana employees are eligible, however, there may be additional eligibility requirements.
#15: Google
Who they are: Do we need to explain who Google is?!
What they offer: Google offers their employees up to $2,500 in student loan repayment assistance per year.
Who is eligible: All Google employees are eligible.
#16: Hulu
Who they are: Hulu is a popular streaming service.
What they offer: Hulu offers employees $1,200 per year in student loan repayment assistance.
Who is eligible: All Google employees are eligible.
#17: Kronos
Who they are: Kronos is a software company catering to management and human resources fields.
What they offer: Kronos offers employees student loan repayment assistance, however, employees have to contact the benefits department to see how much they qualify for.
Who is eligible: It is unclear which Kronos employees are eligible.
#18: Live Nation
Who they are: Live Nation is an American concert promoter and venue operator company.
What they offer: Live Nation matches employee’s student loan payments up to $100 per month, with a lifetime maximum of $6,000.
Who is eligible: To qualify, employees must have been with the company for at least six months.
#19: Lockheed Martin
Who they are: Lockheed Martin is an American aerospace, arms, defense, information security, and technology company.
What they offer: Lockheed Martin offers new graduates student loan repayment assistance through their Invest in Me program. The program provides eligible employees with $150 per month for up to five years. While intended to be used for student loan repayment, the money can be used toward other expenses.
Who is eligible: To be eligible, employees must be a recent graduate, a full-time hire, and working in the Missiles and Fire Control department.
#20: New York Life
Who they are: New York Life is the third-largest life insurance company in the United States.
What they offer: New York Life offers all eligible employees up to $10,200 in student loan assistance over a five year period.
Who is eligible: To be eligible, employees must be non-officers with student loans working under the New York Life Insurance Company, NYL Investors, New York Life Investment Management, or Index IQ.
#21: Nvidia
Who they are: Nvidia is a technology company and global leader in artificial intelligence.
What they offer: Nvidia offers employees $500 per month toward student loans, with a lifetime maximum of $30,000.
Who is eligible: Both full- and part-time employees are eligible if they have worked with Nvidia for at least three months and work at least 20 hours per week.
#22: Parallon
Who they are: Parallon is a leader in healthcare and business operations services, providing hospitals and healthcare systems with tools to improve their business performance.
What they offer: Parallon offers employees $50-$100 per month in student loan repayment assistance. Parallon has not specified any lifetime maximums.
Who is eligible: Full-time Parallon employees are eligible for $100 per month, while part-time employees are eligible for $50 per month.
#23: Peloton
Who they are: Peloton is a well-known fitness technology company.
What they offer: Peloton offers employees $100 per month. The program does not appear to have a lifetime maximum.
Who is eligible: Peloton does not specify which employees are eligible.
#24: Penguin Random House
Who they are: Penguin Random House is an American book publisher and the largest general-interest paperback publisher in the entire world.
What they offer: Penguin Random House offers employees $100 per month in student loan repayment assistance, with a lifetime maximum of $9,000.
Who is eligible: Only full-time employees who have been with the company for at least one year are eligible.
#25: PricewaterhouseCoopers (PwC)
Who they are: PricewaterhouseCoopers (PwC) is a multinational network of firms bringing businesses assurance, tax, and consulting services.
What they offer: PwC offers employees up to $1,200 per year in student loan repayment assistance, with a $10,000 lifetime maximum.
Who is eligible: All PwC employees are eligible. There is no requirement to have worked with PwC for a specific length of time before being eligible.
#26: SoFi
Who they are: SoFi is an American personal finance company and online bank providing customers with a variety of financial services.
What they offer: SoFi offers employees up to $200 per month in student loan repayment assistance, with no lifetime maximum.
Who is eligible: All SoFi employees are eligible.
#27: Staples
Who they are: Staples is an American retail company specializing in office supplies.
What they offer: Staples offers employees $100 per month in student loan repayment assistance, for a maximum of 36 months.
Who is eligible: To be eligible, Staples employees must be deemed qualifying and high-potential by the company. It is unclear what makes an employee high-potential.
#28: Terminix
Who they are: Terminix is one of the largest pest control companies in the world.
What they offer: Terminix offers employees $50 per month in student loan repayment assistance.
Who is eligible: Both full-time and part-time employees may be eligible, however, Terminix does note that the program is only available to qualifying employees. It is unclear what makes a Terminix employee qualify.
#29: The U.S. Government
Who they are: Shall we explain this one?
What they offer: The U.S. federal government offers employees up to $60,000 in student loan repayment assistance, paid in $10,000 increments over the course of six years.
Who is eligible: U.S. government employees are eligible if they have federal student loans and agree to sign a contract agreeing to work for the government for at least three years. U.S. government employees will still qualify for federal loan forgiveness programs such as Public Service LoanForgiveness.
#30: Weedmaps
Who they are: Weedmaps is a California-based cannabis technology company.
What they offer: Weedmaps offers up to $1,000 a year in student loan repayment assistance.
Who is eligible: Weedmaps does note their student loan repayment assistance benefit on full-time roles. It is unclear whether part-time Weedmaps employees are eligible or what other criteria full-time employees have to meet to be eligible.
Why Do Companies Offer Debt Repayment Benefits?
While many employers offer student loan repayment benefits as a way to attract and retain talent, there are more widespread impacts such as improving company culture and employee happiness.
How to Find Employers That Will Pay Off Your Debt
While this list is a solid starting point, we recommend keeping up with Dwindle Student Debt’s growing job page. Dwindle Student Debt allows you to explore a list of companies with student loan repayment benefits, ensuring that you stay up-to-date on potential employment opportunities as more companies add student loan repayment benefits to their offers.
Final Thoughts from the Nest
Whether you’re just beginning the post-grad job search or you’re looking to change companies later in your career, finding a company that offers student loan repayment benefits is a solid choice. To explore additional opportunities with other top companies, check out Dwindle Student Debt.
Financial aid can come in a variety of forms, such as scholarships, grants, and even student loans. On average, full-time undergraduate students receive roughly $14,800 of financial aid each year.1 So, if you submitted the FAFSA and didn’t receive any financial aid, it may have come as a surprise.
What are some reasons you might not have received any financial aid?
Here are seven possible reasons why.
7 Reasons Why You Might Have Not Received Financial Aid
#1: You Didn’t Submit Your FAFSA
The FAFSA, or Free Application for Federal Student Aid, must be filled out and submitted in order to receive federal student aid, such as work-study, loans, and grants. Even some scholarship and grant programs, such as your university’s, require you to have submitted the FAFSA to be considered for aid.
In the 2020-21 academic year, only 68% of students submitted the FAFSA, which is an extremely alarming statistic given that the FAFSA is the gateway to $150 billion in federal student aid.
Generally, almost all schools in the United States require you to submit the FAFSA by the deadline that your school sets, though the FAFSA filing deadline is June 30th and the opening date is October 1st.
If you did not submit the FAFSA on time, you cannot submit it late and must wait until the next application cycle.
Completing the FAFSA in a timely manner is extremely important, even if you might think you won’t qualify for any financial aid. Charlie Javice, the CEO of an online platform that helps students submit the FAFSA called Frank, states, “[Being too rich to get aid] only applies to less than 5% of the U.S. population. Everyone should be doing it.”
#2: You Submitted the FAFSA Late
Time is of the essence when it comes to submitting the FAFSA. Federal financial aid is awarded based on a first-come, first-served basis.
The later you submit your application, the slimmer your chances of receiving a substantial amount of aid, or even aid in general because aid is awarded based on the line up of applications.
If you do not submit the FAFSA by June 30th, you are not eligible for federal financial aid for that year and must wait until the next application cycle.
Do not forget to submit the FAFSA as soon as possible.
#3: You’ve Reached Your Financial Aid Limit
Certain grants and loans have maximum borrowing limits.
If you’ve previously received financial aid but did not receive any additional aid, you may have maxed out the aggregate or cumulative limit of the aid you’ve already received.
For example, the amount of Federal Pell Grant aid you can receive is limited to six years of Pell Grant funding. You are eligible to receive 100% of your Federal Pell Grant award per year, for a total award of 600% over a six-year period.
Your Lifetime Eligibility Used (LEU) is what measures how much of your Pell Grant award you’ve used.
For example, let’s say that you receive a scheduled Pell Grant award of $2,250 in your first year of college. Your scheduled Pell Grant award is the maximum amount of money you can receive for that award year.
If you decide to enroll for only one semester during your first year of college, the Pell Grant amount that you receive, or actually use, changes. You would receive 50% of your scheduled Pell Grant, which is $1,125. Your LEU is now 50%, meaning you’ve used 50/600 of your total Pell Grant award.
However, if you had decided to enroll full-time in the fall, spring, and summer, your received Pell Grant award would have been $3,375, which is 150% of your Pell Grant award for that award year. Your LEU would have been 150%, and you would have used 150/600 of your total Pell Grant award.
Let’s look at the chart below to see how LEU and Pell Grant awards work in hypothetical real-life situations.
We can see that Student A used 400% out of their 600% Pell grant awards by the end of Year 4. Therefore, Student A has 200% of their Pell Grant award left to spend for any further education. Student B used 375% of their Pell Grant award, so Student B has 225% of their Pell Grant award left. Student C used 350% of their Pell Grant award, so Student C has 250% of their Pell Grant award left.
Aggregate limits also apply to certain federal loans. For example, the federal Direct Unsubsidized Loan has an aggregate loan limit of $31,000 for dependent undergraduate students. This means that dependent undergraduate students can only borrow up to $31,000 in Direct Unsubsidized Loans over the entire course of their college career.
As we can see from the table below, a dependent undergraduate student borrows a total of $27,000 for the first four years of their education through the Direct Unsubsidized Loan. The aggregate limit for the Direct Unsubsidized Loan is $31,000, so the student can only borrow $4,000 in their fifth year of education.
If you’ve exceeded the annual limit or aggregate limit for any federal grants or loans, you cannot receive any more financial awards from the specific programs.
Look into the aid you’ve already received and the amount you’ve put towards your college costs to determine whether or not you have reached the limit for federal grants and loans.
#4: You are Defaulted on a Federal Student Loan
You are defaulted on a federal student loan if you’ve missed your scheduled loan payments for more than 9 months, which is around 270 days.
If you are defaulted on a federal student loan, you cannot receive any additional federal student aid, even if you submit your FAFSA. You are also ineligible for benefits like loan forgiveness, repayment plans, and deferment (or temporarily stopping payments for a student loan).
Defaulted federal student loans cannot be forgiven, meaning they cannot be canceled and still must be paid off.
Contact your federal loan servicer as soon as possible to discuss options like loan rehabilitation (the process of un-defaulting a student loan by meeting specified repayment requirements) or loan consolidation (the act of consolidating all federal student loans into one big loan with a singular interest rate and repayment plan).
If you are defaulted on a federal student loan, you will miss out on any federal financial aid until the loan is paid off. In order to be an eligible student to receive federal student aid again, you must pay your loans back.
#5: You Did Not Meet the Income Threshold for Need-Based Aid
The information you provide on the FAFSA determines how much federal student aid you will receive. Information such as your expected family contribution (how much your family can pay based on a federal standard calculation), your school year, and the cost of tuition for your school is used to determine your level of financial need
Your expected family contribution, or EFC, is calculated based on the income and assets of the family, including both liquid and illiquid assets. Assets are resources that can produce positive economic value, like cash, real estate, and stock holdings. Liquid assets are assets that can be quickly sold without a significant loss in value, like the money in your bank account or stocks. Illiquid assets are assets that lose significant value when they are quickly sold, like cars and real estate.
One common misconception about financial aid is how assets are factored into how your financial aid is determined. If your family has a low income but a lot of assets, you can still be disqualified for federal aid. The same applies if you have a small amount of assets and a high income.
#6: You Did Not Meet the Eligibility Criteria for Merit-Based Aid
Your academic standing comes into consideration when determining whether or not you are eligible to receive any federal student aid.
You must be making Satisfactory Academic Progress (SAP), which is measured by having at least a 2.0 GPA on a 4.0 Scale (generally, a C-average) and passing enough classes to make progress towards earning a degree.
If you do not make SAP, you are disqualified from receiving federal student aid.
#7: You Are Not a U.S. Citizen
Only United States citizens or permanent residents with a green card are eligible for federal financial aid. While there are private financial aid offerings, such as scholarships, that do provide money for non-U.S. citizens, they are less common.
If you are a student under DACA or a non-citizen, you unfortunately cannot receive federal financial aid and may be ineligible for some other financial aid.
What to Do If You Didn’t Receive Financial Aid
If you haven’t received any federal financial aid, don’t fret. Consider taking the following steps to remedy your situation.
Submit An Appeal if Your Circumstances Have Changed
The office of Federal Student Aid offers an option to appeal your financial aid package if your circumstances have changed and fall under the following categories: Special Circumstances and Unusual Circumstances.
The process of appealing your financial aid package is called special circumstances review or professional judgment review.
Unusual circumstances involve your dependency status, while special circumstances involve unexpected changes within your family.
Special Circumstances
Unusual Circumstances
A family member loses his or her job
Both parents/guardians are incarcerated
Unexpected health costs
There are Protection from Abuse orders at hand
A family member experiences salary reduction
The student is emancipated or estranged from the family
A family member dies or becomes incarcerated, institutionalized, or disabled
The student is abandoned
If you believe you fall under Special or Unusual Circumstances, make sure to appeal your financial aid package. According to Sallie Mae, 71% of financial aid package appeals were approved.
Steps to Take When Submitting a FAFSA Appeal
Time is of the essence. If you’ve just received your financial aid package and you are not satisfied with it, determine whether or not you fall under Special Circumstances or Unusual Circumstances in a timely manner so that your chances of being approved increase.
Write a short summary of the special circumstances regarding your appeal and provide clear documentation for your claim.
Contact your institution’s financial aid office and send over the necessary materials accordingly.
Apply for Scholarships
Over 1.7 million2scholarships are awarded annually, making $24 billion available to college students every year.
Explore your scholarship opportunities and apply to as many scholarships as you can. It’s a great way to earn free money to pay for your educational expenses.
Because scholarships are a form of gift aid, scholarship money does not need to be paid back and does not accrue interest like student loans.
As a student, there are countless state scholarships (scholarships sponsored by the state you are from or where your school is located), private scholarships (scholarships offered by agencies, businesses, non-profits, or other organizations), and institutional scholarships (school-specific or major-specific scholarships) that you can apply for.
Here are our favorite search engines to find scholarships.
Sallie Mae is a private student loan company that offers a free Scholarship Search tool for undergraduate and graduate students. Make a profile to find scholarships based on your skills, field of study, and interests.
Bold is the holy grail website for finding scholarships. Offering exclusive scholarships for high school students, college students, and graduates, you can find scholarships based on your experiences, skills, and field of study.
Scholarships.com is a database for scholarships that is organized based off of everything from major, to SAT score, to residency. It’s a great place to find scholarships as you can create a free profile, find scholarships that are relevant to you, and also obtain assistance in paying tuition.
Consider Private Student Loans
After you’ve exhausted yourself in applying to as many scholarships that is humanly possible, consider applying for a student loan.
Applying to student loans might seem daunting at first, whether you’re a rookie who doesn’t know where to look or a seasoned borrower who is dreading the lengthy process of searching for the most favorable loan.
Explore loan options from 15+ premier private lenders.
Find affordable loan options with the best interest rates you can get.
Closing Thoughts From The Nest
If you fall under any of the seven reasons why you might not have received any federal financial aid, make sure to take the necessary steps accordingly.
Remember that your financial aid options are still plenty! You can apply for scholarships, explore a list of lenders with Sparrow, or even dispute your financial aid award.
Whatever you choose to do, know that we are here to help you in every step of the journey!
In the 2019-20 academic year, 92%1 of private, newly originated undergraduate student loans were cosigned.
Agreeing to cosign a student loan is a great option to bolster a student borrower’s chances of receiving a student loan. It can also help the borrower secure more favorable terms, such as competitive interest rates, preferable repayment options, and higher loan amounts.
Before you jump the gun and cosign a student loan for someone, bear in mind that you can do more harm than help, depending on your credit score.
If you have adverse credit history, read this article to learn about what you should take into consideration before cosigning a student loan.
Who Can Cosign a Private Student Loan?
Cosigners are usually parents, grandparents, partners, or close friends to the student borrower, although they can be any individual the borrower would like. To be a cosigner, you must be over 18 years old.
As a cosigner, you should keep in mind that you are contractually obligated to repay the student loan in the allocated period of time if the borrower is unable to do so.
Things to Consider Before Cosigning a Private Loan
Make sure the borrower has maxed out all possible federal student loan options before pursuing a private student loan. Federal loans usually don’t require a cosigner or credit history, have lower interest rates, and offer options like income-driven repayment and loan forgiveness opportunities.
Make sure the borrower has looked into federal Direct PLUS loans. Direct PLUS loans are federal loans for graduate students, professional students, and parents of dependent undergraduate students. While Direct PLUS loans require a credit check, they generally have lower interest rates than private student loans.
What Credit Score Do You Need to Be a Cosigner on a Student Loan?
To be approved by a private lender, you will typically need to have a steady income, a minimum FICO credit score of 670 or higher, and a strong credit history.
Does The Borrower’s Credit Score Matter if They Have a Cosigner?
Yes, the borrower’s credit score still matters even if you are cosigning the loan as a reliable, creditworthy individual. Some lenders take the average of the two credit scores, others take the higher of the two credit scores, and some only take the cosigner’s credit score. It truly depends on the lender.
Can a Cosigner Hurt Your Chances of Getting a Student Loan?
Yes, if you have a lower credit score than the borrower, cosigning the loan could hurt the borrower’s chance of getting a student loan with favorable terms.
The purpose of adding a cosigner to a loan is to lower the overall risk to the lender. By adding a creditworthy cosigner onto a loan, a lender essentially has a second layer of protection when it comes to making sure the loan is paid back. If you have a poor credit score, you could make the overall perceived risk to the lender higher, which would generate less favorable terms. If you have a strong credit score or credit history as a cosigner, the loan application overall will pose less of a risk to the lender, which could generate more favorable terms for the primary borrower.
If cosigning a borrower’s student loan worsens the terms they are able to qualify for, we recommend refraining from cosigning the loan unless the borrower is unable to qualify altogether without a cosigner.
Sparrow can help you explore private student loan options and compare cosigners. We offer services that allow borrowers to see which student loans they’d qualify for on their own and with different cosigners. When debating which parent or grandparent to cosign a private student loan with, Sparrow allows borrowers to input their information and see which individual would be better to cosign with. Most loans do not allow for this pre-check before loan prequalification, so take advantage of this tool. Submit an application with us today to see which loans you qualify for and which cosigner is best.
What Student Loans Can You Get Without a Cosigner?
If cosigning a student loan worsens the terms the borrower is able to qualify for, they may want to opt for a loan that does not require a cosigner. The following are Sparrow’s partners that offer private student loan options that do not require a cosigner.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. To qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a student loan with College Ave without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5 or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. SoFi does not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. If you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
Without a cosigner, the borrower’s interest rate may be higher. So, as you are exploring loan options, consider selecting a lender with the option to enroll in automatic payments. An automatic payment does exactly what its name implies: the lender sets up automatic payments from your bank account so that you don’t have to manually complete your monthly payments.
This is beneficial for both you and the lender if you have sufficient funds in your bank account. As payments come out automatically, you won’t miss a payment and the lender is guaranteed to receive a payment every month. In return, private student loan lenders usually offer an interest rate reduction of 0.25% or even 0.50% if you opt-in to their automatic payment. This can save borrowers a significant amount over the life of the loan.
Closing Thoughts From The Nest
Before cosigning a private student loan, you should consider a variety of factors. Factors like credit score, income stability, and credit history are important to think about when aiming to bolster the borrower’s chances of being approved for a private loan with favorable terms.
You’ll also want to account for loan eligibility. Make sure the school the borrower intends to pay for accepts the loan you intend to cosign for. Before you begin making hard inquiries on private loan options that can negatively impact your credit score, use Sparrow’s online tool to see whether cosigning is the right choice or not.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
There’s no doubt that college can get expensive, and a lot of times you may need a student loan to pay for it. But what if you’re denied a loan? Here’s what you can do.
Why You’re Getting Denied a Student Loan
There are many different reasons why your student loan applications might be getting denied. It’s important to know what they are and why you got denied. That way, you can take steps to fix it so it doesn’t happen again. Here are some of the reasons you might get denied a student loan.
You Don’t Meet the Credit Requirements
Most private lenders have a credit requirement. They need to know that you’re trustworthy enough to pay back the loan, and your credit score is how they determine that. Not meeting the minimum credit score requirement makes you risky to lenders and a lot more likely to get denied a student loan.
You’ve Already Reached Your Borrowing Limit
Private lenders will have their own borrowing limits, often dependent on your school’s cost of attendance. These amounts are what institutions believe to be the amount you’ll need for college. If you’ve already borrowed either the lender’s limit or the total of your school’s cost of attendance, lenders may deny your loan application requesting more.
You Don’t Meet the Basic Eligibility Requirements
There are other requirements lenders will look at such as meeting a minimum income, your debt-to-income ratio, your employment and income history, and your future earning potential. All these, in one way or another, relate to your ability to pay back the loan. If you fall short on any of these according to the lender’s requirements, they may deem you too risky to give money.
What to Do If You’re Denied a Student Loan
Being denied a student loan can make you feel like there’s nothing left that you can do. But that’s not true. There are certain steps you can take to help your situation, even if you’ve been denied a loan. The following is a list of actions you can take that’ll help you.
#1: Submit An Appeal
If you were denied but now believe you would be eligible due to extenuating circumstances or incorrect information, you can appeal the decision. This is true for both federal and private student loans. In general, you’ll need to provide a written statement explaining your situation with evidence backing up your claim. Because each private lender is a unique entity, they each may have a unique appeal process, so be sure to check with them directly.
#2: Consider Adding a Creditworthy Cosigner
A lot of lenders require you to meet a minimum credit score. If you don’t meet that credit score, consider adding a cosigner. A cosigner is someone who signs onto the loan, taking legal responsibility for the loan alongside you. A good cosigner is someone with a good financial history and someone you can trust. Typically, a cosigner is a parent or a family member, but, in reality, they can be anyone, including friends, so long as they are able and willing. Even if you don’t need a cosigner, it’s still a good idea to get one because they can help you secure better loan terms.
#3: Check Your Credit Report
You’ll also want to check your credit report to see why you have a bad credit history and what you can do to fix it. Go to the Annual Credit Reportwebsite where you can get a free credit report. These reports provide a detailed overview of your credit history. You can see where you fall short and take steps to fix it. This will raise your credit score and make it easier to apply for loans in the future. Even paying your bills on time can raise your credit score in as little as six months.
#4: Apply for More Scholarships and Grants
Loans aren’t the only source of funding you can use for a college education. You can also apply for college scholarships and grants. Since they are free money, you’ll never have to pay them back, making them a great help in covering the costs of college. You’ll want to apply to as many scholarships and grants, small and large, as you can to help your chances of winning.
#5: Find a Job That Offers Tuition Assistance
There are many different jobs out there that offer to pay for part or all of your school tuition if you work for them. The steady income you’ll get can help take care of college expenses. You might even have extra income left over to cover other things. This is great because not only do you get work experience but you’re, in essence, getting paid to go to school.
#6: Consider Community College
Community college is also another great option if you’re denied a student loan because it’s often more affordable than traditional 4-year schools. In some cases, you may not pay anything because your aid covers all the college costs. Or, you will more easily be approved for loans because you’re asking for a lesser amount. Community colleges also have a lot of different programs that might interest you. This includes partnering with 4-year schools and having their own bachelor’s programs.
#7: Look Into Loan Options with Flexible Eligibility Criteria
There are lenders who offer bad credit loans or have more flexible eligibility criteria. While you can look for them online one-by-one, you can use Sparrow instead to save both time and money. Sparrow partners with lenders who offer these types of loans. That way more students can take advantage of them. Just fill out the Sparrow application to see what rates you can get.
Final Thoughts from the Nest
In some ways, being denied student loans can feel like the end of the world. But don’t worry. There are still plenty of things you can do. And we, here at Sparrow, have got your back. Sign up with us to apply for new loans and take some of the measures we’ve listed above. The important thing is to not give up. Trust us, you will make it to college.
Nelnet Bank offers both private student loans and student loan refinancing. Nelnet Bank’s student loan refinance offering is best if you are seeking competitive rates, a flexible forbearance policy, and the ability to refinance both private and/or federal student loans, including parent PLUS Loans.
• Competitive interest rates • You can refinance parent PLUS loans in your name • Offers 12 months of forbearance due to economic hardship or natural disaster • Cosigner release option after 24 months of timely payments • Flexible repayment options
• Strict eligibility criteria • No biweekly payment via autopay • Not accessible to international students or borrowers with student visas
Competitive interest rates and zero fees for qualified borrowers
When looking for a student loan, finding a low-interest rate is typically a top priority. If you qualify to refinance your student loans through Nelnet Bank, you’ll have access to competitive interest rates, and won’t have to pay origination fees, application fees, prepayment penalties, late fees, or insufficient funds fees.
Fixed APR*
7.12% to 11.19%*
Variable APR*
7.60% to 14.50%*
*Rates as of November 01, 2023. Rates listed have an autopay discount only on the lower boundary, not the upper boundary.
You can refinance parent PLUS loans in your name
If your parent has taken out a Parent PLUS loan or a private student loan in their name, Nelnet Bank gives your parent the option to refinance that loan or transfer the loan to your name (so long as you are the primary applicant).
Offers 12 months of forbearance due to economic hardship or natural disaster
While borrowers who refinance their federal student loans with a private lender lose access to federal protections (income-driven repayment, loan forgiveness, and loan forbearance), Nelnet Bank offers up to 12 months of forbearance (a pause on your repayment due to financial hardship, unemployment, or a disability). Although Nelnet Bank handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship. If you find yourself in need of forbearance, contact Nelnet Bank directly to check your eligibility.
Cosigner release option after 24 months
If you need a cosigner for your student loan, Nelnet Bank might be a good option for you. Unlike several other lenders, Nelnet Bank allows you to release your cosigner after 24 months of timely payments. This can be helpful if you want to build credit in your own name.
Flexible repayment options
If you qualify for student loan refinancing through Nelnet Bank, you could have access to a variety of repayment terms to match your specific financial situation.
Nelnet Bank offers repayment terms ranging from 5 to 25 years. Before you decide on your repayment plan, be sure to consider the following:
A 5-year repayment term is generally the cheapest option because it would cause higher monthly payments.
A 25-year term would be the most expensive because lower monthly payments would be offset by accruing and compounding interest.
Many borrowers choose a term in between these extremes to balance the burden of monthly dues with interest costs.
Drawbacks of Refinancing with Nelnet Bank
Strict eligibility criteria
In order to qualify for a private student loan through Nelnet Bank, borrowers must meet the following criteria:
Be a U.S. citizen or permanent resident and possess a valid U.S. Social Security number
Have obtained at least a bachelor’s degree
Meet Nelnet Bank’s annual income criteria (undisclosed)
Have a credit score of 680 or more, or 640 with a cosigner who has a credit score of 680 or more
Neither borrower nor cosigner can have previously defaulted on a student loan
Neither borrower nor cosigner can have filed for bankruptcy in the past 7 years
If you do not meet Nelnet Bank’s criteria for student loan refinancing on your own, you should try applying with a cosigner who does meet the criteria.
If you don’t have access to an eligible cosigner, you may want to look elsewhere to refinancing your student loan.
Don’t meet the eligibility criteria? Complete the Sparrow application to see if you qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan. It is an effective strategy if you want to “set it and forget it” — essentially allowing you to automatically make payments without having to manually do it at the end of each month.
Unfortunately, when you borrow through Nelnet Bank, you don’t have the option to make biweekly payments via autopay.
Not accessible to international students
Nelnet does not offer student loan refinancing to students who are not U.S. citizens or permanent residents. If you are an international student, check out our partner MPOWER, who offers private student loan refinancing. In addition, Earnest and College Ave offer private student loan refinancing to international students who have a U.S. citizen as a cosigner.
Nelnet Bank Refinancing: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
7.12% to 11.19%*
Variable APR Range
7.60% to 14.50%*
Loan Terms
5, 7, 10, 15, or 20 years. 25-year terms available for variable-rate loans. 20 and 25-year terms require $25,000 minimum.
Loan Amounts
$5,000 – $500,000 depending on degree type.
Ability to transfer a parent loan to the student
Yes (see disclosure below)
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes. Borrowers may incur a late payment fee of 5% of the portion of the monthly payment that was not paid in full when due, or $25, whichever is less, if the borrower fails to make any part of a payment within 15 days of the due date.
Eligibility Requirements – Financial
Minimum Credit Score
680 individually or 640 with a qualified cosigner.
Minimum Income
Did not disclose.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
45%
Ability to qualify if you’ve filed for bankruptcy
Yes, after 7 years.
Eligibility Requirements – Personal
Citizenship
Borrowers must be U.S. citizens or permanent residents, or apply with a cosigner who is a U.S. citizen or permanent resident.
Location
Available to borrowers in all 50 states.
Must have graduated
Yes.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
Did not disclose.
Repayment Options
Academic Deferment
Yes, borrowers can postpone payment if they return to school.
Military Deferment
Yes.
Disability Deferment
Did not disclose.
Forbearance
Yes, hardship and natural disaster forbearance for up to 12 months.
Cosigner Release
Yes (requires 24 months of timely repayments).
Death or Disability Discharge
Yes.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Firstmark Services.
In-house Customer Service Team
Customer service is run by Firstmark Services.
Process for Escalating Concerns
No. Complaints are handled internally by Nelnet Bank’s customer service team.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
3 days.
Before you take out a loan from Nelnet Bank…
Complete the Sparrow application to compare real rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Nelnet Bank a legitimate lender?
Yes, Nelnet Bank is a legitimate lender. The company offers private student loans to undergraduates, graduate students, and parents, as well as student loan refinancing.
Is Nelnet Bank available in all 50 states?
Yes, Nelnet Bank is available to borrowers in all 50 states.
How long does it take to get a Nelnet Bank refinance loan?
Submitting an application through Nelnet Bank takes a few minutes. Once you’ve submitted your loan application, Nelnet Bank will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
It may take some time to actually receive your loan. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a Nelnet Bank refinance loan?
If you don’t qualify for a Nelnet Bank student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or try with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all competing to get you the best rates.
Are Nelnet Bank student loans federal or private?
Nelnet Bank offers private student loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
*Note: Nelnet, not Nelnet Bank, services federal student loans.
Does applying for a loan through Nelnet Bank hurt my credit score?
In order to estimate what rate you qualify for, Nelnet Bank conducts a “soft credit check,” which does not affect your credit score. If you choose to accept the Nelnet Bank loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
*Rates listed have an autopay discount only on the lower boundary.
Throughout the course of your college education, you’ll probably take out many loans. And by the end of it, it may be hard to keep track of. Add in the fact that you have poor credit and not the best credit history, and it just seems too hard to manage. What can you do?
Well, you can consolidate. Here’s what you need to know about consolidating with bad credit.
What is a Student Loan Consolidation?
In the student loan space, the term “consolidation” refers to Direct Consolidation Loans. This is basically the process of combining some or all your federal student loans into one new loan. However, this is only available for federal student loans. It is not an option for private student loans. To do this same process with private student loans, you’d refinance them instead.
How Do You Qualify for a Direct Consolidation Loan?
To qualify for a Direct Consolidation Loan, your loans must be in repayment or in the grace period. To be in that part of your loan journey already, you must not be in school anymore. This can mean you’ve graduated, dropped out, or fallen below half-time enrollment.
Additionally, you can’t consolidate an existing consolidated loan. Unless you add another eligible loan, it’s not allowed. For example, say you’ve already gotten a Direct Consolidation Loan in the past. You couldn’t consolidate that same loan without adding a new loan to the mix.
What Credit Score Do You Need To Consolidate?
By now, I’m sure you know how important credit scores are to loans in general. You generally need excellent credit to get the best terms, but achieving this can be hard for some people. Luckily, Direct Consolidation Loans don’t require you to have a high credit score. It is possible to get these with bad credit.
Consolidating Student Loans with Bad Credit
To combine more than one federal loan into one loan, you have two options: a Direct Consolidation Loan or Student Loan Refinancing.
Consider Direct Consolidation Loans
Consolidating your federal student loans is a good move because they’re pretty accessible. As mentioned, you don’t need a high credit score to get a Direct Consolidation Loan. The most important thing you need is eligible federal student loans. Your loans can even be in default and they are still eligible. You’ll also have access to flexible repayment plans like income-driven repayment.
To get started, go to the Direct Consolidation Loanapplication on the federal student aid website. You can either fill it out online or download, print, fill it out, and then mail the application. It’s important to note that until you get your official loan, you want to keep on making all your loan payments on time. The only exceptions would be if you have loans in deferment, forbearance, or a grace period.
Consider Refinancing with a Lender with Flexible Credit Score Requirements
If you don’t get approved for a Direct Consolidation Loan, you can refinance instead. To recap, refinancing is a process similar to consolidation that is offered through private lenders. Refinancing is available for both your federal and private student loans. However, refinancing typically has stricter criteria than consolidating loans. For example, most lenders require you to meet the minimum credit score, which is typically in the mid-600s. That said, you can find lenders with more flexible credit score requirements.
If you’d like to refinance, start with Sparrow. Sparrow partners with 15+ different lenders, many offering lower or more flexible credit score requirements. Submit the Sparrow application and see what rates you qualify for.
You can also find a creditworthy cosigner to help you qualify for refinancing. Even if you don’t need a cosigner to qualify, it’s still a good idea to explore your cosigner options. A good cosigner can get you better loan and repayment terms than you would get on your own.
Can You Be Denied Student Loan Consolidation?
You can be denied a student loan consolidation for different reasons, such as a low income, too much debt, or a low credit score.
A low income might signal to a lender that you don’t have enough money to cover a new loan. Too much debt signals the same thing and that you might not be able to handle debt. A low credit score could leave a lender thinking that you aren’t trustworthy when it comes to money, making you too risky to take on.
While you don’t need collateral to take out a loan, providing this type of security can help you qualify. Without it, you can be rejected.
Final Thoughts from the Nest
If you want to simplify your federal loan payments, consolidating can be a good option. Because you don’t need a high credit score and can consolidate defaulted loans, consolidation loans are accessible to many people. So, if you want to lift that weight off your chest from so many loan payments and only have one, consider consolidating.
Whether it’s consolidating or refinancing, Sparrow has got your back. Sign up with us and let us do our work so you can spend less time thinking about loans and more time on the important stuff.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your GPA and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
Fixed APR Range: 7.49 – 12.99%
Variable APR Range: N/A
Loan Amounts: $3,001 up to $20,000 per school year
• You do not need a cosigner or credit history • You can get a loan based on your academic performance • Variety of repayment options • 0.5% interest rate discount if you make interest-only payments while in school • You get a dedicated Loan Officer that helps you simplify the borrowing process • DACA students with a work-eligible Social Security card are eligible
• You might be able to find a lower interest rate elsewhere • Loans aren’t available in 13 states • You have to make loan payments while you’re in school • Maximum funding amount is less than most lenders • Not accessible to students enrolled less than half-time
Rather than searching for lenders one-by-one, we recommend comparing Funding U’s rates with a student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
The majority of private lenders look at your income and credit score to assess your creditworthiness. Since most undergraduates have minimal income and limited credit, they are forced to find a cosigner who qualifies. But for many students, finding a cosigner is not an option. This is where Funding U comes in.
Funding U’s goal is to provide a loan that you can get on your own, based on hard work, tenacity, and focus – not based on the income level or credit score of a loan cosigner. By offering loans based on your academic history, employment activities, and other non-credit-based factors, Funding U allows you to take out a student loan without needing a cosigner with strong credit history. This prevents you from having to find someone to go into debt on your behalf and offers opportunities for you to take out a loan without credit history.
You can get a loan based on your academic performance
Funding U determines eligibility using their proprietary SMaRT™ scoring system. SMaRT™ (Student Merit and Risk Test) relies on non-credit variables incorporating 40 years of research. All such data points conform to the Federal Equal Credit Opportunities Act. The SMaRT™ scoring system is designed to predict the probability of an undergraduate college student defaulting on their student loan.
Funding U takes into account a number of factors largely based on the attributes of successful federal student loan borrowers. The lender considers:
Your academic success in college – especially in your major
Your likelihood to graduate on schedule by taking and passing about 15 credits per semester
Your projected total student debt
Your projected earnings based on your major
By basing its lending decisions on forward-looking factors, Funding U aligns itself with borrowers and encourages students to think long term.
Funding U offers you two repayment options for your student loans, both of which require you to make in-school loan payments. While in-school payments can be difficult for some borrowers, it is the best way to reduce the amount of interest you pay over time.
Repayment Option
Terms
Pros
Cons
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Fixed Repayment
Pay $20 every month while enrolled in school and during the grace period.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Note: While there is no immediate repayment option, Funding U allows you to make extra payments, with no prepayment penalties, if you wish before the repayment period starts post-graduation. Those payments will reduce your loan balance.
0.5% interest rate discount if you make interest-only payments while in school
If you elect to make interest-only payments while in school, you will receive a 0.5% interest rate discount. While making payments while you’re in school might be difficult, it will limit the amount of interest that accrues and lead to significant savings over the lifetime of the loan.
You get a dedicated Loan Officer that helps you simplify the borrowing process
If you are pre-approved for a loan through Funding U, you will be assigned a dedicated loan officer that helps you throughout the borrowing process. Accordingly, the loan officer will discuss your student loan offer, repayment options, and academic plans to ensure you have the support you need.
DACA students with a work-eligible Social Security number can qualify
If you are a DACA recipient with a Social Security number, you are eligible for a Funding U student loan. This separates Funding U from many other lenders, which require you to be a U.S. citizen.
Drawbacks of Funding U Student Loans
You might be able to find a lower interest rate elsewhere
The interest rates on Funding U’s fixed-rate loan range from 7.49% to 12.99% without autopay. While this may seem higher than most other lenders, it is an incredible option for students who have limited credit history and no access to a cosigner. Otherwise, these students most likely wouldn’t qualify for a traditional credit-based loan.
However, if you do have a strong credit history or qualified cosigner, you might be better off going with a credit-based lender that can offer you a lower rate.
Funding U loans are only offered to students who are residents in the following states:
Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin
If you don’t live in one of these states, complete our 2-minute form to see if you qualify and at what rate with over 17 different lenders. It’s quick, easy, and does not impact your credit score.
You have to make loan payments while you’re in school
While many lenders offer a deferred payment option that allows you to postpone repayment until after you’ve graduated, Funding U requires in-school payments.
Funding U’s in-school repayment options include:
Fixed repayment: Pay $20 every month while enrolled in school and during the grace period.
Interest-only repayment: Pay interest every month you’re in school and during the grace period.
In-school repayment allows you to minimize the interest that accrues, but it is a negative for those who do not want to make payments while in school. If you’re looking for a lender who offers a deferred repayment plan (payment doesn’t begin until after graduation), you may want to look at other lenders.
Maximum funding amount is lower than most lenders
Funding U offers student loans as large as $20,000 per school year. This is a great option if the gap between your federal student loans and your total cost of attendance is less than $20,000 per year.
If you need to borrow more than $20,000 per year, you might need to look elsewhere to cover the cost of your education. Several of the other private student lenders we partner with offer loans up to the total cost of attendance.
Not accessible to students enrolled less than half-time
Given that Funding U has such a strong emphasis on academic achievement, it makes sense that the lender requires you to enroll at least half-time.
If you are not enrolled in school at least half-time, you are ineligible for Funding U student loans. If you’re studying less than half-time, you may want to consider College Ave.
No credit required, but borrowers can’t have a history of delinquency.
Minimum Income
No minimum, but borrowers must demonstrate they can make monthly in-school payments.
Typical Credit Score of Approved Borrowers
640.
Typical Income of Approved Borrower
Did not disclose.
Maximum Debt-to-Income Ratio
Funding U uses salary and student loan data to estimate your post-graduation debt-to-income ratio. The maximum ratio is 20%.
Ability to qualify if you’ve filed for bankruptcy
No.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen, permanent resident or DACA recipient with a work-eligible Social Security number.
Location
Available only to residents of Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.
Must be enrolled half-time or more
Full-time only.
Types of schools served
Borrowers must attend nonprofit colleges that meet the following 6-year graduation rate requirements and have the following minimum GPA: • 90% graduation rate for freshmen with a 3.5 high school GPA. • 70% graduation rate for sophomores with a 3.0 GPA. • 50% graduation rate for juniors with a 2.75 GPA. • 50% graduation rate for seniors with a 2.5 GPA.
Percentage of borrowers who have a cosigner
N/A — no cosigner allowed
Repayment Options
In-school repayment options
Interest-only repayment: Pay interest each month you’re in school and during the 6-month grace period.
Fixed repayment: Pay $20 each month while enrolled in school and during the 6-month grace period.
Note: Funding U does not offer a full principal and interest repayment option, but borrowers can opt to pay more than what’s required.
Grace period
6 months, but only for the deferred repayment option
In-school Deferment
Yes, up to 24 months.
Military Deferment
Yes, up to 24 months.
Forbearance
Borrowers are eligible for 24 months of forbearance, in 90-day increments, if they have an economic hardship, are completing a medical residency or are affected by a natural disaster.
Cosigner Release
N/A — No cosigner allowed.
Death or Disability Discharge
Funding U will discharge loans in the event of the death of the borrower. Should the borrower become disabled, Funding U offers up to 24 months of deferment for temporary disability and up to 60 months deferment for permanent or complete disability.
Loan discharge if cosigner dies or becomes disabled
N/A — No cosigner allowed.
Autopay
Allows for surplus payments via autopay: No. Allows for biweekly payments via autopay: No.
Customer Service
Loan Servicer
Scratch.
In-house Customer Service Team
Yes.
Process for Escalating Concerns
Yes.
Borrowers get assigned a personal customer service representative
Yes.
Average time from application to approval
Pre-approval happens immediately. Official approval typically takes 3 days.
Before you take out a loan from Funding U…
Complete the Sparrow application to compare real rates from more than 17 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Funding U a legitimate lender?
Yes, Funding U is a legitimate lender. The company was founded in 2016 to support students who have strong projected income but do not have the credit history or access to cosigners to take out credit-based private student loans.
How long does it take to get a Funding U student loan?
Submitting an application through Funding U takes a few minutes. Once you’ve submitted your loan application, Funding U will instantaneously return a decision about your eligibility. If you qualify, you will receive the rate and terms of your loan.
Your school must approve the loan which may take between four to six weeks.
What happens if I don’t qualify for a Funding U student loan?
If you don’t qualify for a Funding U student loan, the company will inform you why. Depending on the reason, you may consider applying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free student loan search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders all bidding for your business.
Are Funding U student loans federal or private?
Funding U’s loans are private loans. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Funding U hurt my credit score?
In order to estimate what rate you qualify for, Funding U may conduct a “soft credit check” — this does not affect your credit score. If you choose to accept the Funding U loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score.
Brazos is a non-profit lender that offers private student loans and student loan refinancing. Since it was launched in 1975, Brazos has focused on bringing transparency and low-cost loans to Texas residents. While Brazos student loan refinancing is only available to Texas residents, the non-profit lender offers competitive rates and flexible terms to those who qualify. It’s best if you are a Texas resident with at least a bachelor’s degree and have an established income and strong credit.
(Note: borrowers are not required to have graduated from a Texas school in order to qualify).
Fixed APR Range: 4.90% to 6.99%*
Variable APR Range: 5.32% to 9.12%*
Loan Amounts: $10,000 to $400,000.
Minimum Credit Score: 720, or 690 with a qualified cosigner.
• Work with a non-profit, rather than a traditional lender • Competitive interest rates • Variety of repayment terms ranging from 5 to 20 years • Generous forbearance options
• Strict eligibility criteria • No cosigner release • No bi-weekly payment via autopay • Students cannot take over Parent PLUS loans that parents took out on their behalf
Work with a non-profit, rather than a traditional lender
As a non-profit student lender, Brazos has been helping Texas families finance the cost of their college education for over 40 years. Brazos is not affiliated with any school, and as a non-profit, its goal is to save you money by offering the most competitive rates possible. While Brazos doesn’t have the name recognition that some of the traditional banks and online lenders have, it offers low rates and personalized customer service.
Competitive interest rates
When looking to refinance your student loan, finding a low-interest rate is typically a top priority. If you qualify for student loan refinancing through Brazos, you will have access to competitive rates.
Fixed APR*
4.90% to 6.99%
Variable APR*
5.32% to 9.12%
Choose from a variety of repayment terms between 5 and 20 years
Brazos allows you to choose from a wide range of loan terms to make repayment as easy as possible. Often, choosing a shorter repayment term helps you qualify for a lower rate, and minimize your total interest charges. Stretching out repayment over a longer period of time can lower your monthly payment amount, but your total repayment costs may increase.
Offers up to 12 months of forbearance due to economic hardship, natural disaster, or military duty
If you experience economic hardship, a natural disaster, or are called up for active-duty military service, Brazos offers up generous forbearance options (a pause on your repayment due to financial hardship, unemployment, or a disability).
Brazos offers up to 12 months of forbearance, in three-month increments. While Brazos handles forbearance on a case-by-case basis, it can be a helpful safety net if you were to fall into financial hardship.
Drawbacks of Refinancing with Brazos
Strict eligibility criteria
In order to qualify for a student loan refinancing through Brazos, borrowers must meet the following criteria:
A U.S. citizen, permanent resident or, if applying with an eligible cosigner, a non-citizen with a work or student visa
Live in the State of Texas (students don’t need to attend college in Texas in order to qualify)
At least the 18 years old
Graduated with at least an undergraduate bachelor’s degree
Be employed or self-employed at the time of the application, or accepted an offer of employment with a start date within 60 days
Have a credit score of 720, or 690 if applying with a qualified cosigner
Have an annual income of $60,000, or $30,000 if applying with a qualified cosigner
Not a Texas resident? Complete the Sparrow form to see if you pre-qualify and at what rate with over 15 different lenders. It’s quick, easy, and does not impact your credit score.
No cosigner release
Given that young people generally have a limited credit history, a cosigner can help you qualify for better loan terms. Many private student lenders allow you to release your cosigner after a few years of timely payments (typically 1-2 years). This essentially means that the cosigner is no longer liable for repaying the loan in the event that you (the borrower) are unable to make payments.
While becoming a cosigner can be daunting, the cosigner release policy is meant to ease the burden and make it less risky. Unfortunately, Brazos does not offer any form of cosigner release. Instead, you will have to apply for a new refinance loan through Brazos to release your cosigner.
That said, 85% of Brazos refinance loans are not cosigned. So, a cosigner release policy may not be a concerning drawback if you opt for a non-cosigned refinance loan.
No biweekly payment via autopay
When you repay your student loan, your payments are due monthly by default. Instead, some borrowers choose to make biweekly payments via autopay — where you automatically pay half your monthly amount once every two weeks. Many borrowers use biweekly autopay in an effort to pay off their student debt faster and pay less in interest over the lifetime of the loan.
Unfortunately, when you borrow through Brazos, you don’t have the option to make biweekly payments via autopay.
You do, however, have the option to make greater-than-minimum payments via autopay. This means you have the option to pay more than your monthly balance in order to reduce the interest that accrues over time. With Brazos, you can set this up automatically so that the desired monthly payment is drawn from your bank account at the end of each month.
Students cannot take over parent PLUS loans that parents took out on their behalf
If your parent has taken out a Parent PLUS loan or a private student loan in their name, some lenders give your parent the option to transfer the loan to your name (so long as you are the primary applicant). Unfortunately, Brazos does not allow students to refinance parent PLUS loans in the student’s name.
If you are a parent who took out a parent PLUS loan, you can still refinance that loan through Brazos — it will just be in your name, not the student’s name.
If you’re looking for a lender that does allow you to transfer parent PLUS loans to the student, you may want to consider SoFi.
Brazos: The Nuts and Bolts
Interest Rates, Fees, and Terms
Fixed APR Range
4.90% to 6.99%
Variable APR Range
5.32% to 9.12%
Loan Terms
5, 7, 10, 15 or 20 years
Loan Amounts
$10,000 to $400,000, depending on the degree earned.
Ability to transfer a parent loan to the student
No.
Application or Origination Fee
No.
Prepayment Penalty
No.
Late Fees
Yes, 5% of the monthly payment or $7.50, whichever is greater. Maximum fee is $35.
Eligibility Requirements – Financial
Minimum Credit Score
720 or 690 with a qualified cosigner.
Minimum Income
$60,000 or $30,000 if applying with a cosigner.
Typical Credit Score of Approved Borrowers or Cosigners
Did not disclose.
Typical Income of Approved Borrower
$172,579
Maximum Debt-to-Income Ratio
40% (this means that the total monthly debt payments must not exceed 40% of monthly income).
Ability to qualify if you’ve filed for bankruptcy
Must not have had a bankruptcy within the past 7 years.
Eligibility Requirements – Personal
Citizenship
Must be a U.S. citizen or permanent resident. If applying with an eligible cosigner, a non-citizen with a work or student visa can qualify.
Location
Borrowers must be a Texas resident.
Must have graduated
Yes, an undergraduate degree is required.
Must have attended a school authorized to receive federal aid
Yes.
Percentage of borrowers who have a cosigner
13.2%
Repayment Options
In-school Deferment
No.
Military Deferment
Yes for up to 36 months.
Disability Deferment
Yes, but only if there is no cosigner. If the primary borrower dies, the cosigner is still responsible for paying the loan.
Forbearance
Yes, borrowers are eligible for 12 months of economic hardship forbearance and natural disaster forbearance, in three-month increments, over the life of the loan.
Cosigner Release
No. Applicants may reapply individually to release cosigner.
Death or Disability Discharge
Yes, but only if there is no cosigner. If the primary borrower dies, the cosigner is still responsible for paying the loan.
Loan discharge if cosigner dies or becomes disabled
No.
Autopay
Allows for surplus payments via autopay: Yes. Allows for biweekly payments via autopay: No
Customer Service
Loan Servicer
Firstmark.
In-house Customer Service Team
Only for application process.
Process for Escalating Concerns
Yes, through Firstmark.
Borrowers get assigned a personal customer service representative
No.
Average time from approval to payoff
N/A.
Before you take out a loan from Brazos…
Complete the Sparrow form to compare real, pre-qualified rates from more than 15 different lenders to make sure you’re getting the best rate possible.
See real rates, not rate ranges or estimates: Sparrow’s rates mimic those of our lenders so you know what rate you’re getting from each lender.
No impact on your credit score: Checking your rates on Sparrow won’t impact your credit score.
Data Privacy: Sparrow doesn’t sell your information, so don’t worry about getting calls from that random number that won’t leave you alone.
FAQ
Is Brazos a legitimate lender?
Yes, Brazos is a legitimate lender. The lender is part of the nation’s largest group of nonprofit student loan organizations and has been an integral part of financing more than 2 million student loans.
Is Brazos available in all 50 states?
Brazos is only available for Texas residents. If you’re a Texas resident, you do not need to go to school in Texas in order to borrow from Brazos.
How long does it take to get a Brazos student loan?
Submitting an application through Brazos takes a few minutes. Once you’ve submitted your loan application, Brazos will instantaneously return a decision about your eligibility. If you qualify, you will be asked to upload documents to verify your income and residence to determine your rate and terms.
Brazos estimates that the entire process will take a few weeks. You can speed up the process by requesting debt payoff letters from your existing lenders and loan servicers.
What happens if I don’t qualify for a Brazos student loan?
If you don’t qualify for a Brazos student loan, the company will inform you why. Depending on the reason, you may consider applying with a qualified cosigner or trying with a different lender. To check your rates across multiple lenders at once, try using Sparrow’s free search engine. In just two minutes, you can receive real, personalized offers from over 15 different lenders ready to help you. And best of all, it won’t impact your credit score.
Are Brazos student loans federal or private?
Brazos’ student loans are private. Before you take out a private student loan, we recommend that you exhaust your federal funding options, including grants and scholarships.
Does applying for a loan through Brazos hurt my credit score?
Yes. If you decide to apply for a Brazos loan, the company will conduct a hard credit check to verify your information. A hard credit check may temporarily impact your credit score. We recommend submitting the Sparrow form prior to submitting a formal loan application with Brazos. The Sparrow form will allow you to see what rate you’d qualify for with Brazos without hurting your credit score.
Whether you’re well-versed with student loans or know nothing about it, we all want to make the smartest, most cost-effective decision when it comes to our financial circumstances.
Refinancing your student loan is a great financial decision and a feasible option for student borrowers, even if you have poor credit.
Refinancing, in simple terms, is a trade. You can refinance, or “trade”, the mortgage to your house, car loan, and student loan for a better option.
Most people refinance their student loans because they want to reduce the overall amount of the loan or get the lowest interest rate possible.
What Credit Score Do You Need to Refinance?
Generally, most loan servicers require a credit score of 620 and up in order to refinance your student loan. Sparrow’s lending partners typically have a minimum credit score requirement of 650 or higher if you want to refinance your student loan.
If your credit score doesn’t meet the minimum requirement, exploring your cosigner options and adding a cosigner to the loan is your best bet to qualify.
Has your credit score improved, qualifying you for competitive interest rates and loan options?
Are you paying high interest rates, but know there are better, lower interest rate options than your current interest rate on the market?
Do you want to extend your repayment term and pay smaller amounts over a longer period of time?
Are you paying a variable interest rate, meaning that your interest rate fluctuates based on the benchmark interest rate or index?
If you answered yes to even one of these questions, consider refinancing your loan and applying with a cosigner to bolster your chances.
Best Student Loan Refinance Companies for Bad Credit
Sparrow partners with refinancing companies that want to help student borrowers with bad credit get the best option that they can. The following are our top picks:
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides student loan refinancing for Arkansas residents. ASLA has a minimum credit score requirement of 670.
College Ave offers student loan refinancing with competitive rates, flexible repayment terms, and strong customer service. College Ave’s student loan refinance offering is best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget. To qualify for a refinance loan with College Ave, you will need a credit score in the mid-600s.
Earnest’s student loan refinancing option is great if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget. Earnest has a minimum credit score requirement of 650.
ISL is a nonprofit lender that offers both private student loans and student loan refinancing. ISL’s student loan refinancing is best if you haven’t graduated and want generous forbearance policies. ISL has a minimum credit score of 670.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 680. It’s best if you want generous cosigner release and forbearance policies.
SoFi is one of the largest student loan refinance companies in the industry. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with an associate’s degree or higher or borrowers with a high income. SoFi has a minimum credit score of 650.
What if I Don’t Get Approved For Refinancing My Student Loan?
If you don’t get approved for refinancing your student loan, don’t lose hope. It is still possible for you to reapply to refinance your loan. Under the Equal Credit Opportunity Act, you have a right to request a written explanation of why your application was denied from your lender. This will allow you to either reapply with new lenders or reapply for the same loan once you’ve addressed the discrepancies in your application.
Consider taking the following steps to increase your chances of being approved for a refinance loan.
Step 1: Add a cosigner.
A cosigner is an individual that “co-signs” the loan with you, meaning that if you fail to pay off the loan, your cosigner is contractually obligated to pay it off on your part. When you add a cosigner with a higher credit score to your loan, the lender will factor in their credit score to the rates and terms you’re able to access. Thus, having a creditworthy cosigner is advantageous as it can help you qualify for a loan you otherwise wouldn’t on your own.
As for cosigners, you won’t be contractually obligated until the entire loan is paid off, depending on the circumstances. The requirements to qualify for cosigner release vary, but the borrower needs to sign off on a cosigner release form, meet a certain number of on-time payments, and have their credit history reviewed.
Step 2: Improve your credit score.
Improving your credit score is the most intuitive fix if you’re trying to get approved to refinance your student loan. A poor credit score is between 300-579, a fair credit score is between 580-669, a good credit score is between 670-739, a very good credit score is between 740-799, and an excellent credit score is between 800-850.
You’ll want to bump your credit score up a range (or more, if possible!). Here are some steps you can take to improve your credit score.
Pay your bills on time. 35% of your FICO credit score consists of your payment history, or your ability to pay your bills on time. This is the most important factor to your credit score, so stay on top of paying off any outstanding debt or bills you may have.
Pay off your debt. Your credit score also considers your credit utilization ratio. Your credit utilization ratio is how much credit you’ve spent versus how much credit you have available. For example, let’s say you have two lines of credit. One line of credit has a $500 credit limit, while the other has a $750 credit limit. In total, you have $1,250 of available credit. Now let’s say you’ve used $20 on your first line of credit, and $600 on your second line of credit, meaning you owe $620. $620 is 49.5% of $1,250, which isn’t a great credit utilization ratio. You’ll want to have a credit utilization ratio of 30% or less.
Limit new credit accounts. Applying for a new credit line requires a hard inquiry, which can damage your credit score temporarily. To prevent your score from dropping, stick to the credit lines you have currently. If you really need to open a new line of credit, make sure to explore your options in a 45-day period. Banks don’t count three new credit applications as three separate hard inquiries if you submit them within a 45-day period.
Don’t close any credit card accounts. Your length of credit history is 15% of your FICO credit score, so the longer credit history you have, the better it is for your credit score.
Pay attention to your credit reports. It’s important to check your credit reports for any misinformation, fraud, error, or possible identity theft. You’ll want your credit reports to be 100% accurate when trying to qualify for a new loan.
Step 3: Boost your cash flow or cut down on expenses.
Lenders measure your creditworthiness with the debt-to-income ratio (DTI). Your DTI tells lenders the ratio of how much you owe to your monthly gross income. For example, let’s say you pay $250 a month for your student loan and $450 for your auto loan.
That’s $700 in monthly debt payments. Now let’s say your gross monthly income (the total you earned before taxes) is $1,500. $700 is roughly 46% of $1500, so your debt-to-income ratio is 46%.
A healthy DTI is 34% and under, an okay DTI is 35%-50%, and an unhealthy DTI is over 50%.
Alternatives to Refinancing
Okay, let’s say that refinancing your student loan hasn’t been working out for you, but you still need lower monthly payments or a longer repayment term.
Consider the following options to get the benefits of refinancing without actually refinancing your loan.
Opt for an income-driven repayment.
An income-driven repayment option is for federal student loans only. An income-driven repayment option is a type of federal repayment plan that readjusts your monthly student loan payment based on your income and family size.
The federal government offers four different income-driven repayment plans that all cap your loan payment between 10% and 20% of your discretionary income (total income after taxes) and forgives your remaining loan balance after 20-25 years of payment.
Revised Pay As You Earn Repayment Plan (REPAYE Plan)
Pay As You Earn Repayment Plan (PAYE Plan)
Income-Based Repayment Plan (IBR Plan)
Income-Contingent Repayment Plan (ICR Plan)
If federal income-driven repayment is an option for you, make sure to read up on each plan and determine which one is the best fit for you.
Opt for federal student loan consolidation.
Federal student loan consolidation is combining multiple federal student loans into one federal loan. This allows you to extend your loan term, lower your monthly payment, get rate discounts, and potentially qualify for an income-driven repayment plan.
On the flipside, federal student loan consolidation warrants longer pay periods, higher interest accumulation, and the loss of specific borrower benefits.
Closing Thoughts From The Nest
Don’t be discouraged if you have to refinance your student loan but have a bad credit score. There are many options available to you as long as you stay deliberate and informed in your journey to securing a new student loan.
Sparrow’s many refinancing partners can help you refinance your student loan. Submit an application with us today to see your options.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Becoming a dentist has a variety of benefits, but getting there can be quite expensive. A 4-year dental school program could run you about $400,000 with all expenses included. That’s why it’s essential to understand how to best pay for dental school
The return on investment with a dental degree is promising, with the average dentist making around $155,000 per year. So, while expensive, pursuing a dental degree is worthwhile.Regardless of your career goals or projected outcomes, financing your dental degree can still be overwhelming. There are four main strategies you’ll want to know about when it comes to knowing how to pay for dental school.
#1: Scholarships & Grants
Regardless of what type of degree you’re paying for, scholarships and grants should always be your first priority. Scholarships and grants are a form of free money, meaning you aren’t responsible for paying them back.
Both scholarships and grants for dental school can come from a variety of sources and vary in amount.
Scholarships for Dental School
Dental school scholarships can come from internal or external sources. Internal scholarships are awarded by your dental program, while external scholarships are awarded by private, professional, or non-profit organizations. The amount you receive in a scholarship will depend on who is providing the scholarship.
For example, the ADEA Crest Oral-B Scholarship awards recipients a one-time stipend of $3,000, while the Chinese American Medical Society awards recipients a $5,000 stipend each year they are accepted.
The eligibility for scholarships will vary depending on the scholarship provider. In general, you must:
Be enrolled in an eligible program. Most scholarship programs require you to be enrolled in an accredited, four-year dental program. If you are unsure whether your program is eligible, check with the scholarship provider.
Demonstrate academic or professional achievement. Scholarship programs will typically require applicants to excel in a specific area, have a special interest, or belong to a specific group. For example, many scholarship programs provide awards to students of certain minority groups, students with a certain GPA, or students who demonstrate financial need. To be a competitive applicant for any scholarship, you should aim to have an array of academic and extracurricular experiences.
Have a solid GPA. While some dental scholarship programs will not require you to report your GPA, many will. A 3.0 GPA is typically the minimum to qualify, however, there are scholarships that award students with lower GPAs. To be a competitive applicant, you will want to aim for a GPA of 3.5 or higher.
Internal dental scholarships will typically appear on your financial aid package when you are accepted to a dental school. However, you should always check in with your school’s financial aid office to inquire about any additional scholarships you may be eligible for.
For external scholarships, you’ll want to focus your search on professional organizations and scholarship search engines. Organizations such as the American Dental Association provide an array of scholarships for dental students. Scholarship search engines such as Scholarships.com, Sallie Mae’s Scholarship Search Tool, and Bold.org are all great options for exploring thousands of dental scholarships in just a few clicks.
Can I Get a Full Ride Scholarship for Dental School?
Full ride scholarships do exist for dental school, however, they are typically significantly more competitive, and thus, harder to receive.
While you can rack up a significant amount in dental scholarships, it typically won’t be enough to cover your tuition entirely. On average, dental school tuition ranges from $53,000 to $70,000 per year, totaling to roughly $200,000 to $280,000 over the course of a standard four-year dental degree. While entirely possible, securing enough scholarship money to cover $200,000+ in tuition may prove to be challenging.
Grants for Dental School
Similar to scholarships, dental grants can come from a variety of sources, but they typically come from your state, your university, or professional organizations. Eligibility for grants is typically based on your financial need, often determined by the information submitted on your FAFSA application
State Grants
State grants are an incredibly underrated resource for free money. Nearly all 50 U.S. states offer grants to students in various programs. To check your eligibility for state grants, fill out the FAFSA, then check your state website. Many states will require you to have submitted the FAFSA to be eligible.
University Grants
Many dental programs offer grants for enrolled students. So, to see which university grants may be available to you, talk to your school’s financial aid office. There may be grant programs that require an additional application beyond the FAFSA.
Professional Organization Grants
Whether a professional organization offers a scholarship or a grant is truly a semantic matter. Some professional organizations will refer to the awards as scholarships, while others will refer to them as grants. So, in your search, be sure to search for both keywords so you don’t miss an opportunity for free money.
After pursuing all scholarship and grant options, you’ll want to look into service programs (if they interest you). A service program will provide you with financial aid in exchange for service work.
Most service programs will require you to commit to serving a specific community for a set amount of time, often providing dental care to people without access. For example, the National Health Service Corps Scholarship service program requires recipients to complete service work for 1-2 years to receive funding. The Health Professions Scholarship Program, on the other hand, covers all tuition and fees and provides a living stipend, but requires recipients to be serving in the military.
If completing a service program sounds interesting to you, it’s worth checking out and submitting applications where you see fit. Be aware, though, that if at any point you decide to withdraw from a service program, your financial aid from the program will be revoked.
#3: Federal Work-Study
Work-study is a federal aid program that provides part-time jobs to undergraduate and graduate students who demonstrate financial need. Federal work-study funds are not awarded upfront, but rather, given in exchange for worked hours throughout the duration of your program. Because of this, work-study is considered “earned money” and should be accepted after all free money options have been exhausted.
Federal work-study is available to dental students at schools that decide to participate. Due to the rigor of dental school, some schools may decide not to participate in the federal work-study program. If your school does not offer work-study, we recommend exploring part-time jobs that offer tuition assistance.
How Do You Get Work-Study for Dental School?
To be eligible for work-study, you must complete the FAFSA and demonstrate financial need. Then, if you receive work-study aid, you will see the aid offer in your financial aid package at each school you are accepted to.
Jobs within the work-study program must pay at least $7.25 per hour, per federal regulations. Although, if the state’s minimum wage is higher, schools must pay that minimum wage. According to a 2020 report by Sallie Mae, the average work-study award was around $1,847 for students with an eligible job.
#4: Student Loans
After pursuing all free money and earned money options, you should consider taking out a student loan. Student loans, regardless of type, are a form of borrowed money. You will be responsible for paying the money back over time, typically with interest. This means that you will likely pay more than what you initially borrowed by the time you pay off your loan(s) completely.
When figuring out how to pay for dental school through a student loan, you will have two main options: federal and private loans.
As a dental student, you will be eligible for two types of federal student loans: Direct Unsubsidized Loans and Direct PLUS Loans. Unlike in undergrad, you are ineligible for Direct Subsidized Loans as a dental student.
Federal Loan Borrowing Limits for Dental School
Direct Unsubsidized Loans have a maximum borrowing limit of $20,500 per year, with a lifetime limit of $138,500. Direct PLUS Loans, however, have a more flexible borrowing limit, allowing you to borrow up to the cost of attendance minus other aid.
How to Get Federal Loans to pay for Dental School
To borrow Direct Unsubsidized or Direct PLUS Loans, you must complete the FAFSA and be considered eligible. You may only be eligible for a certain amount of each depending on your level of financial need or overall borrower profile.
You will not need a cosigner for Direct Unsubsidized Loans, however, you may need an endorser for Direct PLUS Loans depending on your credit history.
Private student loans are provided by private entities such as financial institutions and banks. Each private lender will have their own unique eligibility requirements, interest rates, and borrowing limits.
In general, to secure a private student loan to pay for dental school, you must:
Be a U.S. citizen, permanent resident, or eligible noncitizen
Have a solid credit score (or a cosigner with a solid credit score)
Be enrolled in an eligible dental program
Have a debt-to-income ratio of 65% or less
Not have declared bankruptcy in the last 7 years
Private Loan Borrowing Limits for Dental School
Most private lenders will allow you to borrow anywhere from $5,000 to the total cost of attendance at your dental program. So, if your program costs $250,000 total, private loans will likely cover the entire cost. Some lenders do have minimum borrowing requirements, typically $5,000 or $10,000. If you plan to borrow less than $5,000 for dental school, you will need to find a lender with a more flexible borrowing minimum.
Best Student Loans for Dental School
The best private graduate student loan will ultimately be the one that works best for you. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. With the free Sparrow application, you can see the rates and terms you’d qualify for with 17+ premier lenders.
ASLA is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option if you are from or studying in Arkansas.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection if you don’t have a cosigner available, are an international or DACA student, or have a lower credit score.
Brazos is a non-profit lender offering educational funding to Texas residents. They are a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding that’s available to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best if you are an international or DACA student who doesn’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option if you are an international student who doesn’t have a credit history and can’t access a qualified cosigner.
Sallie Mae offers cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option if you’re seeking competitive interest rates and have a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit if you have a strong credit score or a creditworthy cosigner.
What is the Interest Rate on Dental School Loans?
The interest rate you receive on dental school loans depends largely on whether the loan is federal or private. Federal loans have fixed interest rates that are the same across all borrowers. As of May 2022, the interest rate on Direct Unsubsidized Loans is 5.28%, and the interest rate on Direct PLUS Loans is 6.28%.
Private student loans will have either a fixed or variable interest rate. Because each lender is its own unique entity, interest rates will vary between them. Sparrow partners with 15+ lenders, with interest rates ranging from 0.94% to 14.52%. To check your eligibility across lenders and see what interest rates you would qualify for, complete the Sparrow application.
Final Thoughts from the Nest
Being a dentist can be an incredibly lucrative career. Getting there, however, can be an expensive journey. Understanding how to pay for dental school is a crucial first step in setting yourself up for a successful dental career.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Bad credit can put you in a tough spot when looking for student loans. This is especially true if you are looking at private student loans. But what about federal student loans? Can I take out federal student loans with a poor credit history? How?
What is Considered a Bad Credit Score?
The FICO credit scoring model ranges from 300 to 850, with 300 being the lowest score you can get and 850 being the highest score you can get. What is considered a “bad” credit score will vary depending on the lender you talk to. Typically, anything under 630 is considered high risk to most private lenders.
The good news is that most federal student loans don’t require a credit check to qualify. So, even with an adverse credit history, you have options. To see if you are eligible for these loans, fill out the FAFSA. There are four different types of federal loans you might get depending on your situation.
Direct Subsidized Loans
Direct Subsidized Loans are available only to undergraduate students with financial need. So, you’ll have to show that you have financial need to get this loan. Your answers from the FAFSA will be used to determine whether you do or not.
The government will pay interest on these loans while you are in school. Once you graduate, you’ll be in charge of interest payments. Additionally, you do not need to pass a credit check to get this loan.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to both undergraduate and graduate students. You won’t need to show financial need to get this loan. So, it’s open to a lot more people. On the flip side, the government won’t pay interest on these loans while you are in school. The interest will accumulate unless you make payments on them, which if you can, is a good idea. These also don’t require a credit check to qualify.
Direct PLUS Loans
Direct PLUS Loans are available to graduate/professional students and parents of students. Like unsubsidized loans, you’ll be responsible for the interest. Unlike subsidized and unsubsidized loans, however, these do require an adverse credit check. If you fail that, you’ll need an endorser or a creditworthy cosigner to qualify. Additionally, there is also an extra application you need to fill out outside of the FAFSA to get this loan. Check with your school about the application process.
Direct Consolidation Loans
Direct Consolidation Loans allow you to combine all of your federal loans into one. Your new interest rate will be the average of all your previous loan interest rates. While you may not get a lower interest rate, doing this helps you to more easily manage your student debt. It can even lower your monthly payment. There is also no cost to consolidating your loans. And you don’t need to go through a credit check to do so.
Ways to Improve Your Credit Score Before Taking Out a Loan
While bad credit isn’t as big a deal for most federal student loans, it will matter if you’re taking out a PLUS loan. So, you’ll want to improve your credit score before you take out a PLUS loan so you can pass the credit check. There are different things you can do to help boost your credit score.
Take a look at your debt and payments. Making your payments on time and paying off your debt is good for your credit score. Doing this will show that you are reliable and can handle your debt, which makes you less of a risk. In fact, making on-time payments can even help raise your credit score a little in just six months.
So, continue paying all of your bills on time, and try to pay off any outstanding debt, such as credit card debt, if you can.
Keep open lines of credit you already have and refrain from opening new ones. The length of your credit history is an important factor to determining your credit score. The longer you stay with the same credit account, the better you look. Refrain from closing any current lines of credit you have because it will lower the length of your credit history and impact your score. Likewise, opening new accounts will cause a hard inquiry into your credit which will temporarily hurt your credit score. So, unless you really need to, stray from closing current or opening new accounts.
Regularly check your credit report. Keeping track of your credit report is important to understand your financial situation, but also to check for errors, fraud, and identity theft. Even a small error on your credit report can significantly hurt your score, so it’s important to check fairly often. There are many financial institutions, such as banks and credit card companies, that offer free credit reports. If yours don’t, go to the Annual Credit Report website to get a free credit report from each of the three major credit bureaus. You are, by law, entitled to these reports yearly.
Final Thoughts from the Nest
Bad credit and student loans seem like the worst combination in the world. And you may be stressing that it’s your current situation. Luckily, you can still take out federal student loans to help cover your school expenses. And even from those, you have different loan options depending on your circumstances.
Now, if federal student loans don’t cover all your expenses, there are still a variety of private student loan options that can help cover your remaining college costs. Sparrow can help you find private student loan options for people with bad credit. Just fill out the Sparrow application to be matched with what you qualify for at top lenders. You can even save and compare your favorite lenders before moving forward. Since we partner with 15+ lenders, there’s no doubt you’ll find a good loan for you.
Your credit score is like the report card of adulthood, except it’s one number based on your creditworthiness, as opposed to letter grades. As a college student, having a bad credit score isn’t optimal when it comes to securing a private student loan.
However, don’t lose hope just yet. You still have a variety of options to choose from.Check out this quick read to see the best private student loans for student borrowers with bad credit history.
Best Private Student Loans for Bad Credit
First, here’s is a list of the top 5 student loans for bad credit. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
Yes, you can still receive student loans with bad credit. Bad credit doesn’t automatically disqualify you from receiving a student loan, though the eligibility criteria may vary between loan options.
Federal Student Loans
Federal student loans will be your best option if you have a bad credit store. They are issued by the federal government and are extremely borrower-friendly.
Federal student loans don’t assess your credit score in most cases and come with income-based repayment options, loan forgiveness, and deferment options.
In addition to having flexibility as a borrower, federal student loans also carry a flat interest rate that is typically lower than the interest rates offered by private student loans. This means that interest rates are the same amongst all student borrowers, regardless of credit score.
In order to receive a federal student loan, make sure you meet the eligibility requirements and submit your FAFSA application.
Receiving a private student loan can be more challenging, and you’ll need to be deliberate with your actions.
Find the best private student loan for yourself on the market. You should consider interest rates, repayment options, origination fees, and whether or not these loans are enough to pay for your tuition. Submitting formal applications to multiple private student lenders can damage your credit score temporarily (this is called a hard inquiry), and this is a risk you should not take. Instead, use Sparrow to see what loan options you can get with premier lenders without damaging your credit score. We help borrowers with bad credit find a loan that suits them without hurting their credit.
Consider getting a creditworthy cosigner. A cosigner is an individual, usually a family member or friend, who is responsible for the loan with you. If you can’t or do not repay the loan on-time or in-full, the cosigner is contractually obligated to do so. If you have a bad credit score, having a cosigner is useful because it reduces your risk profile as a borrower. Accordingly, this allows you to have a wide array of loan options with lower interest rates. Though there are loans that don’t require a cosigner, having a cosigner boosts your chances significantly in getting a private student loan.
Explore outcome-based private student lenders who evaluate metrics outside of your credit score. There are private student lenders who do not evaluate credit score, and instead look at your academic performance, major/school, and future income potential. Ascent, Edly, and Funding U are popular outcome-based lenders that are accommodating to students.
What is Considered a Bad Credit Score?
FICO and VantageScore are the two leading scoring models to measure credit, though FICO is the most widely used scoring model and used by 90% of lenders.
This is the most important factor of your FICO score. Your credit history is your record of payments in past credit accounts and assesses your punctuality in payments (or lack thereof).
Amounts owed (30%)
This is the second most important factor of your FICO score. If you have outstanding amounts of money to pay back (ex. You have a $1,000 credit line and you’ve used $900), this can indicate to lenders that you are overextended in your finances.
Length of credit history (15%)
Though you don’t need a long credit history to have a high FICO Score, your credit history takes into account the following items:
When your credit accounts were created (your oldest account, your newest account, and the average age of all your accounts)
Usage of certain credit accounts
Longevity of specific credit accounts
Credit mix (10%)
There are two types of credit accounts: revolving accounts and installment accounts.
Revolving accounts are credit accounts that have flexible repayment plans and options, like credit cards, HELOC (Home Equity Line of Credit), retail store accounts, and gas station cards.
Installment accounts consist of mortgages, auto loans, and student loans.
Having a varied credit mix improves your FICO score, as it shows that you don’t have a limited credit experience. However, this doesn’t mean that you should try to open different types of credit accounts.
Your credit mix is largely dependent on your age, socioeconomic status, and other factors, so it won’t determine whether or not you obtain credit from lenders.
First and foremost, your payment history is the most influential factor for your credit score, so focus on paying your dues on time.
New credit (10%)
Opening multiple credit accounts in a short period of time is a red flag for lenders and can have negative effects on your credit score. Be sure to demonstrate reliability and creditworthiness with the credit lines you have open, instead of opening multiple accounts.
FICO considers a credit score to be poor if it falls below 580, fair if it ranges between 580-669, and good if it falls between 670-739.
What Can I Do to Raise My Credit Score Before Getting a Student Loan?
Though there is no magical quick fix to raise your credit score substantially in a short period of time, you can still raise your credit score by your next credit report with the following steps:
Pay your bills on-time.
Pay off any outstanding debt.
Hold off on opening new lines of credit.
Don’t close your current credit card accounts.
Check your credit report to assure that there is nothing incorrect or fraudulent.
Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA and estimated future earnings to assess your creditworthiness. Therefore, Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no creditworthy cosigner.
For Undergraduate & Graduate Private Student Loans
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. In order to qualify for a student loan with ASLA, you need a credit score of above 670. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores. Ascent’s minimum credit requirement varies based on the loan.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos does not disclose their minimum credit requirement. Brazos is a great option if you live in Texas and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. In order to qualify for a student loan with College Ave, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. In order to qualify for a student loan with Earnest, you will need a credit score of 650. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. Therefore, an Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a minimum credit requirement of 660. It’s best for students who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. Specifically, it is best for international students and DACA students who don’t have a cosigner or a credit history.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. Accordingly, they’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. In order to qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
Closing Thoughts from the Nest
Having a bad credit score as a student can be extremely disadvantageous. Raising your credit score should be an important priority if you plan to take out student loans, open new lines of credit, and more.
However, there are still student loan options available to you, even if you have a bad credit score. Start thinking ahead about where your credit is at, and if it’s not ideal, start taking small steps to build it. In order to find a private student loan for students with bad/no credit, complete the Sparrow application today.
Remember to research federal student loans and outcome-based, borrower-friendly student loans. When looking for private student loans, remember to be deliberate with your actions (think about the effects of hard inquiries on your credit score, consider getting a cosigner, and make an effort to raise your credit score).
On top of that, apply to college scholarships and grants to fill the gaps in college costs.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
According to NerdWallet, dental school students graduated with an average of $304,824 in debt in 2020. Though the tuition for dental school differs between dental programs, financing dental school tuition can be a hefty and expensive challenge.
Scholarships are a great way to minimize this overall debt total. Let’s find out which scholarships are best to apply for in order to make the cost of tuition more affordable.
Benefits of a Scholarship
Receiving a scholarship (or better yet, multiple scholarships) is like getting free money to pay for tuition.
You don’t have to pay scholarships off because they are a form of gift aid, as opposed to private student loans and federal student loans, which you’ll need to pay back.
Applying to as many scholarships as you can to pay for dental school is a financially strategic way to avoid racking up student loan debt.
Can I Get Scholarships for Dental School?
You can receive internal scholarships (awarded by your dental program) or external scholarships (awarded by private, professional, or non-profit organizations) for dental school.
Dental school scholarships usually vary in size depending on the institution you are receiving them from.
Can I Get a Full Ride Scholarship for Dental School?
While it is possible to cover your entire tuition for dental school with scholarships, it’s extremely rare. Given how expensive tuition is, you’ll need a substantial amount of scholarship money to cover the whole cost. Full-ride scholarships are typically very competitive, and thus, few students receive them.
You can, however, cover a substantial amount of your dental school expenses with scholarships. But, given how expensive tuition is, it may be challenging to cover the whole cost with scholarships.
Many dental schools award scholarships to their students based on merit and financial need. Depending on your individual financial situation and the campus-based dental scholarship programs, you may be able to secure a decent amount of scholarship money from your school.
If you apply to external scholarships, it will be a lot more difficult to pay your entire tuition. External scholarships are usually extremely competitive and relatively small. And with the average dental school tuition ranging from $53,000 to $70,000 per year, you’ll need quite a few scholarships to cover that amount.
However, this doesn’t discount the fact that external scholarships add up significantly, especially if you are consistently making an effort to apply to as many scholarships as possible.
Eligibility Criteria for Dental Scholarships
The eligibility criteria to receive a dental scholarship is fundamentally the same as the scholarship requirements for undergraduate or graduate programs.
Be enrolled in an eligible program. Scholarships are usually only awarded to students who are enrolled in an accredited four-year dental program. Make sure to check if the dental program you are enrolled in qualifies you to receive a scholarship.
Exhibit academic or professional achievement. While some scholarship programs are intended for students of certain minority groups with special interests, or students with financial need, you’ll still want to be a competitive applicant. You’ll want to have a variety of community service, research experience, dental-related work, and extracurricular activities to set you apart as an applicant.
What GPA Do You Need for a Dental Scholarship?
Generally, you’ll want to have a cumulative 3.0 GPA or higher in order to qualify for dental scholarships. However, the higher your GPA is, the more competitive of an applicant you’ll be.
Keep in mind to consider your Science GPA in addition to your cumulative GPA. Your Science GPA is calculated based on Biology, Chemistry, Physics, and Math (BCPM).
In 2019, it was reported that the average cumulative GPA for dental school students was 3.55 and the Science GPA was 3.45.
Where to Find Dental School Scholarships
Professional Organizations
The American Dental Association is a prestigious professional organization for pre-dental students, dental students, and all dental occupations. The ADA has partnered with organizations like MouthWatch Patti DiGangi, Crest Oral B, and more to offer scholarships to dental students.
The National Dental Association also offers scholarships for a wide range of students, from the Dr. Bessie E. Delaney Scholarship $10,000 Post-Doctoral Scholarship Award to the Dr. Joseph L. Henry First Year Scholarship $2,000 Freshman Scholarship.
Be sure to check out this list of professional dental organizations and see what each organization has to offer in regards to scholarships.
Your University
If you meet the criteria of demonstrated financial need and high merit, the dental school that you are applying to will usually automatically offer scholarships with your financial aid award.
However, dental schools do provide scholarships outside of the ones offered with financial aid awards. For example, there are usually university-specific scholarships, such as a Dental Alumni Association Scholarship, that are funded by previous dental students who have graduated and pursued their health professions in dentistry.
For example, the UNC Adams School of Dentistry and the Washington University Dental Alumni Association, along with many other dental programs, offer annual scholarships to qualified students.
Scholarship applications can be found on your dental school’s website.
Scholarships.com is a database for scholarships that is organized based off of everything from major, to SAT score, to residency. It’s a great place to find dental scholarships as you can create a free profile, find scholarships that are relevant to you, and also obtain assistance in paying tuition.
Sallie Mae is a private student loan company that offers a free Scholarship Search tool for undergraduate and graduate students. Make a profile today to find scholarships based on your skills, field of study, and interests!
Bold is the holy grail website for finding scholarships. Offering exclusive scholarships for high school students, undergraduates, and graduates, you can find scholarships based on your experiences, skills, and field of study.
Final Thoughts from the Nest
While covering the educational costs of dental school with internal and external scholarships is a strenuous challenge, every scholarship counts!
Make sure to apply to as many scholarships as you can and keep in touch with your dental school’s financial aid office.
Once you’ve exhausted your scholarship options, consider taking out a dental school loan.
A dental degree is not as out of reach as it seems!
According to the Law School Admission Council, a law degree can cost upwards of $150,000. While there are more affordable law programs, it isn’t uncommon for law school graduates to end up in a fair amount of student debt. If you’re headed to law school any time soon, the reality of how much it costs may be setting in…hard.
Before you let this number consume your mind, know that there are a variety of ways to pay for law school. Here’s how you can do it.
#1: Scholarships
Scholarships are a form of free money because they don’t need to be paid back. So, the more scholarships you can rack up, the better.
Where Can I Find Scholarships for Law School?
Law school scholarships can come from various sources such as professional organizations, your university, the Law School Admission Council, and search engines.
Professional Organizations
Professional organizations are typically focused on furthering the development of individuals within their industry. So, many professional organizations offer scholarships to students pursuing a degree in their field. Organizations such as the American Bar Association and the National Bar Association both offer compelling scholarships options for law school students.
Your University
Universities also tend to offer a hefty amount of scholarship money. While most scholarships are merit-based, some university scholarships may require you to meet a certain level of financial need. Sometimes, your university will automatically award you a scholarship upon acceptance. Other times, you may need to reach out to your school’s financial aid office to see what scholarships are available to you.
The Law School Admission Council
The Law School Admission Council (LSAC) website has a frequently-updated list of reputable law school scholarships, with many designed specifically for marginalized students. With over twenty scholarships on the list, LSAC is a great source for trustworthy scholarship programs.
Search Engines
Scholarship search engines will allow you to refine your scholarship search a bit more than the other options. Sites like Sallie Mae’s Scholarship Search Tool and Bold.org’s Scholarship Search Engine allow you to filter your search based on a variety of factors such as your year in school, your interests, your LSAT score, and more. This allows you to find scholarships that match your unique qualifications, which increases your chances of winning the scholarship once you apply.
What LSAT Score Do I Need to Get a Scholarship?
Generally speaking, you’ll need an LSAT score of 165 or higher to be a competitive applicant for most law scholarships. That said, there are a variety of law scholarships catering to applicants with lower LSAT scores.
#2: Grants
Grants are another form of free money, so you’ll want to maximize how much you can receive in these, too. That said, grants are almost always need-based, so they won’t be accessible to every law school student.
If you do demonstrate financial need, there are a few main places you’ll want to look for grants.
University Grants
University grants are similar in nature to university scholarships, except they’re typically based on financial need rather than merit. If you receive a grant from your university, you’ll usually see it on your financial aid package. That said, your university may have grant programs that require a separate application. Reach out to your school’s financial aid office to inquire about any grant programs they may offer.
Private Grants
Private grants are offered by private institutions such as nonprofit organizations, professional organizations, and businesses. To secure a private grant for law school, you will typically need to submit an application with each individual organization that may require your transcript, an essay, and your FAFSA application. Because each private organization is its own unique entity, they may have different eligibility or application requirements.
The Law School Admission Council, for example, offers a variety of private grants such as pipeline grants, grants for underrepresented groups, and outreach grants.
Can Pell Grants be Used for Law School?
Unfortunately, Pell Grants cannot be used for law school. The Pell Grant is an award given to undergraduate students.
#3: Work-Study
Work-study is a form of need-based financial aid that is considered earned money. While you may be awarded a specific amount in work-study, you’ll need to complete a work-study job to receive that money.
Due to the caliber of law school, many universities do not participate in the work-study program or limit the number of work-study hours a first-year student can complete. For second- and third-year law students, universities typically limit work-study employment to 20 hours per week.
Because work-study requires you to complete working hours to receive it, you won’t be able to use work-study funds to cover tuition expenses up front. However, a work-study role can help you cover living expenses while in school.
If you’re attending law school part-time while working, always check with your employer to see if they offer tuition assistance programs to help fund your law school education. If not, it may be worthwhile to explore other part-time employment opportunities that offer tuition assistance or programs to cover education expenses.
#4: Loans
After pursuing all free money and earned money options, you may need to explore borrowed money options to cover that last bit of tuition. In general, law school loans come in two forms: federal and private.
Federal Student Loans
To be eligible for federal student loans, you will need to submit the Free Application for Federal Student Aid (FAFSA). As a law school student, you are eligible for two types of federal loans: Direct Unsubsidized and PLUS Loans.
With Direct Unsubsidized Loans, you are eligible to borrow up to $20,500 per academic year. There is a lifetime borrowing limit of $138,500.
With Direct PLUS Loans, you are eligible to borrow up to the cost of attendance minus other aid you’ve received. There is no lifetime limit for Direct PLUS Loans. You will, however, need to pass an adverse credit check to be able to borrow Direct PLUS Loans.
Private Student Loans
To borrow a private student loan, you will need to submit an application with the lender of your choice. To see what rates you would qualify for with several lenders at once, complete the Sparrow application.
How Much Can I Borrow in Law School Loans?
The amount you can borrow in private student loans will depend on the individual lender’s borrowing limits. Annually, most private lenders will allow you to borrow up to the cost of attendance at your law school minus other aid you’ve received.
Some lenders will have lifetime borrowing limits, which limit how much you can borrow cumulatively. For example, some lenders have a lifetime borrowing limit of $500,000. Note that this limit may include undergraduate loans as well. So, if you previously borrowed a loan to fund your undergraduate academic career, that loan amount may count towards your overall borrowing limit if you plan to use the same lender for law school loans.
What Do I Need to Qualify for a Private Student Loan for Law School?
Each private lender will have its own unique set of borrower eligibility criteria. In general, you’ll need to:
Be a U.S. citizen, permanent resident, or eligible non-citizen
Be enrolled in an eligible program at least half-time
Have a solid credit score, or a cosigner with a solid credit score
Have a steady income, or a cosigner with a steady income
What Can I Use Law School Loans For?
Both federal and private student loans will cover traditional law school expenses such as tuition, room and board, and fees. Private student loans, however, can cover a wider array of expenses including the bar exam. Some private lenders offer a specific bar exam loan designed to cover all bar exam expenses, from the actual exam cost to living expenses during your exam prep.
Best Student Loans for Law School
While there are a variety of lenders ready to help you cover the cost of law school, the following are our top picks.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for law students either from Arkansas or pursuing a degree in Arkansas.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for law students who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
Borrowing money to pay for law school is incredibly common. In fact, the vast majority of attorneys take on student debt to pay for their J.D. So while financing such an expensive degree may feel overwhelming, know that you’re not alone.
Begin the process by exploring scholarship and grant options, see if you qualify for work-study, then dive into the loan process as your last step.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Want to have a career in law without racking up overwhelming amounts of debt?
You have two options if paying out of pocket isn’t possible (which is usually the case for most law school students).
1) You can either move to California, Virginia, Vermont or Washington, which are the only four states in the U.S. that allow aspiring lawyers to take the bar exam without a law degree or 2) Apply to as many law scholarships as you can.
If the latter seems more up your alley, check out this 10-minute read on the best scholarships to apply to as a prospective law student.
Why Should I Apply to Law School Scholarships?
In 2020, the American Bar Association reported that the average law school student owed $165,000 of student debt after graduation.
No matter how big or small, every scholarship is “free money”, as opposed to federal and private student loans, which need to be paid off and usually have volatile interest rates.
Applying to scholarships to pay for law school is a money-savvy thing to do if you want to reduce your overall debt.
Can I Get a Scholarship to Study Law?
If you’re looking to apply to law school, you probably know that your undergraduate GPA and LSAT score are two of the most important components of your application.
Oftentimes, law school admissions departments use the LSAT score and GPA in order to objectively rank your strength as an applicant to determine whether or not you qualify for admission.
Beyond being a determining factor in an already competitive admissions process, your LSAT score is also your ticket to receiving merit scholarships.
Law school scholarships are usually awarded based on your LSAT score because it’s the only comprehensive measure to rank your strength as an applicant against all of your peers and an objective measure of your capability to studying law successfully.
While most scholarships will have an essay requirement and ask you to respond to a series of essay questions, scholarship providers usually won’t even read essay responses unless a certain threshold is met for the LSAT score.
What LSAT Score Do I Need to Get for a Scholarship for Law School?
Scholarship eligibility is largely dependent on your LSAT score.
A recent study showed that 90% of students with LSAT scores between 166-190 received merit scholarships, while only 16% of students with LSAT scores below 140 did.
It’s your safest bet to have an LSAT score around or above the median of the law school that you are hoping to attend. Generally, an LSAT score around or above 160 surpasses the national average of 150, making you a competitive applicant to mid-tier law schools. Applicants for the top ten law schools should aim for an LSAT score of 170 or higher.
How to Find Law School Scholarships
Professional Organizations
A professional organization is a voluntary organization that usually seeks to advance the careers of individuals in a specific profession. Professional organizations can be private organizations or non-profit organizations.
There are plenty of professional law or bar organizations that offer scholarship awards to law school students. For example, the American Bar Association awards scholarships to underrepresented first-year law students, and the National Bar Association holds essay-writing scholarship contests on selected contemporary law issues.
If you already know your intended field of law, there are legal and law specialty associations that offer scholarships to students who plan to study that specific field of law. For example, the American Immigration Lawyers Association gives scholarships to law students who are engaged in the area of immigration law, and The Federation of Defense and Corporate Counsel offers the Barb Currie Diversity Scholarship.
Your University
If you meet the needed criteria of demonstrated financial need and high merit, the law school that you are applying to will usually automatically offer scholarships with your financial aid award.
However, law schools do offer scholarships outside of the ones offered with financial aid awards. It’s important to be prudent and check if there are separate scholarships that your university offers that you can apply to. The application cycle for scholarships is usually during or after the law school application process.
Law School Admission Council
The Law School Admission Council is a great place to look during your search for law school scholarships.
The LSAC compiles reputable scholarships on their website, currently listing over 20 scholarships for law school students of diverse populations. For example, the LGBT Public Interest Scholarship Program is offered to LGBT-identifying or LGBT-interested law students, while the Sarita and Claire Wright Lucas Foundation offers scholarships to female-identifying Black law students.
Helpful Search Engines
There are a plethora of search engines that can help simplify your law school scholarship search. Here’s a few our favorite search engines:
Sallie Mae is a private student loan company that offers a free Scholarship Search tool for undergraduate and graduate students. Make a profile today to find scholarships based on your skills, field of study, and interests!
Bold is the holy grail website for finding scholarships. Offering exclusive scholarships for high school students, undergraduates, and graduates, you can find scholarships based on your experiences, skills, and field of study.
Scholarships.com is a database for scholarships that is organized based off of everything from major, to SAT score, to residency. It’s a great place to find law scholarships as you can create a free profile, find scholarships that are relevant to you, and also obtain assistance in paying tuition.
Final Thoughts From the Nest
Getting into law school is already hard, but paying for enrollment in law school makes things even harder. Scholarships are a great way to get free money to pay for the cost of tuition and bring the bill down significantly.
Paying for law school tuition with entirely just scholarships is difficult, so remember to consider all of your options. Apply to as many scholarships as you can, and consider using Sparrow’s student loan search tool to make up the difference.
Sparrow is like the Sallie Mae or Bold for student loans; our financial search engine simplifies the lending process and personalizes the service to you.
Make a free profile with us today to automate your private student loan search. We want to make it possible for you to attend the law school of your dreams!
The average debt dental students have is around $300,000. This includes debt from both undergraduate and graduate studies. While that is a scary number, you can bring it down by securing free aid like grants. Here is what you need to know about dental school grants.
Benefits of a Grant for Dental School
Grants are free money. Unlike federal or private student loans, once you receive the money, you will almost never have to pay it back. These will help cover the educational costs that you will incur. Grants will also lower the amount of money you might need to take out in loans. This, in turn, helps lower the number we mentioned at the beginning.
Now that you understand why grants are great, where do you find them?
How to Find Grants for Dental School
There are many different sources that offer grant money for dental students. Here are the main ones you’ll probably look at.
Federal Grants
The most well-known federal grant you’ve probably heard of is the Pell Grant. The Pell Grant, however, is only for undergrads. While there are some other federal grants, there aren’t many grant programs for dental school. On the bright side, filling out the FAFSA can help you get grants from other places like your state or school.
State Grants
Most states offer financial aid to students to help cover the cost of attendance. What each state offers will vary depending on the state. To find out what’s available in your state, you’ll need to fill out the FAFSA. Repeat this for every year you’re planning to be in school.
School Grants
Most schools will offer financial aid to enrolled students. Your dental program may even offer grants or other forms of aid. To find out what’s available to you, talk to your school’s financial aid office. They’ll have more information on what grants are open and which ones are the best for you. Be sure to fill out the FAFSA as well since your school may offer additional aid based on the FAFSA.
Professional Organization Grants
You can join a dental association for exclusive access to free aid, including grants. This includes places like the American Dental Association or the Hispanic Dental Association. Both are examples of associations that provide aid to their members. Not only that, but they also offer career resources, testing help, and can be a great way to network.
Other Places to Find Free Money for Dental School
Of course, grants aren’t the only type of free money you can get. Scholarships, fellowships, and service programs are also great sources of free money.
Scholarships
Much like grants, you can get scholarships from many different sources. Dental associations, like the ones mentioned above, offer scholarships. They are usually for members, so you’ll want to think about joining. Universities also offer scholarships to help their enrolled students pay for graduate programs. Again, you’ll want to have filled out the FAFSA already since most schools will offer aid based on that.
A huge resource in looking for scholarships issearch engines. Websites like FastWeb, Niche, and even Sallie Mae all have scholarship search engines. Each website even has its own features to help you with the scholarship search. FastWeb will match you with scholarships based on a profile you fill out. Niche offers no-essay scholarships. And registering with Sallie Mae enters you into their monthly $1,000 sweepstake. If you want to increase your chances of securing a scholarship, there are tutors, like the ones at Chegg, who will review your scholarship essays and help you with them. There are lots of other search engines, too! So, include them in your process because they can be a huge help.
Fellowships
Fellowships are another great source of free money. They’re usually given based on achievements or to fund academic research. Having a fellowship under your belt will look really good on a resume, too. So, they can be a big help now and in the future. You can search for fellowships online. There might even be some available at different dental associations.
Service Programs
Service programs are places that offer funding and aid in exchange for work. Usually, you have to commit to serving a specific community for a set amount of time. The exact details will depend on the program. For example, the National Health Service Corps Scholarship provides funding in exchange for 1-2 years of work in an approved area. If this sounds interesting to you, it’s worth checking out and applying to service programs.
Final Thoughts from the Nest
Having a lot of student debt can be terrifying, but there are a lot of resources out there dedicated to helping you. Sparrow is one of those resources! Once you’ve exhausted all your options for free money, but you still need more, search for private loans with us. Our Sparrow application will match you with what you qualify for at 15+ lenders. Then, use the save feature to mark the ones you’re most interested in. You can even compare them to help you make a final decision.
Take advantage of Sparrow and other resources to make your dental journey a lot easier!
If you have a stable income and a solid credit score,student loan refinancing can save you thousands over the life of your loan. But if you’re planning to refinance federal student loans, know that it does come with some sacrifices. Let’s take a look at the pros and cons of refinancing federal student loans.
Pros of Refinancing Federal Student Loans
Lower Interest Rate: Refinancing can allow you to secure a lower interest rate, which can save you thousands of dollars throughout the loan repayment period. For example, if you had a $30,000 loan with an 8% interest rate, refinancing to a 5% interest rate could save you over $5,000. As of today, some federal loans have interest rates as high as 6.28%. If you have access to a cosigner or have excellent credit, you may be able to score a lower interest rate with a private lender.
Option to Consolidate: Refinancing gives you the opportunity to combine multiple student loans into one, simplifying your monthly payments. There are two options for consolidating federal student loans: federal Direct Consolidation Loan or private student loan refinance and consolidation.
Longer Repayment Term & Smaller Monthly Payments: Refinancing to a loan with a longer repayment period can make your monthly payments more manageable. For instance, switching from a 10-year plan to a 15-year plan can reduce your monthly payment amount.
Cons of Refinancing Federal Student Loans
Giving up Benefits of Federal Loans: If you refinance federal student loans with a private loan, you will lose access to federal loan benefits. These lost benefits include potential loan forgiveness, forbearance, and flexible repayment options.
Restarting Loan Payments: If you refinance federal student loans during the forbearance period (until June 30, 2023), you will have to start making payments again.
Considerations for Refinancing
Refinancing during forbearance: It’s possible to refinance during forbearance. However, we recommend waiting until the forbearance period ends. In doing so, you can avoid accruing interest and starting payments prematurely.
Will Biden Extend the Student Loan Forbearance? While President Biden has extended federal student loan forbearance in the past, there’s no guarantee it will happen again. We recommend waiting until the forbearance is completely over (June 30, 2023) before refinancing. Doing so minimizes the risk of missing out on an extension.
Best Student Loan Refinance Lenders
If you decide to refinance your federal student loans, there are a variety of lenders ready to help you through the process. The following are the best lenders to refinance your student loan.
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Refinancing your student loans can save you quite a bit over the life of your loan. But if you have federal student loans, you may want to hold off to maintain your federal loan benefits.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The average dental student’s debt is around $300,000. While this can be overwhelming, it doesn’t have to be. You can minimize your debt by making educated loan decisions and choosing the right loans for you. Let’s get into it.
Can I Get Loans for Dental School?
Yes. The two main loans you’ll hear about are federal student loans and private student loans. Both can be a great help in paying for your dental education.
Federal Loans
With federal loans, you can get Direct Unsubsidized Loans or Direct PLUS Loans. The maximum loan amount you can borrow with Direct Unsubsidized Loans is $20,500 per year with a lifetime limit of $138,500. With Direct PLUS Loans, the maximum amount you can take out is the cost of attendance minus other aid.
Private Loans
Private student loan borrowing limits will vary more. But, you can typically get up to the cost of attendance minus other aid.
Do You Need a Cosigner for Dental School Student Loans?
It depends. For federal student loans, you usually won’t need a cosigner. The only instance where you might need one is with PLUS Loans. To qualify for a PLUS Loan, you need to pass an adverse credit check. If you fail that, you will need a cosigner to go forward.
Private student loans are where you’ll most often see a cosigner requirement. Lenders set certain requirements that if you don’t meet, then you’ll need a cosigner who does. The specifics of the requirements vary from lender to lender. The biggest one is the credit score requirement. Make sure either you or a cosigner have good to excellent credit. This is a score that is at least in the high 600s.
It’s important to note that a cosigner does more than just help you qualify for a loan. Cosigners can also help get you better terms or a lower interest rate. This can lower your monthly payments and make your loan more manageable.
How to Reduce Your Dental School Debt
First, look for scholarships and grants. This is free money that you won’t have to pay back. Plus, the more of these you get, the less you have to take out in loans. Once you get to loans, consider taking out some federal student loans. These are great because they come with lots of federal benefits such as flexible repayment plans, a grace period, and possible loan forgiveness. Finally, you’ll want to look at private student loans. As you search, carefully review the terms of each loan. The terms include interest rates, fees, and periods of deferment among other things. You might even be able to get a lower interest rate than on your federal student loans.
Use Sparrow to help you look for good private student loans. Fill out our online application to match you with what you qualify for at 15+ lenders. Then, save and compare the ones you liked the most before making a final decision.
Our Picks for Dental School Student Loans
Here is a list of lenders that give out great dental school loans:
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding that’s available to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit and who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
School debt can be overwhelming. Getting the right aid and loans, however, can lower it and make it more controllable. So, when you begin your career in the dental field, you can feel at ease knowing your student debt is under control.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The average lawyer earns about $148,000 per year. But the average law school debt is $160,000. It is important, then, that you understand law school loans and get the best ones. That way, when you graduate, your loans will be more manageable.
Student Loan Options for Law School
You have two main options when it comes to student loans: federal and private.
To be eligible for federal student loans you must fill out the FAFSA. Law students are eligible for two types of federal loans, Direct Unsubsidized and PLUS Loans. With Direct Unsubsidized Loans, you can take out $20,500 per year. The lifetime total is $138,500. With Direct PLUS Loans, you can take out the cost of attendance minus other aid you’ve received. You will need to pass an adverse credit check to be eligible for a Direct PLUS loan.
You can also take out private student loans. The loan amounts you can get will be dependent on each lender, but you can typically get up to the cost of attendance minus other aid. To be eligible to borrow, you’ll need to meet certain qualifications, which will vary with each lender. However, you’ll at least need to make sure you have a good credit score, or have a cosigner with a good credit score. This can help you secure a lower interest rate. Some lenders may also offer a lower interest rate to borrowers who sign up for autopay.
No matter what type of loan you get, you can use the money to pay expenses related to your law degree. You can pay for education expenses like tuition, books, and other supplies you may need or living expenses like room and board and more personal things. Some private student loans will even cover bar exam expenses including the actual cost of the test as well as a prep course and lodging for the exam.
Do You Have to Pay Back Student Loans While in Law School?
It depends. With federal loans, you can typically defer until after you graduate. You’ll even get a grace period of six months before you have to start making payments. With private lenders, you may not be able to wait as long. You should talk with your lender to see what deferment options are available to you. You’ll also want to ask if they offer grace periods.
Once you know when your repayment period starts, ask about repayment plans. Federal student loans tend to have more flexible repayment options such as income-driven repayment and graduated repayment. Income-driven repayment bases your monthly payment on a percentage of your income. So, you’ll never pay more than what you could reasonably afford. Graduated repayment extends the repayment term to 25 years, which lowers your monthly payment. And these are just some. While typically not as flexible, private lenders may offer similar support in the form of deferred repayment plans and hardship plans. Deferred repayment plans allow you to postpone making payments on your loans while in school, however, interest will accrue in the meantime. You should talk with your lender for more information on your repayment options.
How to Minimize Law School Debt
Generally, when trying to minimize school debt, start with scholarships and grants. Then, federal student loans. Finally, private student loans.
Scholarships and grants should always be your first options. It’s free money that you receive and don’t have to pay back. It’s a great way to fund your education worry-free. As a bonus, it’ll lessen the load on how much you have to take out in loans.
Once you’re ready to start looking for loans, first explore federal loan options. In general, federal student loans tend to have lower interest rates and better terms. Additionally, federal student loans have the potential to be forgiven, which private student loans do not.
If you still need more money after that, then explore private loan options. With private loans, especially, take time to review the terms of each loan carefully. You can even use Sparrow to help you do that. Fill out the Sparrow application to get matched with what you qualify for at top lenders. Then, save and compare your favorite ones before making a final decision.
Our Picks for Law School Student Loans
Here are our best picks for law school loans that you can start with.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. It’s a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduate, graduate, law, and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
Final Thoughts from the Nest
Law school can be challenging, but paying for it doesn’t have to be. Securing free aid first through scholarships and grants can help ease the financial burden of law school. Then, use this article to help you navigate loans. Get federal student loans first and use Sparrow to help you look for private ones. That way you can focus more on succeeding at law school.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
In 2020, the American Bar Association reported that the average law school student owed $165,000 of debt after graduation.
While going to law school is a significant financial investment and timely affair, there are ways to finance your law school tuition without taking out a student loan or paying out of pocket.
If you meet the threshold for financial need, grants are a great way to get free money to pay for your law school tuition.
What is the Difference Between a Grant and a Scholarship?
While both grants and scholarships are types of gift aid, scholarships are typically awarded based on merit while grants are typically issued based on financial need.
Federal Supplemental Educational Opportunity Grants (FSEOG)
Iraq and Afghanistan Service Grants
Teacher Education Assistance for College and Higher Education (TEACH) Grants
You cannot receive any of these grants to pay for law school.
Do Pell Grants Apply to Law School?
No, you cannot pay for your law school tuition with a Pell Grant. Pell Grants are only awarded to undergraduate students who do not have a bachelor’s, graduate, or professional degree. However, it is possible for a student who is enrolled in a post baccalaureate teacher certification to receive a Pell Grant.
Institutional Grants
Institutional grants are a form of gift aid offered by the institution you plan to attend.
A majority of law schools issue institutional grants if the student demonstrates financial need through their FAFSA application. Other institutions issue grants based on a combination of financial need and other factors such as residency status.
PennState’s Dickinson Law School has a robust grant program for admitted students. All Pennsylvania residents admitted to Dickinson Law before April 15 will automatically receive a free $20,000 tuition grant renewed each year for a total tuition savings of $60,000. Eligible applicants admitted after April 15 will receive the Commonwealth Scholars Grant as funds remain available.
Institutions will usually have their own separate applications or online forms for grants that can be found on their website or by contacting the financial aid office.
Private Grants
Like the name might imply, private grants are financed by private institutions that are not federal, state-wide, or institutional.
Law school grants and law school scholarships are interchangeable in the private sector, given that most private organizations will ask you to provide your transcript along with your application (which usually consists of essays, general information, and your FAFSA application).
The Law School Admission Council (LSAC) and the American Bar Association (ABA) are distinguished private organizations that provide financial aid for prospective students. LSAC’s grant programs range from pipeline grants, grants for underrepresented populations, and outreach grants. ABA’s Legal Opportunity Scholarship Fund is offered to first-year law students who are racial or ethnic minorities.
While pursuing a legal career is a timely and financially significant investment, it is definitely worthwhile.
Before and while you are applying, make sure to do your research on each prospective school’s financial aid programs, stay on track with applying to grants and scholarships, and discuss the specifics of your financial aid situation with the financial aid office at the law schools you are hoping to attend.
Even if you don’t get as much external and internal aid as desired, it’s important to note that law school graduates who plan to pursue public service jobs may be eligible for federal and school loan forgiveness programs.
There are many financial resources available for you to pursue a legal career, and applying for private, institutional, and federal grants are a great way to receive free money for law school.
Becoming a medical professional is a timely, intensive, and costly affair. With four years of undergraduate education, four years of medical school, and 3-8 years of residency, there’s no doubt that debt can rack up quickly for student borrowers.
Among medical school graduates in 2020, the median student loan debt burden was $207,003.
While attending medical school without accumulating extreme amounts of student loan debt may seem like a bleak and impossible reality, applying for medical school grants are a great opportunity to avoid paying out-of-pocket or getting a loan.
What is a Grant?
A grant is a type of gift aid that is issued purposefully by the government or other institutions to support you for many different things, from education, home renovation, to non-profit work.
Unlike medical school scholarships, medical school grants are issued based on financial need and not based on merit.
Educational grants do not need to be paid back. Grants can come from the federal government, state governments, institutions, and private organizations.
Let’s dive into the types of medical school grants that are available for students like you who need financial assistance in affording medical school costs.
Federal, State, Institutional, and Private Grant Options
Federal Educational Grants
Federal grants are financed by the federal government and are usually easy to secure if a student demonstrates financial need. Currently, no federal grant options exist for professional schools like medical school.
Contrary to popular perception, federal grants like the Pell Grant and the Federal Supplemental Educational Opportunity Grant cannot be used for medical school.
While the Pell Grant and the FSEOG are only for undergraduate students (except in special cases that do not include medical school), submitting your Free Application for Federal Student Aid (FAFSA) is still important to find which loans, grants, and options you have for financing your medical school tuition.
State Grants
State grants are financed by the state government and are unique to the individual state.
While state grants can be specific to medical school students, you can still apply for general state grants that can be used towards the cost of tuition for medical school.
Institutional Grants
Institutional grants are issued by the institution (medical school, in this case) you are attending.
Usually, the institution evaluates your level of need based on your FAFSA and uses its own funds to issue a grant.
For example, Harvard Medical School has specific grants based on your field of medicine, and UCLA has a variety of grants, scholarships, and loans.
Private Grants
Private grants are financed by private institutions or non-profit organizations.
Private grants will usually have personal applications you can apply with and have their own means of verifying your financial need.
Applying for Medical School Grants
Fill out and submit your FAFSA (Free Application for Federal Student Aid)
Filling out your FAFSA is crucial to receiving all types of grants. FAFSA assesses what loans, grants, and work-study funds you qualify for and also gives external institutions information about you to determine how much financial aid is required.
Contact your school’s financial aid office
While the Internet is a hefty tool for finding grants for medical school, your school’s financial aid office will be extremely helpful when applying for grants, especially since they are in charge of all money matters for the institution.
Here’s a handy checklist of things to cover:
Ask if your medical school has institution-wide grants or scholarships that you can apply for.
Determine how much external aid is allowed. All medical schools have varying procedures on what is done with too much or too little external aid, so be sure to ask if extra aid is disbursed cumulatively or whether you’ll receive an advanced payment.
Ask your medical school for a list of private and state grants that you can apply for.
When it comes to financing your education, the financial aid office will be your best bet for comprehensive knowledge, information, and resources.
Apply for state grants
Now it’s time to put the Internet to use after you’ve exhausted the financial aid office.
All 50 states in the United States have educational grants that vary by state; it is just a matter of whether or not you are eligible to apply.
State grants usually have their own applications, but may require you to submit the FAFSA to determine your eligibility.
You can use the FAFSA website to access your state’s department of education for a comprehensive list of state-issued grants.
Apply for private grants
Medical school grants are slightly different from those offered to other graduate students, as many of the grants are in the form of fellowships or research grants.
Most private gift aid is merit-based, so there are more medical school scholarships than medical school grants.
However, it is still possible to find private organizations that do offer grants for your education.
The American Medical Association is a national organization that offers many grants and scholarships to medical school students.
Organizations like the American Indian Graduate Center, the Latino Medical Students Association, and the Howard Hughes Medical Institute Gilliam Fellowship for Advanced Study offer specific grants for minority medical school students only.
Medical school is really expensive. That’s why so many students opt to get student loans. Before you start applying though, let’s go over some things you need to know about medical school loans.
How Do Medical School Loans Work?
With medical school loans, you can take out a lot more than you’re probably used to.
Federal Direct Unsubsidized loans, for example, can lend up to $20,500 per year. Overall, the total amount you can borrow is $138,500.
Federal Grad PLUS Loans can lend you the cost of attendance minus other aid you’ve received.
Private student loan amounts will differ. It’ll all depend on the lender as well as your finances.
You can use all this money to pay for tuition, books, room and board, application or test fees, and other similar costs.
What Makes a Medical School Loan Good?
Now let’s go into what you should look at when figuring out which loans are best for you.
Cosigner vs No Cosigner
A cosigner is someone who takes on the legal and financial responsibility of the loan along with you. If you fail to make a payment, then it’s up to them to do so. A creditworthy cosigner can help bring down your interest rate and get you better terms.
Federal student loans don’t usually need a cosigner. The only instance where you may need one is if you fail the adverse credit history check for Grad PLUS loans. Otherwise, you’re good. But, you may need a cosigner to qualify for private student loans. There are non-cosigned private student loan options, but they tend to have higher interest rates than cosigned private loans.
So, before borrowing loans, look for a qualified cosigner and check the cosigner policies.
Interest Rate
Federal student loans have fixed interest rates that don’t change. They usually range anywhere from 3% to 5% depending on the type of loan you are getting. Private loan interest rates vary more. They can go between less than 1% all the way up to 13%+.
There are some things you can do that can maximize your chances of getting a lower rate. Having good credit, having a cosigner, and opting for an autopay discount are some.
Compare interest rates on different loans carefully before accepting any.
Repayment Terms
You want to take a careful look at the terms to make sure you understand and agree with them. For example, most medical school loans will offer grace periods. Federal student loans have a grace period of six months after you graduate, but with private loans, it can vary. You’ll also want to look at the deferment period, which depends on the lender. Some may even offer residency deferment options. Finally, look at the repayment plans. Federal student loans offer income-driven repayment plans while private lenders may offer hardship plans.
Again, be sure to read the repayment options and make sure that they are in line with what you need or want for repayment.
Our Picks for Medical School Loans
Federal student loans come from the government. But private lenders can range. These are our best picks for private medical school loans.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Ascent is a great option for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
College Ave’s student loan offers educational funding for undergraduates, graduate students, professional school students, career school students, and parents of students. It’s a great option for students seeking a more flexible repayment term that allows them to find a loan that matches their budget.
Earnest’s student loans provide funding that’s available to undergraduate, graduate, and professional students. They’re a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. It’s best for students with strong credit and who want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a great option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. They’re a good option for students seeking competitive interest rates with a creditworthy cosigner.
SoFi offers educational funding to undergraduates, graduates, law and MBA students, and parents of students. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
How to Apply for Medical School Loans
To apply for a federal student loan, fill out the FAFSA as soon as it comes out in October for every year you’ll be in school.
To apply for a private student loan:
Check your eligibility with the Sparrow application. You’ll need to meet these basic requirements:
Be a U.S. citizen, permanent resident, or eligible noncitizen
Be enrolled in a school
Meet credit and income requirements
Compare your student loan options. Before you accept any, compare your loan options, their terms, and interest rates. From there, you can use this information to make a final decision.
Submit a formal application with the lender, then wait to hear back. It takes time for lenders to verify information and make a decision. Typically, it takes at least a couple of weeks, but it can take longer.
Make sure that the funds get disbursed. Most lenders send the money to your school, so you should always check with them to see if it all went through.
Final Thoughts from the Nest
As you start your medical career, we want to make sure that you have everything you need to succeed. That includes being well informed on loans. To make the student loan search process easier, start with Sparrow.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Medical school can get really expensive to pay for. Luckily, there are various types of aid to help you pay for it. A big one is scholarships. So, how and where can you apply for medical school scholarships?
Where Do Medical School Scholarships Come From?
Funding for medical school scholarships can come from all sorts of places, from the federal government to local nonprofits. But, there are certain sources that you’ll see more than others.
Federal Scholarships
Federal scholarships are funded by the federal government and are conditional. Usually, you have to work as a healthcare professional in a certain community. For example, you can choose to do so in the military or in an underserved community. In general, you have to commit to one year of work for each year you use the scholarship. For military service, you have to commit to providing medical care for at least 3 years. For the community, you usually only have to commit to about 2 years.
Institutional Scholarships
Institutional scholarships are scholarships that are funded by your school. Most medical schools offer scholarships to help students cover their expenses. Among the ones they offer, there can be full-tuition or full-ride scholarships. It’s important to know that full-ride and full-tuition do not mean the same thing. A full-ride scholarship covers the cost of attendance. Full-tuition scholarships only cover the tuition costs of the school.
Local Scholarships
Local scholarships are those funded by local businesses and organizations. Although a lot of students tend to overlook these, they are a great source of funding. Despite typically being smaller scholarships, they tend to have less competition. Less competition can maximize your chances of winning. And, a couple of these scholarships combined can help you pay for school.
Merit-Based vs Need-Based Scholarships
Additionally, you also want to know the difference between merit-based and need-based scholarships. A merit-based scholarship is based on your academic or extracurricular achievements. A need-based scholarship is dependent on your level of financial need. Most schools offer need-based scholarships, but not all will offer merit-based scholarships. Know which ones your school offers.
How to Get Medical School Scholarships
There are usually scholarships available year-round for most degree programs. So, you can apply for them before and during school. Sometimes, you can get them even after you graduate or during residency to pay off debt.
Although there are a lot of scholarships year-round, you may not qualify for all of them. Scholarships come with requirements you have to meet to apply. Most scholarship programs will list the eligibility requirements on their website and will ask you to confirm that you meet them before you can apply.
Before you apply, though, be sure to have all the information you’ll need. The exact things that you’ll need will depend on the type of scholarship. You can read the details of the scholarship to find that out.
Generally, though, you’ll need at least some contact information. This includes things like your full name, email, phone number, and your address. Never include sensitive information like a social security number or your credit card. Legitimate scholarships will never ask you for that information. If they do, it’s probably a scam. Good for you, there are lots of websites that’ll find you legitimate scholarships. Here are some of our favorites:
Fastweb
Fastweb will ask you to create a profile that it’ll use to find the best scholarships for you. You can even be matched with scholarships just for being a medical student. Plus, they’ll send you email reminders so you can stay on top of your scholarship applications.
Chegg
This one may be a surprise as Chegg is mainly known for homework help. But, they offer scholarships, too! Not only that, but they also offer tutors who can help you with your scholarship essays. Chegg is a win-win!
Niche
This is another website that uses a matching process, so you’ll be asked to create a profile, too. Besides all the scholarships they offer, they also offer regular no-essay scholarships. These repeat throughout the year so you’ll have plenty of chances to enter.
These are just some of the different websites you can use, but there are so many others.
What Should I Do If I Can’t Get Scholarships?
If you can’t find scholarships to help fund your medical degree, there are other places you can get money from. First off, fill out your FAFSA. This will sign you up to potentially receive grants, work-study, and federal loans. You’ll usually be offered a financial aid package where you can accept or deny each award. After that, you can start looking for private student loans, which Sparrow can help with. Just fill out the Sparrow application to be matched with lenders.
Final Thoughts from the Nest
Pursuing a career in medicine can be extremely fulfilling. Funding it, though, can be a little stressful. That’s why scholarships are so great. It’s money you can use without having to pay it back. If you can’t seem to get any at first, don’t worry. It’s like that with everyone. Just keep on applying. We know that you’ll be able to find some.
The average graduate student borrower leaves school with $71,000 in student debt. This is on top of undergraduate student loans, bringing the average debt total for graduate students to $82,800.
While an exciting new chapter of your life, financing your graduate education may feel overwhelming. Before selecting a loan to pay for graduate school, it’s important to understand what your options are.
Federal and Private Loan Options
Federal Loan Options for Graduate School
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students. Eligibility is not based on financial need.
How much can you borrow in Direct Unsubsidized Loans?
Graduate students can borrow up to $20,500 annually in Direct Unsubsidized Loans. There is a lifetime limit of $138,500.
Direct PLUS Loans
Direct PLUS Loans are available to eligible graduate and professional students as well as parents of dependent undergraduate students. Eligibility is not based on financial need, however, a credit check is required. If you have adverse credit history, you will need to meet additional requirements to qualify.
How much can you borrow in Direct PLUS Loans?
In Direct PLUS Loans, graduate students can borrow up to the cost of attendance minus any financial aid already received.
Private Loan Options for Graduate School
There are a variety of private lenders, such as banks and financial institutions, that work with graduate students. Each individual lender will have its own unique eligibility requirements and borrowing limits. You can check your eligibility across 15+ lenders in one application using Sparrow.
What Makes A Graduate School Student Loan Good?
When borrowing a graduate school student loan, you should review a variety of factors to ensure it’s a good fit for you.
Cosigner vs No Cosigner
A cosigner is an individual who signs onto a loan alongside you. By signing onto the loan, the cosigner takes full responsibility for the loan should you fail to pay it back. Having a creditworthy cosigner can help you secure a lower interest rate and better terms.
Most graduate school student lenders will offer both cosigned and non-cosigned loan options. If you are searching for a student loan on your own, a non-cosigned loan option may be a good fit for you. However, if you do have access to a creditworthy cosigner, having them sign onto the loan may help you score better terms.
A creditworthy cosigner is someone who:
Has a stable income. If you are unable to make payments on your loan for any reason, your cosigner will be responsible for doing so. Make sure that your cosigner is in a position to make those payments if necessary.
Has little to no debt themselves. Again, if you are unable to make payments, you want to be sure your cosigner is in a financial position to make them. Balancing multiple debt payments could make it more difficult for the cosigner to manage yours.
Has a high credit score. A cosigner can help you secure a lower interest rate on your loan if they have a high credit score.
Has a solid debt repayment history. When you add a cosigner to your loan, the lender will evaluate their financial history. Having a solid debt repayment history shows the lender that the cosigner is responsible, and therefore, scores you a lower interest rate.
Minimum Income Requirements
If you are pursuing a graduate education immediately after your undergraduate education, you may not have a full-time income just yet. Many private student lenders require a minimum income to borrow. So, you’ll either need to meet that minimum income requirement or have a creditworthy cosigner who does.
There are also lenders that offer non-cosigned loan options with no minimum income requirement. Be sure to evaluate your options and select the loan that best aligns with your borrower profile.
Interest Rate
Each student loan will have its own unique interest rate and terms. If borrowing a loan with a cosigner, your interest rate will likely be lower. If borrowing a loan without a cosigner, your interest rate will likely be higher. Compare interest rates carefully to select the loan that is best for you.
Repayment Options
Each individual lender will offer a unique set of repayment options. While some lenders will allow you to defer repayment while in school, others will require immediate repayment. For example, MPOWER borrowers are required to make interest-only payments starting 45 days after loan funds have been disbursed. On the other hand, lenders such as SoFi and Sallie Mae offer several repayment options including deferred repayment.
Be realistic about which repayment options would work best for you. Always review your options carefully before selecting a loan.
Our Picks for Graduate School Student Loans
The best student loan will always be the one that works best for you. However, the following are our top picks for graduate school student loans.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering private student loans to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. Brazos is a great option if you live in Texas, have strong credit, and want competitive interest rates.
College Ave’s student loan offering is available for undergraduate, graduate, professional, and career school students, as well as parents of students. It’s best if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans are available to undergraduate, graduate, and professional students. It is best if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey’s student loan offering is available to undergraduate and graduate students. It’s best if you have strong credit and want generous cosigner release and forbearance policies.
MPOWER is an online lender that offers non-cosigned undergraduate and graduate student loans to international, domestic, and DACA students. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Prodigy Finance is an online lender that offers non-cosigned graduate student loans to international students. It is best for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that offers cosigned and non-cosigned undergraduate, graduate, and career training student loans. It is best for students seeking competitive interest rates with a creditworthy cosigner.
SoFi is a strong option for undergraduate, graduate, law, and MBA students, as well as parents looking to fund their child’s education. With competitive interest rates, a diverse set of repayment options, and exclusive member benefits, SoFi is a good fit for borrowers with a strong credit score or a creditworthy cosigner.
How to Apply for a Graduate School Student Loan
To apply for a graduate school student loan:
Check your eligibility. Sparrow allows borrowers to check their eligibility with 15+ lenders in one free application.
Compare loan options. After seeing which lenders you qualify with, we’ll show you your loan options side-by-side. You can evaluate the loan options to see which one you’d like to pursue.
Wait to hear back. After selecting the lender you’d like to pursue, you can submit a formal loan application with them. It can take a few days to a few weeks to hear back from the lender about whether you’ve been approved.
Ensure the funds were disbursed. After your school certifies the loan, the lender will let you know. Then, the money will be sent to your school. Always follow up with your school to confirm that the funds were properly disbursed.
Final Thoughts from the Nest
Going to graduate school is an exciting new chapter. While funding that education can be overwhelming, we’ve got your back.
The most important thing to remember: Always evaluate your loan options carefully. Be sure that the loan you select feels right. If it doesn’t, keep browsing until you find one that does.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
When paying for college, there are two main types of student loans you will find: federal and private. Within these categories, there are several kinds of loans, each designed to cover a different academic program.
Before taking out a student loan, it’s important to understand the broader landscape of your loan options. That way, you can select the loan option that best fits the degree you are pursuing.
The federal government issues federal student loans. Each year, U.S. citizens pay federal taxes, and a portion of these tax dollars are allocated to providing federal student aid programs. Private student loans are issued by private entities such as banks and financial institutions.
Who is eligible for student loans?
To be eligible for federal student loans, you must:
Demonstrate financial need
Be a U.S. citizen or eligible noncitizen
Have a valid Social Security Number
Be enrolled or accepted for enrollment in an eligible degree or certificate program
Be enrolled at least half-time to be eligible for Direct Loan Program funds
Maintain satisfactory academic progress in college or career school
Show you’re qualified to obtain a college or career school education
Whether you are eligible for a private student loan will depend on the lender’s eligibility criteria. Each individual lender will have its own eligibility requirements.
How much can you get in student loans?
The amount you can borrow in both federal and private student loans depends on a variety of factors such as:
The type of loan
Your year in school
Your school’s cost of attendance
Types of Federal Student Loans
Federal student loans come in a variety of forms depending on your year in school and your financial need.
Direct Subsidized Loans
Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. While in school, the Department of Education pays the interest on Direct Subsidized Loans. So, the amount you receive in a Direct Subsidized Loan will be exactly the same the day you graduate — no interest will have accrued in the meantime.
Who is eligible for Direct Subsidized Loans?
Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. Direct Subsidized Loans will cover up to 150% of your program length. So, if you are pursuing a traditional 4-year program, you can only receive Direct Subsidized Loans for 6 years (4*150%).
How much can you get in Direct Subsidized Loans?
Your university will ultimately determine your financial need, which in turn dictates how much you are eligible to borrow in Direct Subsidized Loans. For example, if your school’s cost of attendance was $20,000, and you received $15,000 in scholarships, your financial need would be $5,000. You would be eligible for up to $5,000 in Direct Subsidized Loans.
There are, however, limits to how much you can borrow based on your year in school.
Undergraduate Year 1 Annual Limit: $3,500
Undergraduate Year 2 Annual Limit: $4,500
Undergraduate Year 3 Annual Limit: $5,500
Lifetime Subsidized Loan Maximum: $23,000
So, even if your financial need was $5,000, but you are in the first year of your undergraduate education, you would only be able to receive up to $3,500 in Direct Subsidized Loans.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are available to undergraduate and graduate students, regardless of financial need. Unlike Direct Subsidized Loans, the Department of Education does not pay the interest on Direct Unsubsidized Loans while you are in school. Interest will begin to accrue after the loan is disbursed.
Who is eligible for Direct Unsubsidized Loans?
Direct Unsubsidized Loans are available to both undergraduate and graduate students. You do not need to demonstrate financial need to receive a Direct Unsubsidized Loan.
How much can you get in Direct Unsubsidized Loans?
Individual universities will determine how much you can borrow in Direct Unsubsidized Loans based on your cost of attendance, any aid you’ve already received, and your dependency status.
To calculate your maximum borrowing eligibility for Direct Unsubsidized Loans, your university will first take into account any Direct Subsidized Loans you’ve already been offered. Then, the university will evaluate your dependency status and determine your eligibility with these factors in mind.
Year in School
Dependent Status Students
Independent Status Students
Undergrad Year 1 Annual Limit
$5,500
$9,500
Undergrad Year 2 Annual Limit
$6,500
$10,500
Undergrad Year 3 Annual Limit
$7,500
$12,500
Graduate/Professional Degree Annual limit
N/A
$20,500
Subsidized
$31,000
$57,500 for undergrads
$138,500 for graduate/professional students
Let’s use an example to illustrate this.
Brandon, a 3rd year undergraduate student, filed as a dependent. ($7,500 annual limit)
Brandon received $2,000 in Direct Subsidized Loans. (minus $2,000)
Brandon is eligible for up to $5,500 in Direct Unsubsidized Loans. ($7,500 – $2,000 = $5,500)
$7,500 (Brandon’s overall Direct Unsubsidized Loan eligibility) – $2,000 (What Brandon already received in Direct Subsidized Loans) = $5,500 (The maximum amount Brandon is eligible to borrow in Direct Unsubsidized Loans).
Note: This does not guarantee that Brandon will receive $5,500 in Direct Unsubsidized Loans. This is simply the maximum amount Brandon is eligible to receive.
PLUS Loans
PLUS loans come in two forms: Grad PLUS and Parent PLUS. Grad PLUS loans are available to students pursuing graduate or professional degrees. Parent PLUS loans are available to parents of dependent undergraduate students.
Who is eligible for PLUS loans?
To be eligible for a Grad PLUS loan, you must:
Be enrolled at least half-time in an eligible graduate or professional school
Pass a credit check
Meet the same eligibility requirements needed for federal student aid
To be eligible for Parent PLUS loans, you must:
Be the biological or adoptive parent of a student enrolled in school at least half-time
Be a citizen or eligible non-citizen
Pass a credit check
Meet the general eligibility requirements for federal student aid
How much can you get in PLUS loans?
PLUS loans can cover the entire cost of education minus any other financial aid you’ve already received.
For example, if your cost of attendance was $50,000, and you previously received $20,000 in additional aid, you would be eligible to borrow up to $30,000 in a PLUS loan.
This is true for both Grad PLUS and Parent PLUS loans.
Direct Consolidation Loans
A Direct Consolidation loan is available to you after you’ve graduated, left school, or dropped below half-time enrollment. A Direct Consolidation loan allows you to combine multiple federal student loans into one loan. This can simplify your payments, but there are certainly various pros and cons to weigh.
Who is eligible for a Direct Consolidation loan?
To be eligible for a Direct Consolidation loan, you must have graduated, left school, or dropped below half-time enrollment. Your loans must be in repayment or in their grace period.
Your federal student loans must also be one of the following types:
Subsidized Federal Stafford Loans
Unsubsidized and Non-Subsidized Federal Stafford Loans
PLUS loans from the Federal Family Education Loan (FFEL) Program
Supplemental Loans for Students
Federal Perkins Loans
Nursing Student Loans
Nurse Faculty Loans
Health Education Assistance Loans
Health Professions Student Loans
Loans for Disadvantaged Students
Direct Subsidized Loans
Direct Unsubsidized Loans
Direct PLUS Loans
FFEL Consolidation Loans and Direct Consolidation Loans (only under certain conditions)
Federal Insured Student Loans
Guaranteed Student Loans
National Direct Student Loans
National Defense Student Loans
Parent Loans for Undergraduate Students
Auxiliary Loans to Assist Students
Generally, you cannot consolidate a Direct Consolidation loan unless you are adding an additional loan into the consolidation.
How much can you consolidate with a Direct Consolidation loan?
Currently, there are no set limits on the amount you can consolidate with a Direct Consolidation loan.
Types of Private Student Loans
Private student loans are provided by private entities such as financial institutions and banks. They come in a variety of forms, designed for nearly all academic programs.
Undergraduate Student Loans
Private undergraduate student loans cover undergraduate degrees such as Associate’s and Bachelor’s degree programs.
Who is eligible for private undergraduate student loans?
Each individual private lender will have its own unique set of eligibility requirements. In general, most private lenders require you to:
Attend an eligible, degree-granting program
Be a U.S. citizen, permanent resident, or eligible noncitizen
Meet certain income requirements
Meet certain credit history requirements
There are a handful of private lenders that offer future-income-based student loans. These loans allow you to skip over most financial criteria many lenders require. To check your eligibility with 15+ top lenders, start here.
How much can you get in private undergraduate student loans?
How much you’re able to borrow in undergraduate private student loans depends on the lender you’re borrowing from. Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received.
For example, if your school’s cost of attendance is $30,000, and you accepted $5,000 in scholarships, you would be eligible to borrow up to $25,000 in private undergraduate student loans.
Graduate Student Loans
Private graduate student loans cover graduate degree programs such as Master’s programs.
Who is eligible for private graduate student loans?
Similar to undergraduate student loans, each individual private lender will have its own unique set of eligibility requirements for graduate student loans. In general, most will require you to meet the same set of criteria as you would need to for undergraduate student loans.
How much can you get in private graduate student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Medical School Student Loans
Medical school student loans cover traditional school expenses such as tuition, room and board, and fees. Most medical school student loans also offer benefits designed specifically for medical school students such as residency deferment, interest-only repayment options for residency, and longer repayment periods to make payments smaller during residency.
Who is eligible for medical school student loans?
Each individual private lender will have its own unique set of eligibility requirements for medical school student loans. In general, most will require you to be enrolled in an eligible program and completing medical school or residency at least half-time.
How much can you get in medical school student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Law School Student Loans
Law school student loans cover traditional school expenses such as tuition and fees. But, law school loans can also support law students during the period of time between graduating and passing the bar exam.
Most law students spend roughly three months studying for the bar, and most do it right after graduation. As a recent graduate, many law students take out an additional student loan to pay for the bar course itself and living expenses for those three months of studying.
Who is eligible for law school student loans?
Each individual private lender will have its own unique set of eligibility requirements for law school student loans. In general, most will require you to be enrolled in an eligible J.D. program, completing it at at least half-time status. Recent graduates preparing for the bar may also be eligible depending on the lender.
How much can you get in law school student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Dental School Student Loans
Dental school student loans cover traditional dental school expenses such as tuition and fees. Most dental school student loans also offer benefits designed specifically for dental school students such as deferment and flexible repayment options should you choose to pursue a dental residency program.
Who is eligible for dental school student loans?
Each individual private lender will have its own unique set of eligibility requirements for dental school student loans. In general, most will require you to be enrolled in an eligible dental school program, completing it at at least half-time status. Recent graduates pursuing a dental residency program may also be eligible for additional post-graduate student loans to cover costs associated with residency.
How much can you get in dental school student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received. Others have borrowing limits, some reaching $500,000.
Non-Cosigned Student Loans
Non-cosigned student loans are designed for borrowers with little to no credit score.
Who is eligible for a non-cosigned student loan?
If you have at least two years of credit history, you may qualify for a non-cosigned credit-based student loan. If you do not have two years of credit history, you may want to pursue non-cosigned outcomes-based student loans.
While both are non-cosigned options, outcomes-based student loans are ideal for borrowers with no credit history. Most lenders offering non-cosigned loan options base the interest rate and terms you receive on other factors instead, such as your future income potential based on your major.
You must be enrolled in an eligible program and meet basic eligibility requirements.
How much can you get in non-cosigned student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received.
International Student Loans
International student loans are a type of private student loan available to non-U.S. citizens studying in the United States. International student loans can help you cover expenses such as tuition, room and board, books, travel expenses, health insurance, and more.
Who is eligible for international student loans?
Non-U.S. citizens studying in the United States are eligible for international student loans. As with other student loans, you must meet a lender’s basic eligibility requirements to qualify. In general, lender’s look for individuals with a U.S. citizen or permanent resident cosigner, however, there are exceptions.
How much can you get in international student loans?
Most lenders will allow you to borrow up to the cost of attendance minus any other aid you’ve already received.
Refinance Loans
Refinance loans allow you to take out a new student loan, often with better terms and interest rate, to replace your previous student loan(s). By doing so, you may pay less overall by lowering your interest rate or shortening your repayment period.
Who is eligible for a refinance loan?
Each individual refinance lender will have its own unique set of eligibility requirements. In general, most will require you to:
Have graduated or left school
Have attended an eligible, degree-granting program
Be a U.S. citizen, permanent resident, or eligible noncitizen
Meet certain income requirements
Meet certain credit history requirements, usually with a credit score of 650 or higher
Have a debt-to-income ratio of 65% or less
How much can you get in a refinance loan?
Most lenders will allow you to refinance up to your outstanding balance, some reaching up to $500,000.
State Loans
Many U.S. states have private student loan programs available to their residents. The program requirements, borrowing limits, and how it generally functions will vary by state.
Who is eligible for state student loans?
Each individual state will have its own unique set of eligibility requirements that may include:
Specific income limits
Age requirements
Credit requirements
Dependency status requirements
Pursuing college in that specific state
Demonstrating financial need
Demonstrating sufficient academic progress
How much can you get in state student loans?
Each individual state will have its own borrowing limit for state loans.
Institutional Student Loans
Institutional student loans are provided by your college or university. With institutional student loans, the terms are set by the school. Thus, they vary by institution.
Who is eligible for institutional student loans?
Each individual college or university will have its own unique set of eligibility requirements. Schools may, however, require you to meet certain academic requirements such as having a certain GPA.
How much can you get in institutional student loans?
Each individual college or university will have its own borrowing limit for institutional loans.
Final Thoughts from the Nest
There are many different types of student loans. Each one will offer something slightly different, so be sure to compare your options closely.
As a reminder, financial aid should always be accepted in the following order:
When you do arrive at the student loan phase of financing your college education, be sure you understand what all of your options are. To search and compare private student loan offers in one easy application, use Sparrow.
Unfortunately, finding free money for graduate school can be challenging. However, there are options such as grants to help pay for your education.
A grant is a type of financial aid that does not have to be repaid and is typically given based on need. In this article, we’ll talk about the benefits of a grant, eligibility requirements, and how to find a grant for graduate school.
Benefits of a Grant
A major benefit of grants is that the money is free, and you’re not responsible for paying it back unlike a loan. However, there are other long-term benefits of a grant. Receiving a grant could mean less scholarship applications to fill out or less student loans to borrow.
Who is Eligible for a Grant for Graduate School?
For the most part, if you’re a student or will be a student at an accredited university, you are eligible for grants. In order to qualify for federal grants for graduate school, you will need to demonstrate financial need by filling out the FAFSA. Some federal grants, such as the Iraq and Afghanistan Service Grant, are available to students under certain circumstances.
Depending on the award, the provider might ask for a minimum GPA, type of degree program, or research goals.
What is the Difference Between a Grant and a Fellowship?
Fellowships are also a great source to earn money for graduate school. They offer free money that you can use to pay for your education, similar to grants. Fellowships don’t need to be paid back as well.
However, the difference between a fellowship and a grant is the reason why the money is issued to a student. While most grants require you to demonstrate financial need, fellowships will be based on academic achievement or research.
How to Find Grants for Graduate School
Your best bet in finding grants is through federal and state governments, your school, and professional organizations.
Federal Grants
In order to receive grants from the federal government, you will need to fill out the FAFSA.
You won’t be eligible for the Pell Grant since that grant is exclusively for undergraduate students. However, there are a few other federal grants you should consider.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant offers a $4,000 per year grant for a graduate student. In order to be eligible, you must agree to teach full-time for four school years.
If you like to travel and want to learn more about the world, consider the Fulbright program and the grant they offer. The grants are administered by the U.S. Department of State’s Bureau of Educational and Cultural Affairs. These grants are intended for individual study or research projects or for English Teaching Assistants Programs. In order to be eligible, you must hold a bachelor’s degree and have sufficient language skills fit for your chosen country.
State Grants
Different states offer grants that cover a graduate education. They will vary and have different requirements beyond financial need, such as participation in a certain field of study. Reach out to your state’s department of education or education agency to learn more about the grants they might offer.
School Grants
Universities may offer grants to students pursuing a graduate education. Some universities will require that you demonstrate financial need. Others might automatically consider you for grants and other types of assistance. Check your university’s graduate school to learn more about the grants offered for your field of study. Don’t hesitate to ask the school’s financial aid office as well.
Professional Organization Grants
Professional organizations or associations are another great source for grants. Professional organizations usually seek to advance a particular profession or the interests of their members. Because of this, members pursuing a graduate degree could be eligible for grants. If you’re interested in a particular organization, such as the American Bar Association or the American Marketing Association, check their website to see the resources that they offer.
Final Thoughts
Graduate school can be very pricey, but it can also be an important tool for social mobility. Fortunately, there are many ways to find financial assistance. See what grants you qualify for before applying for student loans. Remember, exhaust all your options before turning to private student loans.
First off, congratulations on graduate school! That’s an amazing accomplishment. Getting accepted to graduate school might mean having to go through the loan process. Again.
Now, they’re graduate student loans, which can sound more intimidating. The good news is they don’t have to be. The better news? This article will help you on the topic of graduate student loans. So, let’s get into it.
What Is A Graduate Student Loan?
A graduate student loan is a type of loan that pays for school expenses that go with a graduate degree program. Usually, you can get a lot more money with graduate loans than you would with undergraduate loans. That’s definitely a perk. On the flip side, most graduate loans will require a credit check of some kind, regardless of the type of loan. No matter the type of loan you decide on, it’s important to secure free aid like scholarships and grants first. It’ll help you out a lot in the long run.
Now, there are two basic types of graduate loans that you can get.
Federal Graduate Loans
Federal student loans are a great source of loan money for many reasons. For one, you’ll get benefits like flexible repayment options and possible loan forgiveness. Additionally, you’ll also get a six-month grace period after you graduate.
There are federal student loans for any kind of student, including graduate students. The two types of federal loans you’ll be able to get as a graduate student are Direct Unsubsidized Loans and Direct PLUS Loans.
Direct Unsubsidized Loans are available to undergraduate, graduate, and professional students. There is no need to prove financial need. As long as you are enrolled in a school or program at least half time, then you are eligible to receive this. The most amount of money you can borrow each year as a graduate or professional student is $20,500. The interest rate, as of April 2022, is 5.28%.
Direct PLUS Loans are available to graduate or professional students. They’re also available to parents of dependent, undergraduate students. As a grad student, you’d be getting a grad PLUS loan. There is a credit check for this type of federal loan, but it’s only to check for adverse credit history. An adverse credit means things like bankruptcy, delinquent accounts, and defaults. As long as you don’t have any of that, you’re good. If you do have an adverse credit history, you’ll probably need to add a cosigner to qualify. The most that you can borrow with your grad PLUS loan is the cost of attendance minus other aid received. The interest rate, as of April 2022, is 6.28%.
Private Graduate Loans
There are many lenders that offer student loans for graduate students. Like undergraduate private loans, each lender will have their own terms. So, it’s important to look around and inform yourself of the terms of each loan option.
You’ll want to pay close attention to aspects such as the repayment terms, interest rates, and fees. Always ask lenders if they offer borrower protections or loan perks such as an autopay discount. An autopay discount might lower your interest rate if you sign up for auto payments.
Because private lenders give out the money, there will be a lot more requirements. Some factors considered are your credit score, current income, and potential future earnings. Your current income, especially, may play a big role. You may have to start repayment as soon as it’s disbursed, which is when you’re in school. So, you want to make sure that you afford it.
The maximum amount you can borrow depends on each lender. Generally, you want to only borrow any remaining cost you have after accepting other forms of aid. And, always be conscious of how much you are borrowing. Remember that while borrowing $10,000 for one year may not seem like a ton, you will likely need to borrow following years as well. Make sure you are thinking of your overall debt, not just the amount you’re borrowing each individual year.
How to Apply for Graduate Student Loans
Each type of graduate loan has a different process when it comes to applying. For federal student loans, you have to fill out the FAFSA. Fill it out as soon as it’s available on October 1st. The earlier you fill it out, the better your chances are of getting money. The FAFSA alone is enough to apply for Federal Direct Unsubsidized Loans. Federal Direct PLUS Loans, on the other hand, require an extra application. Check with your school for the application and information on eligibility requirements.
Now, for private student loans, you’ll generally have to apply with each lender individually. I know. I know. It’s a lot of work. Lucky for you, Sparrow helps make this process easier. With Sparrow, you can fill out a single application. This will match you to what loans you qualify for at 15+ top lenders. Save the ones you like and compare them before deciding. Using Sparrow will save you a lot of time, money, and sanity. All you have to do to get started is create a free account.
Final Thoughts from the Nest
This phase of your educational career is no doubt exciting and stressful all at the same time. Let us help you by providing guides such as these and making the loan searching process easier. Take a deep breath, create an account, and let some of the weight fall off your shoulders.
Going to graduate school is a great opportunity to secure higher earnings. It could also help you ascend to a higher position at a company. However, grad school is expensive.
Did you know that there are scholarships available designed for graduate education?
In this article, we’ll talk about the importance of a scholarship, the requirements for these scholarships, and the best resources to find graduate school aid.
Benefits of a Scholarship
Aside from being free money, scholarships have huge benefits. First of all, they help reduce the amount you need to take out in student loans. It can also help you focus on your studies more by reducing the need to get a job to support your graduate education.
Earning a scholarship can be difficult to accomplish. Because of this, it could be a great addition to your resume if you earn a scholarship, especially for graduate students.
What GPA Do You Need to Get Graduate School Scholarships?
It depends on the scholarship provider, but typically a 3.5 GPA would be a minimum requirement for securing a graduate school scholarship. This is important if you’re applying for a scholarship that considers academic achievement. Other scholarships might require a 3.0 GPA if they’re based on aspects such as community service or even financial need.
Keep this in mind when applying for scholarships. The goal of the scholarship can help you determine if it requires a higher GPA. For example, if the scholarship is meant to celebrate students in STEM, you might need at least a 3.5 GPA to be eligible.
How to Apply for Graduate School Scholarships
There are multiple routes to take in order to get a scholarship for graduate school. For some graduate programs, you will be automatically considered for merit-based scholarships. Other programs might have separate applications to apply for scholarships.
Before applying, think about the requirements they have for the application. Many will require an essay or personal statement in-line with the goal of the scholarship. A resume might be required because it will highlight campus involvement or community service. Every provider will have different requirements. It’s important to do your research and find scholarships that are fit for you.
How to Find Graduate School Scholarships
In order to apply for a graduate school scholarship, you have to actually find said scholarships.
Reach out to your university’s financial aid office to see what scholarships, or even grants and fellowships, are available for you. Once you’ve done your research at your university, it’s time to find scholarships elsewhere.
Here are a few resources you can use to start your grad school scholarship hunt.
Professional Organizations
If you’re passionate about your field of study, joining a professional association could have many benefits. A professional organization offers exclusive resources to members passionate about those career interests. Such resources are scholarships for undergraduate or graduate students in the association. For example, theAmerican Bar Association awards scholarships to first-year law students from underrepresented communities. Find a professional association and learn about the scholarship opportunities they offer.
Search Engines
Search engines are a great way to find scholarships available for you. You can use them to find awards based on a degree program of interest such as an MBA, law school, or a medical program. You can even search for scholarships based on the amount they’re providing. This tool can help you prioritize the ones that you believe will benefit you the most.
GoGrad helps you find scholarships for graduate school. The platform has specific categories for LGBTQ students, military veterans, women, and students pursuing an MBA. GoGrad also gives you a timeline of financial aid for graduate school, helping you stay on track as you apply for scholarships.They also debunk common misconceptions about scholarships and provide educational resources.
Sallie Mae is one of the most recognizable private student loan companies. Did you know that they also offer free scholarship resources? Sallie Mae offers a free Scholarship Search tool for both undergraduate andgraduate students. You can easily create a profile that finds the best scholarships based on your field of study, skills, and interests. Plus, by registering for the free tool, you could have a chance to win one of their $1,000 monthly sweepstakes.
Similar to Sallie Mae’s Scholarship Search tool, Scholarships.com matches you with scholarships. This tool also organizes and filters scholarships for you by dollar amount or due date. This can help you prioritize certain scholarships before others.
When you create a free account with Chegg, you will have access to over 25,000 scholarships. You can also find tutors to review a scholarship essay if you need someone to look through it.
Fastweb provides access to over 1.5 million scholarships through the search tool. The tool also personalizes your options when you make a free profile and sends you notifications when you’re matched to a new scholarship.
Niche not only helps students find the right universities and programs, but it also provides access to thousands of scholarships through their search tool. The tool matches applicants with scholarships that fit their backgrounds and interests. As a great bonus, many of the Niche scholarships are “no-essay,” meaning that an essay is not required to apply.
Cappex also matches students with scholarships. They even segment scholarships by the current level of undergraduate enrollment. When you create a free account, you will be entered for a chance to win a $1,000 Cappex Easy Money Scholarship. With over a billion dollars in scholarships on the platform, there are bound to be a few scholarships fit for you.
Aside from scholarship matching, Scholarships360 offers a section dedicated to graduate scholarships. They even offer tips to pay for your education. You can find the top scholarships of the year for graduate programs such as law school, medical school, or an MBA.
Bold offers exclusive scholarships only found on the platform. They also match you with scholarships after making a free profile. By creating a profile, you can showcase your experiences and skills to the scholarship panels. Plus, everything is done on Bold, meaning that you can manage your scholarships, check the status, and even have funds applied to your tuition right through their website.
Final Thoughts from the Nest
Applying for financial aid as a graduate student can be hard. There aren’t the same amount of resources available for graduate students as there are for undergraduate students. However, there are so many ways to secure the funds you need to pay for your graduate studies. Scholarships are a great option to consider before deciding to take out a student loan. Reach out to your university’s financial aid office and check out all these search engines for scholarships fit for you!
If you need to take out private student loans once you’ve exhausted all other options, consider usingSparrow. Sparrow matches you with private student loans fit for your needs and your educational goals. You can even compare loans side-by-side, helping you determine which loans work best for you.
Okay, so you probably already know about federal and private student loans, right? Well, let us introduce you to another type of loan: the institutional loan. Like with any type of loan, institutional loans have their own little ins and outs that you need to know about. Before we go over them, though, let’s answer an important first question.
What Is An Institutional Loan?
An institutional loan is a type of private student loan where the lender is a college or institution. These are only offered to students already enrolled in the school.
Institutional loans function a little differently than traditional private student loans. For example, there are no standardized interest rates or terms across institutional loans.
This means that the terms of each loan will vary a lot more than usual from school to school. This includes repayment terms, and financial, cosigner, and eligibility requirements. The differences in these terms can be impactful. For example, some schools may not have flexible repayment plans, or they may not have as many borrower protections. Talk with your school’s financial aid office to understand all the terms and conditions clearly. Those terms and conditions should be ones you agree to and can follow.
Do Institutional Loans Have Interest?
Yes. Like with any loan, lenders have to make money somehow. They do this by charging interest, which is the amount of money you pay for borrowing the loan. When it comes to the interest rate, each school will set its own. Generally, though, long-term institutional loans can range anywhere from 3% to 10%. Short-term institutional loans will usually be close to around 1%. If you’re particularly lucky, you may go to a school that offers a 0% interest rate.
Should I Get An Institutional Loan?
The answer to this question is completely up to you. As always, you want to look at other forms of aid first. Start with free aid like scholarships and grants. Then, look at federal loans. While you do have to pay back federal loans, they often come with a lot of benefits and flexible plans. After that, you can start looking for private loans like institutional loans. These should only be considered after you’ve accepted other forms of aid.
When taking out loans, you can typically borrow up to your school’s cost of attendance minus any financial aid you’ve already received. Try to limit what you borrow to what you think you can reasonably pay back.
How Do I Apply for An Institutional Loan?
To be considered for an institutional loan, you’ll need to have filled out the FAFSA. Also, remember that you can only get these types of loans at the school you’re enrolled in. Go through the enrollment process if you haven’t otherwise and you know what school you’re going to already. Finally, talk to your school’s financial aid office. They’ll inform you on things like documents you need, any requirements you have to meet, and the terms of the loan.
Final Thoughts from the Nest
As with any student loan, institutional loans can be a great help. But, they’re not the only type of private student loans. Always compare several student loan options prior to accepting any one offer. Other private lenders may have great loans to offer you that match what you need.
And, you don’t have to scour the internet to find them. When you’re ready to compare private student loan offers, fill out Sparrow’s application to get matched with lenders. Then, save the ones you’re interested in and compare them before making a decision. It’s that easy.
Paying back your student loans can be a hassle. Do you know what can make them less of a hassle? Refinancing! Maybe you’ve heard that term before but aren’t actually sure what it means. Let’s go over it.
What Does It Mean to Refinance a Student Loan?
When you refinance your student loans, you’re agreeing to let a lender pay off your current loans. You’ll then get a new private loan to pay your new lender back. This new loan often comes with better terms than your first loan. So, refinancing can help you reduce your monthly payment or interest rate.
Which Student Loans Should I Refinance?
You can refinance both your private and federal student loans. When you refinance, you’re essentially combining your loans into a new, private loan. If you have federal student loans and you refinance them, you’ll lose out on the benefits that come along with them. You’ll give up benefits like flexible repayment plans and possible loan forgiveness.
For example, the government recently extended the loan repayment pause through September 1st, 2022. This repayment pause, though, is only for federal student loans. Private student loans aren’t eligible. Refinancing now would mean having to start making payments again. If you’re planning to take advantage of any of the benefits of federal student loans, then refinancing may not be a good option.
Refinancing private student loans, though, is a different situation. It’s commonly agreed that refinancing private student loans can be a good move. If your financial situation has improved since you first took out the loan, you probably qualify for better terms. To qualify for better terms, focus on having a good credit score and steady income. A good credit score is at least 670 or higher. A steady income is enough to support your current lifestyle plus the loan payments. If this sounds like you, then refinancing can be a great financial move. Securing better terms and a lower interest rate can save you a lot of money in the long run.
You also want to think about how much of the term or balance is left. If your outstanding balance is low, then refinancing might not be the best move. Even if you can get a lower monthly payment, you might be extending the life of your loan. This can make you pay more interest over time.
Pros and Cons of Student Loan Refinancing
As you can see, deciding to refinance is a personal decision. While for some people it’s a good idea, for others it might not be. This can be for different reasons.
Pros
Refinancing your loan will usually get you better terms. Most people can get a lower interest rate or monthly payment. This helps out a lot because it can help you pay off your student loans faster and save money in the long run.
When you refinance your loans, you may also have the option to consolidate. If you choose to refinance and consolidate, you’re basically combining your loans into a new one. This makes managing your monthly payments easier. Instead of having various payments, you’ll have one.
Additionally, if you have a cosigner, refinancing your loans can release them.
Cons
Refinancing when you have a cosigner can be a good idea. But, refinancing when you have federal loans might not be. By refinancing, you’re going to be giving up federal benefits, which can really come in handy. Currently, the loan repayment pause is helping out a lot of people. But, it’s only available for federal student loans. If you do refinance, you have to be sure you won’t need the benefits. Finally, if refinancing gets your loan term extended, you’ll end up paying more. Even if the extension does lower your monthly payment, you’ll pay more in interest over time.
Final Thoughts from the Nest
Refinancing can be a good move for a lot of people. The key is taking an honest look at your situation and seeing if it’s the right move for you.
Has your financial situation improved? Do you think you’ll be needing to take advantage of the benefits of your federal student loans? How much time is left until you’re fully paid off? These are all questions you want to ask yourself before you decide to refinance.
When you’re ready, use Sparrow to help you compare student loan refinance options. Fill out the Sparrow application to get matched with what you qualify for with 15+ lenders. You can even save the ones you’re interested in and compare them before making a decision.
Qualifying for student loans on your own is already hard because chances are you have too limited of a financial history. Now, imagine that you don’t have a cosigner to help with that. It’s even harder. Let’s go through how to find the best student loan for people without a cosigner:
What Is A Cosigner?
Before getting into it, let’s define what a cosigner is and who that can be. A cosigner is someone who agrees to be legally and financially responsible for the loan, just like you. In the event that you can’t make your monthly payment, your cosigner will have to handle it. That’s why it’s important for your cosigner to be someone you can trust and who has good finances. This means having a good credit score and a steady income. They don’t even have to be a parent or family member. Your cosigner can be a friend or someone else you trust.
But if you’re reading this, chances are you weren’t able to find someone who is both willing and able to be a cosigner for you. In that case, you want to look for non-cosigned student loans.
Yes! You can get both federal student loans and private student loans without a cosigner. Let’s do a quick overview of how you can do so with each.
Federal Student Loans
Most federal loans don’t require a cosigner, so they’re a great option if you don’t have one. Most students need a cosigner because they usually don’t meet the minimum credit score. However, federal student loans don’t look at your credit score. So, there’s not much need for a cosigner in most cases. Normally, as long as you’re enrolled in college and have filled out the FAFSA, you’ll be eligible. An exception to this is the Direct PLUS Loan. To receive a Direct PLUS Loan, they’ll run a credit check for adverse credit history. If you do have an adverse credit history, you’ll need a cosigner to qualify.
There are loans for undergraduate students, graduate students, professional students, and parents of students. They all have their own predetermined, fixed interest rates and loan limits. Federal student loans are especially helpful because they come with benefits. Some of the most notable benefits are flexible repayment plans and loan forgiveness programs. Each loan also comes with a grace period of about six months before you start repayment. Repayment usually starts after graduation.
You can get a private student loan without a cosigner, but it can be a bit harder. There are two ways of doing this. The first is qualifying for a loan by yourself. Because lenders are funding part of your education, they need to be sure that you are a good investment. They do this by setting certain criteria borrowers have to meet. As long as you meet all the eligibility requirements, you won’t need a cosigner. To do this, make sure you have a good credit score. It needs to be at least in the high 600s. Also, verify that you have enough income to support your current lifestyle plus the monthly payment. There are other requirements that will vary from lender to lender. You’ll need to inform yourself of this. But, having good credit and a steady income is a good place to start.
If you are in a position where you think you can qualify on your own, then great! The problem is that’s not everyone. The good news is there are financial institutions that offer non-cosigned student loans. These will also have certain requirements set forth by lenders. They may be easier to meet, so you’ll have a better chance of qualifying. Yet, these loans do tend to have higher interest rates than other private student loans.
With all private student loans, the terms are going to be different depending on the lender. Typically, though, they’ll have higher interest rates than federal student loans. Private student loans may have less flexible repayment options or borrower protections. Before agreeing to accept a loan, make sure you know the:
Assuming you’ve already accepted free aid (scholarships and grants), then you’ll first want to complete the FAFSA. If you haven’t, then this is your sign to go apply for some free aid right now. Completing the FAFSA allows you to apply for federal student loans. After you’ve taken a look at and accepted any federal student loans you may have been offered, you can shop around for private lenders. If you don’t qualify on your own, you’ll want to look for lenders that offer loans without needing a cosigner. Interest rates will probably be higher, but it’s a good option if you still need more money with no cosigner to help.
With all loans, it’s important to look over the terms and conditions carefully. Only use loans to cover the remaining cost of attendance you have after accepting other forms of aid.
Where to Find the Best Student Loans with No Cosigner
To help get you started, here are our best picks for student loans with no cosigner. You can use Sparrow to find the best student loan rates for no cosigner and compare across multiple lenders in minutes.
The Arkansas Student Loan Authority (ASLA) is an Arkansas state entity that provides educational funding for all Arkansas students who wish to attend higher education institutions. ASLA does not require a cosigner, however, you will need a credit score of at least 670 to qualify. ASLA is a great option for Arkansas students.
Ascent is an online lender that offers educational funding for students. They offer three types of student loans: a traditional cosigned loan, a non-cosigned credit-based loan, and a non-cosigned outcomes-based loan. Collectively, the three options provide a great selection for those who do not have a cosigner available, are international or DACA students, or have lower credit scores.
Brazos is a non-profit lender offering educational funding through private student loans available only to Texas Residents. They offer a wide range of loan options, covering undergraduate, graduate, MBA, law, medical, dental, veterinary, and doctoral degree programs. While you can qualify for a loan with Brazos without a cosigner, their eligibility criteria is fairly strict. To qualify, you must have a credit score of 720 or higher and an income of $60,000+. Brazos is a great option if you live in Texas, have a strong credit history, and want competitive interest rates.
College Ave Student Loans offers educational funding for undergraduate, graduate, professional, and career school students, and parents of students. To qualify for a student loan with College Ave without a cosigner, you will need a credit score in the mid-600s. College Ave is a great option if you are seeking a more flexible repayment term that allows you to find a loan that matches your budget.
Earnest’s student loans provide funding to undergraduate, graduate, and professional students. If applying without a cosigner, you’ll need to meet Earnest’s minimum credit score requirement of 650. You will also have fewer options when it comes to repayment, leaving you with either a 5 or 7-year repayment period. Earnest is a great option if you are seeking competitive interest rates, unique borrower perks, and flexible repayment options that allow you to find a loan that matches your budget.
Edly Income-Based Repayment (IBR) Student Loans, originated by Edly’s partner FinWise Bank, provide an alternative loan option for students. Students who are approved for an Edly student loan will not have to make payments while in school. Instead, borrowers make payments after graduation based on their income. Due to the structure of IBR loans, borrowers have a variety of benefits when it comes to repayment. An Edly IBR loan is best if you are seeking a loan option with no cosigner, competitive repayment terms, and flexible repayment options.
Funding U Funding U is an online lender that focuses exclusively on undergraduate students with no cosigner. Rather than looking at your credit score or income, Funding U looks at non-traditional metrics such as your school, major, GPA, and estimated future earnings to assess your creditworthiness. Funding U’s student loan is best if you are a high-achieving undergraduate student with limited credit history and no access to a creditworthy cosigner.
LendKey is an institution that offers educational funding to undergraduate and graduate students. By connecting borrowers with a network of 100+ lesser-known credit unions and community banks, LendKey allows you to work with smaller lenders with low rates and good customer service, rather than traditional lending institutions. LendKey has a proprietary scoring model that assesses your creditworthiness by looking at standard metrics such as your credit score in combination with non-traditional metrics such as your GPA and major. This offers a bit of flexibility for those applying without a cosigner. LendKey is best for students who want a variety of options, competitive interest rates, and generous forbearance policies.
MPOWER is an online lender that offers educational funding to international, domestic, and DACA students. They offer non-cosigned undergraduate and graduate student loans. It is best for international students and DACA students who don’t have a credit history and can’t access a qualified cosigner.
Nelnet Bank offers private student loans for undergraduate, graduate, MBA, law, and health professional students. While you can qualify for a loan with Nelnet Bank without a cosigner, their eligibility criteria is fairly strict. To qualify, you will need a credit score of at least 680 or higher and an income of $36,000. It’s best if you are seeking competitive rates, a variety of repayment terms, and a flexible forbearance policy.
Prodigy Finance is an online lender that provides funding to international students. They offer non-cosigned graduate student loans. They’re a good option for international students who don’t have a credit history and can’t access a qualified cosigner.
Sallie Mae is an online lender that provides educational funding to students. They offer cosigned and non-cosigned undergraduate, graduate, and career training student loans. To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They’re a good option for students seeking competitive interest rates and flexible repayment options.
SoFi began offering private student loans in 2019 and has quickly become a strong option for undergraduates, graduates, law and MBA students, and parents looking to fund the cost of their child’s education. They do not disclose their minimum credit requirements for student loans, so while you may be able to get a loan without a cosigner through them, you may need a higher credit score to do so. Nonetheless, if you do qualify, SoFi will offer you competitive interest rates, a diverse set of repayment options, and exclusive member benefits.
Final Thoughts from the Nest
Shopping for student loans can be a pain, especially if you don’t have a cosigner. The good news is that it doesn’t have to be! After accepting other forms of aid, fill out the FAFSA and consider federal loans first. If you still need money after that, use Sparrow to help you look for private student loans. This will make your student loan experience a lot easier. Happy loan shopping!
After graduating from college, you may leave school with more than one student loan. If juggling more than one loan feels overwhelming, a Direct Consolidation Loan might be a good option for you.
In this article, we’ll talk about what a Direct Consolidation Loan is, the pros and cons, and how to get a Direct Consolidation Loan.
What is a Direct Consolidation Loan?
A Direct Consolidation Loan allows you to combine multiple federal student loans into a single loan with a fixed interest rate.
For private student loans, something similar exists but with a different name: student loan refinancing. Refinancing allows you to convert private and/or federal student loans into one private loan. See below for a list of the best student loan refinance rates:
The latest rates from Sparrow’s partners
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Pros and Cons of Getting a Direct Consolidation Loan
It’s important to weigh the pros and cons of a Direct Consolidation Loan before deciding to move forward. Sure, having to make a single monthly payment rather than making multiple payments a month toward your student loans sounds neat. However, there are more things to consider.
Pros
When you consolidate your student loans, you may be eligible for lower monthly payments because the repayment term will probably be longer.
Consolidating a loan could also open up new repayment options. Repayment plans for Direct Consolidation Loans include:
Standard repayment plan
Graduate repayment plan
Extended repayment plan
Income-contingent repayment
Pay As You Earn (PAYE)
Revised Pay As You Earn (REPAYE)
Income-Based Repayment (IBR) plan
Finally, when loans are consolidated, the interest on the consolidated loan is simply the average of the old loans’ interest rounded to the nearest eighth of a percent. This means that the interest rate on a consolidated loan could be higher or lower than the initial interest rate on each individual loan.
For example, let’s say you have three loans. One loan has a 3.4% interest rate, and the other two have a 5% interest rate. Consolidated, the interest rate would be 4.47%, better than 5% interest.
Cons
Consolidating your student loans could mean taking on a longer repayment term, which could also mean more interest paid over time. Not only are you paying for your loan, you’re also paying for the interest that comes with each additional year that it takes to repay your loan.
Sure, your monthly payments will be low because your loan repayment amount is scattered over a longer period of time, but the interest is what will cost you more money the more time it takes to pay your loan back.
Once you consolidate your loans, you won’t get a grace period. The first payment will be due in about 60 days after your loan is disbursed.
Finally, consolidating your loans could make you lose certain benefits, such as reduced interest rates, rebates, and loan cancellation benefits that could be available under certain loans you may have. Whatever benefits you had with those loans leaves if you consolidate them.
How Long Does it Take to Get a Direct Consolidation Loan?
Getting a Direct Consolidation Loan will take time. It typically takes 30-45 days to consolidate your loan, but it can take up to a few months.
However, filling out the Direct Consolidation Loan Application doesn’t take too long. If you are interested in applying for a Direct Consolidation Loan, the process must be completed in one sitting. In general, it takes around 30 minutes or less to complete.
Can Direct Consolidation Loans be Forgiven?
Did you know that consolidating your loans can make you eligible for the Public Service Loan Forgiveness program (PSLF)? The PSLF program is a federal loan forgiveness program for those employed in an eligible public service or nonprofit role. After ten years of making payments on your Direct Consolidation Loans, the Department of Education will forgive your remaining balance.
Keep in mind that due to the COVID-19 pandemic, past payments that aren’t typically eligible for loan forgiveness under this program can now be forgiven through the PSLF waiver. This means that if you have not consolidated your loans but you work for a qualifying employer and have been making payments, those payments can count toward the program if you consolidate your loans by Oct. 31, 2022.
Final Thoughts
Determining whether to consolidate your federal loans can be a tough decision to make. If you are passionate about public service or non-profit work, consolidating your loans might be the best option for you, but if you want to save as much money as possible in the long-term, it might make sense if you don’t do so. Weighing the pros and cons in relation to your situation can ease the concerns of whether or not consolidating your loans is a good option for you.
If you need help choosing the best student loan refinancing option for your private loans, Sparrow is a great place to start. Sparrow’s rate comparison tool allows you to easily compare rates side-by-side to find the best student loan refinance option for you. Get started today!
Whether you’re an undergraduate student looking to attend graduate school or a parent looking to help your child pay for college, looking for ways to fund that education can be difficult. However, parent PLUS loans could make it easy to pay for a college education.
In this article, we’ll break down what parent PLUS loans are and the process of applying for, borrowing, and paying those loans back.
What are the Two Types of PLUS Loans?
Parent PLUS loans are federal loans for students pursuing graduate or professional degrees and parents of undergraduate students. These loans have a fixed interest rate and are unsubsidized, meaning that interest accrues while you are in school.
Parent PLUS
If you are the parent of a dependent student, you could take out a parent PLUS loan to pay for your child’s undergraduate education. These loans are the responsibility of the parent and can’t be transferred over to the student after completing school.
Grad PLUS
Students pursuing graduate school or professional school can consider a grad PLUS loan. These loans are particularly focused on students considering education beyond the undergraduate level. Grad PLUS loans are the responsibility of the student that takes out the loan.
How Much Can You Borrow in PLUS Loans?
Unlike other types of loans, you can borrow as much as the total cost of attendance in PLUS loans, minus any other financial aid received.
For example, if the total cost of attendance for your program is $40,000, and you receive $20,000 in scholarships, $5,000 in grants, and $2,000 in work-study funds, you will be eligible for up to $13,000 in PLUS loans.
However, just because you can borrow that much money, it doesn’t mean that you must do so. PLUS loans should be used to cover the difference once you have exhausted all types of financial aid.
Remember to accept aid intentionally by following this order: Scholarships/Grants (free money) → Work Study (earned money) → Loans (borrowed money)
Do You Have to Pay Back PLUS Loans?
PLUS loans are, well, loans. If you take out a grad PLUS loan, you are responsible for paying that loan back. If you take out a parent PLUS loan, you are responsible for paying for that loan, not your child.
If you consolidate your loan, you qualify for anIncome-Contingent repayment plan.
What if you cannot make payments toward your parent PLUS loan?
You can request a deferment. Graduate students have agrace period of six months after graduating before making a payment. But, since interest accrues, borrowers are responsible for that interest during that period.
If you have parent PLUS loans, you could be eligible for thePublic Service Loan Forgiveness program (PSLF). The PSLF is a loan forgiveness program for those interested in public service. After 10 years’ worth of payments, your remaining balance will be forgiven. To qualify, you will need to consolidate your loan to make it eligible for PSLF forgiveness. You will also need to work for an eligible employer.
How to Apply for a PLUS Loan
There are certain criteria borrowers must meet to qualify for a PLUS loan.
Parent PLUS
In order to qualify, you must:
Be the biological or adoptive parent of a student enrolled in school at least half-time
Pass a credit check. If you cannot pass the credit check yourself, you can use an endorser. An endorser agrees to pay for the loan in case the borrower doesn’t repay the loan. The Department of Education can also approve you through an explanation of circumstances related to your credit history.
Meet general eligibility requirements for federal student aid. You must be a citizen or eligible non-citizen to receive any kind of federal aid.
Personal information (name, address, email address, phone number)
Student information (name, address, social security number, date of birth)
Employer’s information
Grad PLUS
In order to qualify, you must:
Be enrolled at least half-time in graduate or professional school.
Pass a credit check. Just like parent PLUS loans, if you don’t pass the credit check, an endorser could help you secure a loan. The Department of Education can also approve you through an explanation of circumstances related to your credit history.
Meet the same general eligibility requirements needed for federal student aid.
Personal information (name, address, email address, phone number)
Employer’s information
Final Thoughts
Direct PLUS loans are a great way to pay for your college education. It’s important to weigh out what your options are to pay for college before deciding if a PLUS loan is ideal for you or your child.
Studying in the United States is an exciting opportunity. When it comes to funding this new chapter, there are various options including scholarships, grants, and student loans.
While helpful, scholarships and grants may not cover your entire cost of attendance. If so, a private international student loan may be your next step.
To get you prepared, let’s dive into everything you need to know about student loans as an international student.
What are International Student Loans?
International student loans are a type of private student loan available to non-U.S. citizens studying in the United States. International student loans can help you cover expenses such as tuition, room and board, books, travel expenses, health insurance, and more.
Why International Student Loans?
On average, international students pay between $20,000 and $40,000 in tuition per year to study in the United States, according to the International Education Specialists. Note that this is strictly tuition and does not include any additional fees, housing, meal plan, travel expenses, insurance, phone plan, etc.
Because of this, most international students are unable to pay for college out of pocket. Even with scholarships and grants, there still tends to be a remaining balance. To cover that remaining balance, many international students opt for a private student loan.
What Types of Loans are International Students Eligible For?
As an international student, you are more than likely eligible for private international student loans. To be eligible for federal student loans, however, you must meet certain criteria.
Are International Students Eligible for Federal Student Loans?
As an international student, you are only eligible for federal student loans if you are an eligible noncitizen. An eligible noncitizen is someone who:
Is a U.S. national, such as a citizen of American Samoa or Swains Islands
Is a U.S. permanent resident with a permanent residence card or “green card”
Has an Arrival-Departure Record (I-94) from the Department of Homeland Security showing any of the following statuses:
Refugee
Asylum granted
Indefinite parole
Humanitarian parole
Cuban-Haitian entrant
Holds T-nonimmigrant status
If you are an eligible noncitizen, you should complete the FAFSA to apply for federal student aid. Be sure to complete the FAFSA and pursue any federal aid prior to exploring private international student loans.
Are International Students Eligible for Private Student Loans?
If you are not an eligible noncitizen, and therefore ineligible for federal student loans, private international student loans will be your best option.
Most international students will be eligible for a private student loan due to the wide variety of eligibility criteria. Each individual lender will require that you meet a unique set of criteria. Whether you meet that eligibility criteria depends on how the lender chooses to evaluate borrowers.
In general, private student lenders will ask you to provide information such as:
Proof of enrollment
Your student visa
Your tuition bill
Proof of identity
Then, private student lenders will use this information in combination with your credit history to determine your eligibility. Having a U.S. citizen or permanent resident cosigner may help you secure a private student loan.
Importance of a Cosigner
Around 92% of all undergraduate student loans are cosigned. As an international student, most lenders will ask you to have a U.S. citizen or permanent resident cosigner. Having a cosigner will not only help you secure a student loan as an international student, but help you secure better interest rates and terms.
What is a Cosigner?
A cosigner is an individual who would sign onto the loan alongside you. By signing the loan with you, the cosigner takes full responsibility for the loan if you are unable to repay it. While not required, having a creditworthy cosigner can help you secure lower interest rates and better terms on your student loan.
Why Does Having a Cosigner Help?
When you borrow money from a lender, the lender evaluates you based on the level of risk you may bring to them. Lenders want to know that you’re going to pay them back. So, they typically use your credit history to evaluate your past financial performance to determine how likely you are to pay them back, and on time.
If your financial history demonstrates responsibility, you pose less risk to the lender. If your financial history demonstrates irresponsibility, you may be a riskier borrower for a lender.
As an international student, you likely won’t have a financial history in the United States. This makes you challenging to evaluate from a lender’s perspective. Having a U.S. citizen cosigner allows lenders to review their financial history, determine their responsibility, and set the terms of the loan based on that.
So, if you don’t have a financial history in the United States, but your U.S. citizen cosigner does, you can score significantly better rates and terms than if you took on the loan without the cosigner. When possible, you should pursue cosigned loan options before non-cosigned options.
Can You Get Loans Without a Cosigner?
If you don’t have a U.S. citizen cosigner, you aren’t out of luck. You can still get an international student loan without a cosigner. There are lenders that work with students just like you.
First, make sure that you meet the basic eligibility requirements of most private student lenders:
Go to an approved school
Come from a qualifying country
Be enrolled at least half-time in an eligible program
Live in the United States while attending school
Verify your identity
Qualify for a student visa to study in the United States
Each individual lender will have their own unique set of eligibility requirements. Starting with meeting the basics is a good first step.
Can I Get a Student Loan as an International Student with No SSN?
When it comes to private student loans, lenders typically check your credit score. In order to do so, lenders typically need your SSN. As an international student, you likely won’t have an SSN, but don’t worry. There are various lenders that don’t require SSNs.
The easiest way to get a private student loan as an international student with no SSN is to have a U.S. citizen cosigner. If you don’t have access to a cosigner, there are lenders that work with students without cosigners or SSNs.
How Much Can You Get in International Student Loans?
Typically, international student loans will cover up to the cost of attendance minus any other aid you’ve already received. This level of coverage is crucial as an international student because expenses can be higher due to travel and getting settled in your new country.
For example, let’s say you are attending a university for the 2022-2023 academic year with the following expenses:
Tuition: $50,000
Room and Board: $12,000
Campus Health Insurance: $3,000
Books and Supplied: $1,500
Miscellaneous Fees: $750
Transportation: $500
Total Expenses: $67,750
In this example, your total cost of attendance would be $67,750 for the academic year. If you received $30,000 in scholarships, your remaining balance would be $37,750. You would be eligible to borrow up to $37,750 in student loans to cover that remaining balance.
Best Student Loans for International Students
The best student loan will always be the one that works best for you. However, these are our top picks for international student loans.
MPOWER offers non-cosigned student loans to international students. MPOWER does not require borrowers to have a credit history or a cosigner. Instead of using your credit history to determine your eligibility, MPOWER uses information such as your future income potential.
Prodigy Finance offers non-cosigned student loans to international students. Prodigy Finance does not require borrowers to have a high credit score or a cosigner. Prodigy Finance uses information such as your credit history and future income potential to determine your eligibility.
Ascent offers traditional cosigned credit-based loans for international students. With a qualifying U.S. cosigner, international students can be eligible for Ascent private student loans.
College Ave offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with College Ave, borrowers must have a Social Security Number and a U.S. citizen or permanent resident cosigner.
Earnest offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Earnest, borrowers must apply with a creditworthy U.S. citizen or permanent resident cosigner. The borrower must also have a physical address in the United States and a Social Security Number.
Sallie Mae offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Sallie Mae, borrowers must apply with a creditworthy U.S. citizen cosigner.
How to Apply for International Student Loans
To apply for an international student loan, you’ll need to know when you plan to enroll, how much it’s going to cost, and if you’ll have a cosigner.
When you plan to enroll.To apply for a student loan, you’ll need to know where you’re going to school and how much it will cost. Some private lenders have restrictions on what schools they work with and how much they allow you to borrow.
How much it’s going to cost.To apply for a student loan, you’ll need to let the lender know how much you want to borrow. Your school will provide you with the overall cost of attendance, but be sure to factor in additional costs such as travel expenses, transportation, health insurance, and more.
If you’ll have a cosigner.Before applying for a student loan, ask around to see if you can secure a cosigner. If you can, make sure to know all of the individual’s information so you can input it into the lender’s application.
Should I Take Out An International Student Loan?
Whether you decide to fund your education with a private international student loan is ultimately up to you. Before accepting any loan, however, you should exhaust all scholarship and grant opportunities first.
If, after accepting scholarships and grants, you are unable to pay your remaining balance out of pocket, a private student loan may be the next best option. When you’re ready, know that Sparrow has your back the whole way.
Final Thoughts from the Nest
Whether you decide to take out a student loan to fund your international education depends on your unique circumstances. Regardless, know that Sparrow is here to help.
When you’re ready to start the student loan process, start the Sparrow application. Sparrow’s student loan search and comparison process allows you to see all of your student loan options in one place. We’ll even help guide you to the best loan option so you can be confident in your lending decision.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
According to the Institute of International Education, 73% of international students in the United States depend on resources outside the country to pay for their college education. This sentiment is true when it comes to cosigners, too.
Most international students only have access to a cosigner outside the U.S. However, many private student lenders require international borrowers to have a U.S. citizen cosigner.
But what if you don’t have a cosigner in the United States, or a cosigner at all? Don’t worry. There are lenders that work with students just like you. Let’s break down how to get an international student loan without a cosigner.
Options for an International Student Loan Without a Cosigner:
A cosigner is an individual who signs onto a loan alongside a borrower. By signing the loan with you, the cosigner takes full responsibility for the loan if you are unable to repay it.
While not required, having a creditworthy cosigner can help you secure lower interest rates and better terms on your student loan. When possible, you should pursue cosigned loan options before non-cosigned options.
Cosigners are typically a parent or guardian, but if that isn’t an option for you, consider asking a(n):
Extended family member (aunt, uncle, grandparent, cousin, etc.)
Friend
Spouse
That said, don’t ask just anyone. Make sure that you are confident they would be a good cosigner, not just any cosigner.
What Makes an Individual a Good Cosigner
A good cosigner is someone who is trustworthy, financially stable, and creditworthy.
Trustworthy. For someone to cosign your loan, they are doing you a favor. Any missed payment on your end becomes a bad mark on their end, too. So, for the cosigner, they need to be able to trust you to make payments on time and be transparent with them when you can’t.
Likewise, it’s important that you can trust them, too. You may need to talk to your cosigner about a missed payment. Being able to trust your cosigner makes these conversations much easier.
So, there must be a mutual trust between you and your cosigner, regardless of who they are. Only ask someone to cosign your loan if you are confident they would be trustworthy throughout the entire life of your loan.
Creditworthy. A cosigner can provide you with access to better interest rates and terms. On a cosigned loan, the lender looks at your cosigner’s credit history to determine your interest rate. On a non-cosigned loan, the lender is looking at your credit history to determine the interest rate.
If your cosigner doesn’t demonstrate creditworthiness, having them sign onto the loan won’t necessarily help you.Creditworthy cosigners typically have a credit score of 670 or above. In general, the higher their credit score the better.
Financially stable. When signing onto a loan, the cosigner is taking full responsibility to repay the loan should you be unable to repay it. Make sure that the cosigner you select would be able to make these payments if necessary.
Can a Cosigner be a Non-US Citizen?
If you are an international student, your cosigner typically needs to be a U.S. citizen or permanent resident, although there may be a few exceptions. In general, look for a U.S. citizen or permanent resident to serve as your cosigner.
How to Get an International Student Loan Without a Cosigner
If you don’t have a cosigner, don’t worry. There are lenders that work with students just like you. To secure a student loan as an international student without a cosigner, there are a few things you can do.
Meet the Basic Qualifications
To qualify for any international student loan, with or without a cosigner, you need to meet basic eligibility requirements. The basic requirements may include:
Go to an approved school
Come from a qualifying country
Be enrolled at least half-time in an eligible program
Live in the United States while attending school
Verify your identity
Qualify for a student visa to study in the United States
Each individual lender will have their own unique set of eligibility requirements. Make sure you meet this basic list of eligibility requirements first.
Find a Lender that Gives International Student Loans without a Cosigner
MPOWER is an online student lender that offers non-cosigned undergraduate and graduate student loans for international, domestic, and DACA students. When determining your borrowing eligibility, MPOWER will not take into account your credit score. Instead, MPOWER will consider a variety of data points such as your future income potential to determine your creditworthiness.
MPOWER offers student loans with fixed interest rates ranging from 7.52% to 14.98%. MPOWER offers a wide variety of bonuses for borrowers such as their three unique scholarship opportunities:
Global Citizen Scholarship: (1) $5,000 scholarship and (4) $3,000 scholarships.
Women in STEM Scholarship: Scholarships ranging from $2,000 to $5,000 for female international and DACA students at eligible full-time STEM degree programs.
Central America Scholarship Program: Scholarships ranging from $1,000 to $3,000 for students from Central America.
Prodigy Finance is an online student lender that offers non-cosigned undergraduate and graduate student loans for international students. Similar to MPOWER, Prodigy Finance will not take into account your credit score when determining your borrowing eligibility. Instead, Prodigy Finance will consider information such as your future income potential and credit history to determine when making their lending decision.
Prodigy Finance offers student loans with variable interest rates ranging from 7.52% to 12%. Prodigy Finance offers a wide variety of bonuses for international student borrowers such as:
Referral bonuses
Help with moving to the United States
Assistance in securing a visa
Help setting up a United States phone number
Assistance navigating your new home in the United States
To check your eligibility with both MPOWER and Prodigy Finance, complete the free two-minute Sparrow application.
Final Thoughts From the Nest
Navigating the loan process as an international student can be confusing, but Sparrow is here to help. There are high-quality lenders ready to help you through the process of finding a student loan that works for you.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
As an international student, navigating the U.S. financial aid process can be tricky and stressful. You may have questions about whether, as an international student, you are eligible for certain types of aid.
In this article, we’ll talk about federal student aid and the eligibility criteria for international students.
Are International Students Eligible for Federal Student Aid?
American students receive federal and state financial aid through the FAFSA in order to fund their education. In most cases, international students will be unable to receive federal student aid, but there are exceptions. If you are an international student and an eligible noncitizen, you can receive federal aid.
Eligible noncitizens include:
U.S. nationals, such as citizens of American Samoa or Swains Islands.
U.S. permanent residents with a permanent residence card – also known as a “green card.”
Others with Arrival-Departure Record (I-94) from the Department of Homeland Security showing any of these statuses: refugees; asylum granted; indefinite parole; humanitarian parole; Cuban-Haitian entrant.
Those holding T nonimmigrant status
In order to fill out the FAFSA, you must have a Social Security Number (SSN) or an Alien Registration Number (ARN). This is why only U.S. citizens and eligible noncitizens can fill out the FAFSA and receive federal aid through this method.
What International Students Do Need To Know About Federal Aid
Most international students can’t apply for federal aid through the FAFSA. However, some colleges might ask you to fill out a manual version of the FAFSA anyway. Colleges can use this information to determine what kinds of institutional aid students are eligible for.
When it comes to federal aid, there are a few other resources for you such as Fulbright grants for non-U.S. students wanting to study in America. These resources are great if you are a student interested in graduate school, conducting graduate research, or in becoming a foreign language teacher assistant at a college.
Can International Students Get Pell Grants?
The federal Pell Grant program is the largest federal grant program offered to undergraduate students. This grant is designed to support students from low-income families. To qualify for the program, a student must demonstrate financial need by filling out the FAFSA.
What Financial Aid Can International Students Get?
Even though you might not be eligible for federal student aid, there are other forms of aid that can help you cover the cost of attending college.
Institutional Aid
Colleges and universities can decide if international students receive financial aid on their behalf. It’s important to keep in mind that not all colleges and universities will offer aid for international students. Making a list of prospective colleges and making a note of whether or not they offer aid for you will help you find a school that covers your needs.
If the colleges you’re interested in offer financial aid for international students, they might require you to fill out certain forms to determine financial need and eligibility under their guidelines.
Examples of financial aid eligibility forms include:
International Student Financial Aid Application (ISFAA): Individual applications for different schools will be required.
CSS Profile: Participating colleges/universities use this form so you can fill out a one-time form and submit it to select schools.
Manual FAFSA form:. Because the online application requires an SSN or an ARN, the manual version reduces the need for one if you’re an international student. Filling the form out manually helps colleges/universities determine your eligibility for institutional aid.
Aside from need-based aid, some colleges might open up merit-based scholarships to international students that have excelled in their coursework. Reach out to the financial aid office of your prospective colleges to learn more about what their requirements are for these types of scholarships.
Financial Aid From Your Home Country
Many foreign governments might have financial aid programs that help international students study in the United States. Speak to your home country’s department of education to learn more about the types of aid that they could offer you. If possible, speaking to your country’s embassy or consulate in the United States might help you find government-backed scholarships.
Tuition Waivers
A tuition waiver allows you to not pay a portion of all of a college’s tuition for a certain amount of time. Not all schools will grant tuition waivers to international students but there are a significant amount of schools that do. Some schools will set requirements that you’ll need to meet in order to be granted a waiver, such as academic performance or involvement in a fellowship program. Speak to your prospective school’s financial aid office to see if they offer tuition waivers.
Student Loans
If you need further assistance to pay for college, an international student loan might be something worth considering. Lenders can offer assistance based on your individual situation.
Final Thoughts
Applying for financial aid as an American student is already difficult enough. International students face major challenges in order to receive financial aid as well. However, there are schools in the U.S. that understand your needs and will work with you. Speak to the financial aid office of colleges/universities to determine what aid is available to you.
So, you’ve done your research on international student loans. You feel a little better knowing everything that you do now. All that’s left is to apply, but how do you do that? Let’s get into it.
When to Apply for International Student Loans
Before you can officially start applying, you need to have a couple of things worked out first.
Know what program or university you’re going to attend
You’ll need to know what school you’re going to. Usually, you’ll want to be accepted. Remember that your international student loans are going to be private student loans. This means you’ll deal with private lenders who will want to make sure that their money is in good hands. Having a concrete plan for your education tells lenders that their money will be safe with you.
This step is especially important because most international student loans have school restrictions. They’ll only offer loans to students of certain schools. And which schools depend on the lender. Knowing where you’re going will narrow down which loans you qualify for.
Know how much it’s going to cost
Once you’ve picked where you want to go, you need to find out how much it’s going to cost you. There are the typical school-certified expenses such as tuition, books, and room and board. But you’ll also need to account for travel expenses, health insurance, recreation, and more. So, take the time to sit down and calculate the cost of living. Doing this will help you know what type of loan is good for your situation. For example, this will help when it comes to knowing how much you’ll need to take out or if it’s smarter to go for a fixed or variable interest rate.
Before applying for any loan, look for money in other places first. This means applying for scholarships and grants, collecting money you saved on your own or got from your parents or a job, or any other way you can save up money. Loans, while helpful, can take a long time to pay off. They’ll stick with you for years, so you want to take out only what you absolutely need after exhausting other options first.
Know who can be your cosigner
You are more than likely going to need a cosigner. While there are non-cosigned loan options, those have even more restrictions. Additionally, you may get a higher interest rate. So, you’ll want to try and stick to finding a cosigner if you can.
Your cosigner will have to be either a U.S. citizen or a permanent resident and have been in the U.S. for at least 2 years. Additionally, they must have good credit, stable income, and good overall financial status.
How to Apply for International Student Loans
Once you know where you’re going, how much it’ll cost, and who can be your cosigner, you can move on to applying. Here’s some information you’ll need for the application process.
Basic information
You’ll need basic information about yourself, which shouldn’t be too hard. For example, you’ll need your full name, date of birth, address, and contact information such as your phone number. Also, provide the name of the school you’re taking out the loan for. You’ll need proof of enrollment at the school, too.
Financial Information
Lenders will also ask for proof of income and details of your current job or place of employment. Provide your employer’s current contact information. Do the same for other references you have. This includes both phone numbers and emails. Finally, include information about your debts (if applicable) and your gross annual income.
Citizenship Status
You’ll need to show proof of your current citizenship status. Usually, this will be in the form of a visa that you’ll have already secured. If you don’t have a visa yet, take some time to apply for one before you start applying for loans.
Cosigner
You’ll need basic information such as their full name, date of birth, and permanent address. You also need their social security number and financial information. This includes proof of income, credit score, employment information, and debts.
Where to Apply for International Student Loans
Normally, you’d have to apply for each loan individually. However, this way of applying can be tedious and make the process longer than it needs to be. Use Sparrow instead! With Sparrow, you can compare real student loan offers by filling out one application. If you’re not ready to officially apply yet, use Sparrow’s search and comparison feature. This lets you compare existing lenders and save the ones you’re interested in for later. Get started by clicking here!
Final Thoughts from the Nest
Becoming an international student can be scary, but it’s also exciting! As long as you prepare everything in advance, the process shouldn’t be too hard. Besides, now you have a secret weapon: Sparrow. And here at Sparrow, we know that you’ll do just fine.
As an international student, attending college in the U.S. can be exciting. It can also be expensive. Since many U.S. students take out student loans to pay for college, you might be wondering if you can too.
In this post, we’ll dive into the student loan eligibility of international students and the availability of student loans.
Are International Students Eligible for Federal Student Loans?
As an international student, you are eligible for federal student loans if you are an eligible noncitizen. Eligible students can apply for federal student loans by filling out the FAFSA.
U.S. nationals, such as citizens of American Samoa or Swains Islands.
U.S. permanent residents with a permanent residence card – or “green card.”
Others with an Arrival-Departure Record (I-94) from the Department of Homeland Security showing any of these statuses: refugee; asylum granted; indefinite parole; humanitarian parole; Cuban-Haitian entrant.
Those holding T nonimmigrant status
Are International Students Eligible for Private Student Loans?
If you are unable to secure federal student loans because you are not an eligible noncitizen, you can still apply for private student loans.
Private lenders will request proof of enrollment in an eligible program to lend to you. You’ll want to make sure that you have proper documentation, such as your student visa and tuition bill. Keep in mind that each private lender is unique, so they will each have their own requirements.
As an international student, it can be a challenge to secure loans on your own. While not impossible, having a cosigner can help you meet the requirements you otherwise wouldn’t by yourself. A cosigner typically has to be a U.S. citizen or permanent resident with good credit. This will help you secure private student loans with lower interest rates.
However, if you don’t have a cosigner, you can still apply for private student loans. There are many lenders that offerprivate student loans specifically for international students.
How Much Can an International Student Get in Student Loans?
Typically, you can borrow up to the total cost of attendance, minus other aid received, depending on your school. However, each lender will have its own borrowing limits.
To verify the cost of attendance at your respective school, talk to your school’s financial aid office. If your student loans are approved, the financial aid office will certify the loan amount.
How to Find an International Student Loan
It might be hard to figure out where to start if you’re navigating student loans for the first time. However,Sparrow is a great resource to help you find the best student loans for you.
International students can use Sparrow to receive personalized rates on student loans. Many lenders allow international students to borrow if they have a U.S. citizen as a cosigner.
Did you know that two of our lending partners focus primarily on international student loans? This puts your needs first! To compare international student loans side-by-side, Sparrow will be the best option for you!
Final Thoughts
You might have a lot of questions and worries about studying in the United States. Paying for college is a big part of the conversation, too. The good news is that you don’t have to go through it alone. With these resources on-hand, you are a step closer to studying in the United States. It’s a matter of finding the student loan that is right for you as an international student!
While studying in the United States can be incredibly exciting, paying for it as an international student without a Social Security Number (SSN) can be confusing. But don’t worry. In this article, we’ll break down the student loan process for international students with no SSN. That way, you can feel confident in your borrowing decisions.
A Social Security Number, or SSN, is a nine-digit number used by the United States Social Security Administration to identify citizens and legal residents. SSNs were once used strictly to track citizens’ employment income to gauge their eligibility for retirement benefits. Now, SSNs are used for a variety of additional purposes such as taxes and banking.
You may see Social Security Numbers referred to as “taxpayer identification numbers.” These two terms are often used interchangeably because SSNs are used to identify individuals on all tax-related documents.
What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a ten-digit number used to identify taxpayers who do not have a Social Security Number. ITINs are intended to be used for federal tax purposes, but are useful during the student loan process.
The IRS will assign you an ITIN regardless of immigration status. The IRS uses information you provide such as drivers licenses, immigration papers, passports, and birth certificates to confirm your identity before issuing you an ITIN. The ITIN you receive can be used to apply for student loans without an SSN.
Why Do Most Student Loans Require an SSN?
Federal student loans are issued by the United States Federal Government. Thus, the aid is intended for U.S. citizens, permanent residents, and eligible non-citizens. In order to qualify for federal aid, the government uses SSNs to ensure borrowers do in fact belong to one of these categories.
When taking out a private student loan, lenders typically check your credit score. In order to check your credit score with the three major credit bureaus, lenders need your SSN. Because the majority of private student lenders use credit scores to determine borrowing eligibility, the majority do require SSNs. However, there are lenders that don’t require SSNs.
Can International Students Get Student Loans Without an SSN?
International students with no SSN can get student loans. In order to qualify for federal student aid, you must meet specific eligibility criteria. For a private student loan, you will have several options.
How to Get Federal Aid with No SSN
You must be considered an “eligible noncitizen” to qualify for federal student aid without an SSN. You are an eligible noncitizen if you identify with one of the following categories:
U.S. National (including natives of American Samoa or Swains Island)
U.S. Permanent Resident with a Green Card (Form I-551, I-151, or I-551C).
You have an Arrival-Departure Record (I-94) from the United States Citizen and Immigration Services (USCIS) that designates you as a:
Refugee
Asylum Granted
Cuban-Haitian Entrant
Conditional Entrant (if issued before April 1, 1980)
Parolee (with specific conditions)
You or your parent hold a T-Visa (for victims of human trafficking)
You are a Battered Immigrant-Qualified Alien (for victims of abuse by your citizen or permanent resident spouse)
You are a citizen of the Federated States of Micronesia, the Republic of Palau, or the Republic of the Marshall Islands.
Undocumented students, including DACA recipients, are not eligible for federal student aid.
When filling out the FAFSA as an eligible noncitizen, you will be asked for your Alien Registration number. The number you provide will be run through the Department of Homeland Security’s database to verify your identity. If they do not have your number on record, they will ask you to provide additional documentation to prove your identity and your student status. You will not be able to receive federal student aid until this process is complete.
If you are an international student who does not identify as an eligible noncitizen, you are not eligible for federal student aid.
Most private student lenders require borrowers to be U.S. citizens or permanent residents, and thus, require an SSN. However, there are several lenders that don’t.
The easiest way to get a private student loan as an international student with no SSN is to have a U.S. cosigner. A cosigner is an individual who signs onto the loan with you. By doing so, the cosigner takes responsibility for the loan should you be unable to make payments.
Having a U.S. cosigner will provide you with a wider selection of lenders to choose from and typically, lower interest rates. If you do have access to a U.S. cosigner, pursue cosigned loan options first.
That said, most international students do not have access to a U.S. cosigner. The good news? There are international student loan options that do not require a cosigner. Non-cosigned international student loans may ask for your ITIN in lieu of an SSN.
Ascent offers traditional cosigned credit-based loans for international students. With a qualifying U.S. cosigner, international students can be eligible for Ascent private student loans.
College Ave offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with College Ave, borrowers must have a Social Security Number and a U.S. citizen or permanent resident cosigner.
Earnest offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Earnest, borrowers must apply with a creditworthy U.S. citizen or permanent resident cosigner. The borrower must also have a physical address in the United States and a Social Security Number.
Sallie Mae offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Sallie Mae, borrowers must apply with a creditworthy U.S. citizen cosigner.
MPOWER offers non-cosigned student loans to international students and does not require borrowers to have a credit history or a cosigner. Instead of using your credit history to determine your eligibility, MPOWER uses information such as your future income potential.
Prodigy Finance offers non-cosigned student loans to international students and does not require borrowers to have a high credit score or a cosigner. Instead, they use information such as your credit history and future income potential to determine your eligibility.
Final Thoughts from the Nest
There are various loan options for international students with no SSN. While federal aid may not be an option for you, private student loans are a great way to fill in the gaps.
To check your eligibility with each of these private lenders, complete Sparrow’s application. Sparrow allows you to search for and compare loan options side-by-side. We’ll show you all of the lenders you qualify with, regardless of whether you have an SSN or a cosigner.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Student loans cover the gap between the cost of college and what you’re able to pay out of pocket. While student loans can cover quite a bit, they do have limits.
There are two main types of student loans: federal and private. The borrowing limit for each type of loan will depend on various factors.
A dependent student is one who relies on another, typically a parent(s), as another source of income. If your parent(s) claim you as a dependent, their income is factored into your Expected Family Contribution. Thus, you may receive less financial aid than if you filed as an independent student.
An independent student is one who does not rely on another person as a source of income. There are specific conditions a student needs to meet to be considered an independent. The student must be at least one of the following:
At least 24 years old
Married
A veteran or member of the armed forces
A graduate or professional student
An orphan
A ward of the court
An individual with legal dependents other than a spouse
An emancipated minor
An individual who is homeless or at risk of becoming homeless
Independent students tend to receive more financial aid than dependent students.
Undergraduate Federal Student Loan Limits
There are two types of undergraduate federal student loans: subsidized and unsubsidized. Federal subsidized loans are given out based on financial need. Federal unsubsidized loans are given out based on the overall cost of attendance (COA) minus any financial aid the student has already received.
How Subsidized Loan Amounts are Determined
When you complete the FAFSA, your financial information will help determine your Expected Family Contribution (EFC). Financial aid staff will subtract your EFC from the overall cost of attendance (COA) at your respective school to determine your financial need. The result of this equation will determine how much need-based aid you are eligible for.
For example, if the COA at the school is $20,000 and your EFC is $9,000, your financial need is $11,000. Thus, you won’t be eligible for more than $11,000 in need-based aid.
How Unsubsidized Loan Amounts are Determined
After need-based aid is given, your eligibility for non-need-based aid will be determined. To do this, financial aid staff will subtract the amount of financial aid awarded so far from the overall COA.
For example, if the COA at the school is $20,000 and you’ve been awarded a total of $9,000 in need-based aid and scholarships, you are eligible for up to $11,000 in non-need-based aid.
While dependent and independent students can borrow both subsidized and unsubsidized loans, independent students are typically able to borrow more in unsubsidized loans.
The borrowing limits for federal undergraduate student loans are as follows:
Dependent Undergraduate Students
First Year: $5,500 ($3,500 subsidized, $2,000 unsubsidized)
Second Year: $6,500 ($4,500 subsidized, $2,000 unsubsidized)
Third Year and Beyond: $7,500 ($5,500 subsidized, $2,000 unsubsidized)
Total Limit Over the Course of Your Entire Education: $31,000 ($23,000 subsidized, $7,000 unsubsidized)
Independent Undergraduate Students
First Year: $9,500 ($3,500 subsidized, $6,000 unsubsidized)
Second Year: $10,500 ($4,500 subsidized, $6,000 unsubsidized)
Third Year and Beyond: $12,500 ($5,500 subsidized, $7,000 unsubsidized)
Total Limit Over the Course of Your Entire Education: $57,500 ($23,000 subsidized, $34,500 unsubsidized)
Graduate Federal Student Loan Limits
As of July 1, 2012, the Department of Education no longer offers subsidized loans for graduate students. Graduate students are, however, eligible for unsubsidized loans.
Graduate students can borrow up to $20,500 in unsubsidized federal loans per year. There is a lifetime limit of $138,500 for borrowing which includes undergraduate loans.
So, let’s say that as an undergraduate student, you borrowed $30,000 in federal student loans. As a graduate student, you would only be eligible for up to $108,500 in graduate student loans.
Important Notes
In order to be eligible for any federal student loan, regardless of year or dependency status, you must complete the FAFSA. For a complete guide on how to complete the FAFSA, check out this article.
Private Student Loan Borrowing Limits
Because each private lender is its own individual entity, each one will have its own unique borrowing limit. Most private student lenders will cover the total cost of attendance. Others have specific limits, some reaching $500,000.
To see what you qualify for with each lender, complete the Sparrow application. The following are the lenders we partner with and their respective borrowing limits:
Refinance limit: up to the total outstanding balance
Final Thoughts from the Nest
Depending on what type of student loan you need, your year in school, and your dependency status, the borrowing limit will vary. To see what you’re eligible to borrow from top private student lenders complete the Sparrow application.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Federal student loans are only available to United States citizens and eligible noncitizens. Thus, many international students have fewer student loan options when studying in the United States.
For many international students, a private student loan is the best way to pay for college. Many lenders offer loans to international students, but most require a U.S. citizen cosigner in order to be eligible. Luckily, there are a few exceptions.
Let’s break down what makes an international student loan good and the top lenders you can choose from.
What Makes an International Student Loan Good?
When looking for an international student loan, there are several factors to consider. The most important factors are the cosigner policy, the interest rate, and the repayment options.
Cosigner vs No Cosigner
A cosigner is an individual who signs onto a loan alongside the borrower. By signing onto the loan, the cosigner takes full responsibility for the loan should you fail to pay it back. Having a creditworthy cosigner can help you secure a lower interest rate and better terms.
Many international student lenders require borrowers to have a U.S. citizen or permanent resident as their cosigner. However, most international students don’t have access to a U.S. citizen willing to cosign, so they opt for a non-cosigned student loan instead.
Before selecting any loan, you should look for a creditworthy cosigner. Cosigned international student loans tend to have lower interest rates than non-cosigned loans. Thus, you should pursue cosigned private student loan options before non-cosigned options.
Regardless of which loan you select, you should always read lenders’ cosigner policies carefully.
Interest Rate
Each international student loan will have its own unique interest rate and terms. If borrowing a loan with a cosigner, your interest rate will likely be lower. If borrowing a loan without a cosigner, your interest rate will likely be higher.
Because international student borrowers tend to not have a cosigner, the interest rates can be higher. As of March 2022, the interest rates for international student loans from Sparrow’s lending partners ranged from 1.13 percent to 14.98 percent. This range is fairly wide due to various factors such as the type of APR (variable or fixed), whether the loan was cosigned, the country the borrower is from, the borrower’s credit history, and more.
Compare interest rates carefully to select the one that is best for you.
Repayment Options
Similarly to interest rates, each international student loan will have its own selection of repayment terms. While some international student loans don’t require you to make payments while in school, others require immediate repayment.
It’s important to consider whether you will be able to afford to make payments immediately after the loan is taken out. Many students are unable to make payments while in school and prefer a repayment option that doesn’t start until after graduation.
Before selecting an international student loan, read up on the lender’s repayment options. Make sure that the lender’s options align with your desired timeline for repayment.
Our Picks for International Student Loans
The best international student loan is ultimately the one that works best for you. However, the following are our top picks for international student loans.
International Student Lenders That Require a Cosigner
Ascent offers traditional cosigned credit-based loans for international students. With a qualifying U.S. cosigner, international students can be eligible for Ascent private student loans.
College Ave offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with College Ave, you must have a Social Security Number and a U.S. citizen or permanent resident cosigner.
Earnest offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Earnest, you must apply with a creditworthy U.S. citizen or permanent resident cosigner. You must also have a physical address in the United States and a Social Security Number.
Sallie Mae offers traditional cosigned credit-based loans for international students. In order to be eligible to borrow with Sallie Mae, you must apply with a creditworthy U.S. citizen cosigner.
International Student Lenders That Don’t Require a Cosigner
MPOWER offers non-cosigned student loans to international students. MPOWER does not require borrowers to have a credit history or a cosigner. Instead of using your credit history to determine your eligibility, MPOWER uses information such as your future income potential.
Prodigy Finance offers non-cosigned student loans to international students. Prodigy Finance does not require borrowers to have a high credit score or a cosigner. Prodigy Finance uses information such as your credit history and future income potential to determine your eligibility.
How to Apply for an International Student Loan
To apply for an international student loan:
Check your eligibility. In order to qualify for any student loan, you will need:
Proof of identity
Proof of citizenship status
Certification of enrollment at your school
Proof of the cost of attendance
Compare loan options. When selecting an international student loan, it’s important to compare your options side-by-side. Comparing loans allows you to be confident that you’re selecting the one that’s best for you. To see which international student loans you qualify for and compare them side-by-side, complete the free Sparrow application.
Wait to hear back. Verifying an international student borrower can take longer than a U.S. citizen borrower. Most lenders take anywhere from a few days to a few weeks, depending on the time of year and your school’s response time.
Ensure the funds were disbursed. After your school certifies the loan, the lender will let you know. Then, the money will be sent to your school. Be sure to follow up with your school to confirm that the funds were disbursed.
Final Thoughts from the Nest
Private student loans are a great option for international students unable to access federal student loans. By comparing your options, you can select a loan that supports your educational journey.
To find the best international student loan, start here.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
There are about 20 million students in the U.S., including international students. When figuring out how to pay for your education, you’ll come across student loans. Yet, international student loans work differently than private student loans for students from the United States. Here’s your guide to navigating the world of international student loans.
What Are International Student Loans?
An international student loan is a type of loan available for non-U.S. citizens studying in the United States. Usually, these students are already accepted into a school or program.
You’ll find that international student loans are always going to be private student loans. This is because federal student loans are usually reserved for citizens, permanent residents, and eligible non-citizens. Never fear! The international student loan business is growing. There are plenty of private lenders willing to lend, so you’ll have options.
Like most private student loans, you may need a cosigner. If you do decide to have a cosigner, they’ll need to be either a U.S. citizen or permanent resident and have lived in the United States for at least 2 years. They also must have a good credit score as well as a steady income. Having a cosigner can help you get approved for a lower interest rate on the loan. A lower interest rate will lower the interest and thus, the overall cost of the loan.
Having a good cosigner will also allow you to be able to use the money to attend a wider range of schools. However, there can still be limitations on what schools or programs you can attend. There are loans that don’t need cosigners but these may limit your options in terms of what schools they work with. So, there’s a chance your school may not be on the list. But, if the school you chose is on your lender’s list, then it’s a great option if you can’t get a cosigner. Regardless of your cosigner status, make sure that lenders allow loans for your school before applying.
Why Do International Students Pursue Student Loans?
Like all students, paying for college can be a struggle. International students may face extra stress because of international travel. So, many students turn to loans to help them cover the costs. Loans can help pay for books, room and board, health insurance, travel, living expenses, and more.
Although international student loans can be a big help, they can also cost a lot over the life of the loan. You want to make sure you exhaust all other options available to you. This includes scholarships, grants, and personal funds. If you still need more, then start looking for loans. You’ll want to look for loan amounts that can cover any of the remaining costs after factoring in other aid you have.
Is Getting An International Student Loan a Good Decision?
It really depends on the student. If you can afford to pay your tuition bill out of pocket, you shouldn’t pursue a student loan. If not, pursuing an international student loan is likely a good decision.
The best piece of advice we can give is to sit down, calculate the costs, and see what you have. Talk to your parents or guardian. If you come to the agreement that you can afford it on your own, great! If you realize you’ll need some help, also great! There are plenty of lenders willing to lend money out to you. Just focus on your personal situation and figure out what’s best for you.
Final Thoughts from the Nest
College is already hard without the added factor of being an international student. It’ll be okay, though! There are plenty of resources ready to help you accomplish your educational goals. One of them is Sparrow! With Sparrow, you can compare real international student loan offers by filling out just one application. This simplifies the whole process for you and your family.
Not ready to apply for loans just yet? It’s fine. You can also use the search and comparison feature to compare existing lenders, then save your loan offers to come back to later. Get started by clicking here.
There are two types of student loans: private and federal. While private student loans are provided by private entities such as banks and financial institutions, federal student loans are provided by the federal government. If you think you may need a student loan to pay for college, check your student loan eligibility ASAP.
How to Check Your Eligibility
Private Student Loans: Each private student lender has its own unique eligibility requirements. Therefore, the easiest way to check your eligibility for multiple private student loans at once is to use the Sparrow application. Sparrow will show you the lenders you’re eligible to borrow from and the exact interest rate you’d qualify for with each one.
Federal Student Loans: To check your eligibility for federal student loans, you must complete the FAFSA.
Who is Eligible for a Student Loan?
Private Student Loans
Private student loans are provided by a lender such as a bank, credit union, state agency, or a school. Each lender has different rates and eligibility requirements. However, in just two minutes, you can check your student loan rate and eligibility with 17+ lenders by using the Sparrow application.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
While each private student lender will have its own unique eligibility, there are a few that tend to be the same across the board:
Enroll in an eligible program:Private student loans can only be used for education costs. Therefore, you’ll need to enroll in an eligible academic program to be considered for private student loans.
Be a U.S. citizen, permanent resident or eligible international student. Most private student lenders will require you to be a U.S. citizen or permanent resident with a Social Security number.
If you are an international student, you’ll be eligible with many lenders if you have a cosigner who is a U.S. citizen or permanent resident. If not, MPOWER and Prodigy also provide student loans to international students without an SSN or credit history.
Federal Student Loans
To qualify for federal student loans, you must:
*Demonstrate financial need (for most programs). Whether or not you must prove financial need depends on the type of student loan. Specifically, to qualify for Federal Direct Subsidized Loans, you’ll need to show financial need. To receive Direct Unsubsidized or PLUS Loans, you do not need to demonstrate financial need.
*Your financial need is calculated based on the information you provide on the FAFSA.
Be a U.S. citizen or *eligible noncitizen. In general, you must be a U.S. citizen or eligible noncitizen to qualify for federal student loans. However, in some cases, legal U.S. residents without citizenship may qualify.
* An eligible noncitizen is a U.S. national, U.S. permanent resident, or an individual holding an Arrival-Departure Record from U.S. Citizenship and Immigration Services under one of the following titles: Refugee Asylum Granted Cuban-Haitian Entrant Conditional Entrant (valid if issued before April 1, 1980) Victims of Human Trafficking (T-Visa -2, -3, or -4 holders) Parolee (with certain conditions)
Have a Social Security number. In most cases, you need a social security number to be eligible. However, there are a few U.S. territories in which you would not need a Social Security number.
Enroll in an eligible academic program. Federal student loans can only be used for accredited or recognized, degree-granting programs. Therefore, if you aren’t attending one of these schools, you won’t be able to receive federal student loans.
Have satisfactory academic progress. Each individual school will have its own academic requirements. Accordingly, if you do not meet those, you can be denied federal financial aid including federal student loans.
Enroll at least half-time (for Federal Direct Loans only). For Federal Direct Loans, you must be enrolled at least half-time.
Complete the FAFSA. The FAFSA collects and processes your financial information to determine your eligibility for need-based aid. In order to qualify for any federal student loans, you must complete the FAFSA.
Meet all qualifications for your specific program. To be considered a student at your respective school, you must meet their enrollment requirements. Generally, this may mean having a high school diploma or GED. You must meet all of your school’s requirements in order to be eligible for federal student aid.
Note: Selective Service registration is no longer required to qualify for federal student loans.
How is Student Loan Eligibility Determined?
Eligibility for private student loans depends on the lender. Each lender looks at your application against a different set of criteria. Check your student loan eligibility across multiple lenders at once. In general, here are the main factors that determine your eligibility:
Eligibility for federal student loans will depend on whether you meet the FAFSA criteria. After filling out the FAFSA, your information will be used to determine if you qualify for federal student loans. Then, it will determine what type of loans you are eligible for and how much aid you are eligible for overall.
What Disqualifies You From Getting a Student Loan?
Student loan applications can be denied for a variety of reasons. The most common reasons are not meeting the basic eligibility criteria for the respective loan. However, there are other ways you can be disqualified from obtaining a student loan.
Private Student Loans
Each private lender has their own unique requirements to qualify for a student loan. Lenders will look at a variety of factors to determine whether you are eligible to borrow from them. This includes, but is not limited to:
Your employment history
Your credit score
Your debt-to-income ratio
Your enrollment status at a qualifying school
If you do not meet the basic eligibility criteria within these categories, you may not qualify for a private student loan with that specific lender.
Federal Student Loans
If you do not complete the FAFSA, you will not be able to receive federal student loans.
Additionally, being convicted of certain crimes can also be cause for disqualification. Drug-related crimes, such as sale of illegal drugs or drug possession, can disqualify you from receiving federal aid in the future.
Is There an Age Limit for a Student Loan?
For many private student loans, you must be at least 18 years old to take out a loan. This number can vary from state to state.
For federal student loans, you must submit the FAFSA. In order to submit the FAFSA, you need an FSA ID. Applicants must be at least 13 years old to obtain an FSA ID. However, there is no upper age limit for federal student loans.
Final Thoughts from the Nest
Federal and private student loans each have their own eligibility requirements. Before submitting the FAFSA or applying for a private student loan, make sure you meet the basic eligibility requirements.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. Accordingly, this may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
You’ve exhausted all of your scholarship, grant, and work-study options. Now, it’s time to start considering student loans to cover that last mile of financial need.
When you look at your student loan options on paper, they may seem suspiciously similar. However, there are various elements to loans that can make them drastically different.
In this article, we’ll break down the key components that make up student loans and provide some helpful tips to ensure you’re getting the best loan possible.
What Is the Difference In These Loan Offers?
If you’re comparing multiple loan offers with the same principal balance, consider the following:
Federal student loans are issued by the federal government. Private student loans are issued by banks and other financial institutions.
When comparing a federal loan against a private student loan, it’s important to consider elements beyond their interest rate. For example, federal student loans typically have greater benefits than private student loans.
No Cosigner vs. Cosigner
Federal student loans do not require a cosigner whereas private student loans often do.
Loan Forgiveness vs. No Loan Forgiveness
Federal student loans have the potential to be forgiven through federal loan forgiveness programs. Private student loans, however, do not have loan forgiveness options. If you opt for a private student loan, you will forgo loan forgiveness benefits.
Greater Repayment Options
Federal student loans typically have greater repayment options than private student loans. While private student lenders do offer a wide variety of repayment options, there are some that are exclusively offered for federal student loans. For example, federal student loans have various income-driven repayment options. It’s important to consider how you plan to pay back your student loans when choosing between a federal and private student loan.
Eligibility Requirements
There are a variety of ongoing eligibility requirements when it comes to both federal and private student loans. For example:
SSN Requirements
In order to be considered for federal student loans, you must have a Social Security Number or an Alien Registration Number. If you are concerned about your Alien Registration Number expiring, you may want to select a private student loan that does not require proof of this information. You may be asked to recertify your Alien Registration Number year over year to secure more financial aid.
State Requirements
Some private student lenders require borrowers to live in specific geographic areas. If you anticipate moving or do not have a residential address in that specific area, you may want to select a different loan option. Be sure to read the fine print about state requirements when comparing two loan offers.
Enrollment Status
Different lenders require different levels of enrollment to be an eligible borrower. Federal student loans require borrowers to be enrolled at least half-time to receive aid. On the other hand, some private lenders require at least half-time enrollment while others require borrowers to be enrolled full-time. If you anticipate dropping below full-time status, you will want to compare lenders’ policies for eligibility based on enrollment status.
Annual Percentage Rate (APR)
APR, or Annual Percentage Rate, is the annual rate of interest charged to borrowers including any fees and additional costs. Note that APR is different from interest rate as it includes the fees and additional costs, as where interest does not.
APR is written as a percentage and represents the amount of the principal you will pay each year. In other words, this is the amount you would be “charged” each year for borrowing the money.
APR is typically perceived as one of the most, if not the most, important element of a loan. However, before simply choosing the loan with the lowest APR, be sure to compare other aspects of the loan such as fixed vs variable rates, the repayment term, and monthly payments.
If you’re getting caught up on the student loan lingo, check out our Glossary as it might help you understand this article better.
Fixed vs. Variable Rate
Interest rates on private student loans will either be fixed or variable.
Fixed interest rates will remain the same throughout the life of the loan. This means that the “cost of borrowing” the money will always remain constant throughout the lifetime of the loan. For example, if you choose a fixed interest rate loan with a 5% interest rate, it will stay at 5% until you’ve paid it off.
Variable interest rates will adjust over time in response to changes in a financial market index known as the London Interbank Offer Rate, or LIBOR. (Don’t get too caught up in what LIBOR is or how it works. Just know that changes in LIBOR result in changes to your loan’s variable interest rate.) This means that the cost of borrowing may shift over time and is totally out of your control.
There are pros and cons to both fixed and variable interest rates.
Fixed Rate
Pros
Remains the same each month allowing you to budget accordingly
Best for people with stable but tight finances
Cons
Can start higher in comparison to variable interest rates
Variable Rate
Pros
Tend to start lower in comparison to fixed interest rates
Good for people who plan to pay their loan off quickly
Cons
Riskier for borrowers since the rate can change every month
If you’re willing to stomach the month-to-month volatility, a variable interest rate could be a good option for you. If not, we recommend sticking with the more predictable option, a fixed interest rate.
Principal
Principal is the amount of money you borrow when you take out a loan. While you’re in school, you cannot borrow more than the total cost of attendance. Your school’s financial aid office will certify the loan to ensure that your loan does not exceed the cost of attendance.
When comparing loans, you’ll want to pay close attention to how much the lender is willing to offer you. For example, if you need $30,000 to pay for the remainder of your tuition bill, but the lender only approved you for $20,000, that loan may not be the best fit.
Repayment Options
Federal and private student loans will have different repayment options. If you are deciding between taking out more in federal loans or private loans, consider how the repayment options differ and how you plan to pay back your loans.
Remember that the sooner you start making payments, the sooner you will be out of debt. Interest on student loans accrues daily, meaning the longer you wait to start repaying, the higher your total cost. (Note that some federal student loans do not accrue interest while you’re in school, so waiting until you graduate to start making payments may be okay. In general, it’s good practice to start paying them off as soon as you can, but again, always read the terms and conditions!).
Monthly Payment
Before you take out a loan, use a student loan calculator to see what your future monthly payment may be. Depending on the interest rate and repayment period, your monthly payments could differ significantly between loans. Calculating this before you even select a loan will help you in the long run.
Our platform is a great place to start. When you submit a Sparrow application, we’ll show you all of your loan options side-by-side. With each option, we’ll help you compare the predicted monthly payments based on the principal balance and interest rate.
Be realistic about how much money you expect to make after graduating, and ask yourself what would actually make sense financially when weighing your options.
Repayment Terms
Repayment terms include all of the conditions involved in borrowing money from that lender. This can include anything from the repayment period to the interest rate to the penalty fee cost. It’s important to review the loan terms carefully for every single loan you look at. You may discover that one loan would require you to pay back your debt in 5 years which may be a dealbreaker for you.
Pay extra attention to the fees and additional costs. While these are typically reflected in the APR, that may not always be the case. If the additional fees are not included in the APR, they may come as a surprise later on. Thus, be sure to check if these additional fees are included before deciding if one is better than the other.
(You know when you sign up for something and it asks if you’ve read the Terms and Conditions? And you just check it off and go? Yeah, this is one of those times you should really read all the terms and conditions.)
Grace Period
A grace period on a student loan is a time when the borrower isn’t required to make payments. The majority of private student lenders do not require payments while in school or for 6 months after you graduate or leave school. On the other hand, some lenders have a 9-month grace period, and others have no grace period.
Be sure to check if the lender offers a grace period, and if so, how long it is.
Cosigner Release Policies
Because federal student loans do not require a cosigner, this element won’t apply if you are comparing federal student loans. If you are comparing private student loans, however, understanding the cosigner release policy is important.
A cosigner is an individual who agrees to sign onto a loan alongside the borrower. Cosigning a loan can provide the borrower with a lower interest rate or better terms. However, cosigning a loan signifies agreement to pay back the loan in the event that the primary borrower does not.
Thus, many cosigners prefer the option to later be released from the loan, and therefore relinquished from their responsibility to pay back the loan. A cosigner release policy allows the cosigner to be released after certain conditions have been met.
The vast majority of private student lenders have a cosigner release policy, but some do not. If you are comparing cosigner release policies, here are a couple things to look out for:
Income Requirements
Having someone cosign your student loan helps you qualify based on their income, credit history, and financial profile. If you hope to remove the cosigner, you will need to meet those income requirements on your own. Thus, you will need to make sure your credit score is up to par and that you have great enough income to afford your loan payments and other expenses.
Number of On-Time Payments Required
Many private student lenders require the primary borrower to have made a specific number of on-time payments before cosigner release is an option. For example, many lenders require 12, 24, 36, or 48 on-time payments before the cosigner release application is even available. Additionally, fixed and interest-only payments made during school may not count towards this overall number of payments. So, if you plan to release your cosigner after graduation, you may need to wait at least a year to be able to do so.
Forbearance
Loan forbearanceoccurs when the borrower requests to pause or reduce loan payments for a limited period of time due to economic hardship or other unforeseen circumstances.
Different lenders offer different options for forbearance, ranging anywhere from 12 to 24 months.
While putting your loan into forbearance isn’t ideal and probably not something you plan to do, it’s important to consider when comparing loan options just in case you need it down the line.
Lender Benefits
Some lenders offer exclusive membership benefits to their borrowers. While lender benefits shouldn’t take precedence over elements such as interest rate, it can be a nice added benefit.
For example, some lenders offer free financial planning, referral bonuses, and member discounts to their borrowers. If it isn’t clear what the lender offers, don’t be afraid to ask. Not all benefits will be clearly advertised.
Autopay Discounts
One of the most common lender benefits is an autopay discount. An autopay discount typically provides borrowers with a small interest rate discount for opting in to automatic debit payments. This means that each month, payments will come out of the borrower’s bank account automatically.
Most lenders offer a 0.25% discount, but some offer up to 0.50%. While it may seem small, a 0.25% interest rate discount can save you quite a bit over the life of your loan.
For example, with a loan of $50,000 at a 5% interest rate and a 10-year repayment period, you would pay $63,639 total by the end of the repayment period.
With the same loan and the same repayment period but a 0.25% interest rate discount, you would pay $62,909. While not a massive difference, the $730 saved could be an extra rent payment or vacation.
Total Cost
Because of interest, you will almost never pay back the exact amount you borrowed; you will almost always owe more.
With most private loans, interest accrues even while you’re in school. This means that even if you took out a loan for $10,000 your freshman year, you will be paying back more than $10,000 by the time you graduate or leave school.
Calculating the total cost, or the amount you can expect to have paid at the end of your repayment period, is a very helpful exercise. It will help you see how much you will end up paying in the long run with each of your loan options.
Where to Compare Student Loans
If you’re looking to compare private student loan options side-by-side, Sparrow is the perfect place to start. Simply fill out our Find My Rate form, and we’ll take it from there. After automating your search, we’ll help you compare the options to select the student loan that works best for you.
Final Thoughts from the Nest
The importance of each of these elements will vary from person to person. For example, repayment options might be most important to you, and that may cause you to take a loan with a higher interest rate. On the other hand, securing the lowest interest rate might be most important to you, and that may cause you to take a loan without a grace period.
Taking these elements into consideration will help you find the loan that works the best for you and your educational journey.
When you’re ready to start comparing offers, start here.
Every student’s biggest fear when it comes to private student loans is not qualifying. Having a cosigner can help prevent that. The thing is you may not want a cosigner for the entire life of the loan. In that case, you’ll want to check with different lenders to see who offers a cosigner release policy. But what is a cosigner release policy? Glad you asked. Let’s get into it.
What Is A Cosigner?
First off, let’s define what a cosigner is. A cosigner is someone who takes on the financial and legal responsibility of the loan along with you. If you miss a payment, it’s up to the cosigner to make it up. Additionally, any missed payments will not only affect your credit but theirs as well.
You’ll typically see cosigners for private student loans. This is because most students don’t meet the credit score requirement. For that same reason, you won’t see federal student loans with cosigners. Since they don’t have a credit score requirement, there is no need for cosigners.
When choosing a cosigner, make sure that it’s someone you trust and who has good finances. This would mean having a good credit score and stable income.
Cosigner release policies free cosigners from legal and financial responsibility to the loan. Hence, releasing them. While each lender has their own set of requirements for the policy, there are some that overlap. The most important thing is that you demonstrate financial responsibility. Normally if you can do that, you can apply to release your cosigner.
Why Might You Want to Release Your Cosigner?
There are many reasons to want to release your cosigner. On your end, it’ll be one step closer to being financially independent, which is a pretty big deal. For your cosigner, it’ll release them from your debt. It’ll also help with their credit since they will no longer have an open account on their credit report.
Also, releasing your cosigner will lessen any tension there is as a result of sharing debt. Finally, it can help avoid messy situations later on. For example, sometimes if a cosigner passes away, the loan will enter default. If the roles were switched, then the loan would become the responsibility of the cosigner. To avoid these complicated scenarios, releasing your cosigner is a good idea.
How to Release Your Cosigner
So, we know the what and the why, but what about the how? How do you release your cosigner? Here’s what you have to do:
You have made at least 12 consecutive payments on time
There has to be a history of you making the payments on time. The exact time frame can range from 12 months to 48 months, or even 5 years! It depends on the lender. Apart from this, the payments need to be consecutive. In other words, without any forbearance or deferment. So, if you’ve experienced that recently, you’ll have to set the clock back to zero.
This is extremely important. Remember, the whole point of a cosigner is having a safety net in case you can’t make a payment. So, to release them, you have to prove to lenders that they can trust you to make your payments on time.
You have good credit and a stable income
Most private lenders require that you meet a minimum credit score. You also have to show that you have the finances necessary to make payments. This means having enough money to afford your current lifestyle and pay back the loan. If you now meet the credit and finance requirements, then you’re in good shape to move on.
Submit an Application
Of course, you’ll want to check with your lender for any other requirements they may have. Once you meet all of them, you can request an application from them. Some may even have them available online. Check with your lender to see where you can get one.
After receiving the application, fill it out and gather any documents that you’ll need. You’ll mostly need documents about your finances. You’ll be able to find out exactly what you need from your lender. Make a copy of everything and save every interaction that you have with your lender. This will help protect you in case something comes up down the line. It’ll also make the process easier.
It’s important to note that the process may be long and lenders can reject you. Talk with your cosigner and make sure this is what you want to do before applying.
What to do if your cosigner release is not approved
If you’re struggling to get approved for your cosigner release, a great option is to consider refinancing your student loan under just your name.
A cosigner release policy is a great option to have for the future. But like all financial decisions, they require some thought before moving forward. If you and your cosigner decide this is the right move for you, then it’s time to submit the cosigner release application with your lender.
To find private student lenders with cosigner release policies, sign up with Sparrow for an easier process. To get started, click here.
Before even starting college, you’ll imagine all the things that you can do with your degree. But then it hits you: student loans. The great news is that student loans include grace periods that give you time to plan before it’s time to pay.
In this article, we’ll dive into what a student loan grace period is, their length, and their flexibility.
What’s a “Grace Period”?
A grace period is a portion of time after graduating where you don’t have to make any payments on your student loans. Instead, you start paying once the grace period is over.
How Long is a Student Loan Grace Period?
Typically, student loan grace periods last six months after graduating or leaving college. However, your grace period depends on whether you took out a federal loan or a private loan.
Federal Direct subsidized & unsubsidized loans: Six months
Federal Stafford subsidized & unsubsidized loans: Six months
Federal PLUS loans: NONE (but there is a six month deferment period)
Can You Pay Student Loans During Your Grace Period?
Fortunately, you can begin to pay off your student loans during the grace period.
You can begin making monthly payments as if there isn’t a grace period. It might help you budget for your student loans adequately if you start paying sooner. If you have federal student loans, exit counseling will show you the amount owed before graduating. At the same time, if you’re unable to make a payment as you had planned during your grace period, you’re off the hook.
You can also pay off your loan’s interest if you’re not able to make full payments. Despite having a grace period, interest can still accrue toward your student loan. Before it’s added to your monthly balance, paying off that interest can ease the amount you’ll owe on a monthly basis. If this option is available to you, your lender will reach out to you.
Can You Extend a Grace Period on Student Loans?
If the six-month grace period isn’t enough, it is possible to extend it. However, the type of student loan you have determines the route you can take.
Federal Student Loans
A grace period can be extended if you are called to active military duty for more than 30 days before your grace period has ended. You’ll get another six-month grace period once you’re finished serving.
If you return to school at least half time before the grace period ends, you’ll have another six-month grace period.
What if you’re not planning on joining the military or going back to school? You could enroll in anincome-driven repayment plan for $0 monthly payments. This option is worth considering if you’re struggling to find work after graduating. Check with your federal student loan servicer to see if you qualify. Another option could be to requestdeferment or forbearance on your loans. Depending on special circumstances, you could qualify for deferment or forbearance.
Private Student Loans
If you need an extension, lenders might extend your six-month period by three months. Deferment and forbearance might be an option to consider if your lender offers this. However it’s important to speak to your lender as soon as possible to see if they offer these options.
Final Thoughts
A grace period can ease the worry of having to pay back your student loans immediately. If you’re looking for a job or if you’re planning to move to another part of the country, take advantage of the time. You can also take this opportunity to get a head start on your student loan payments. Regardless of whatever you plan to do, it’s there to help you focus on the things that matter post-graduation.
If you’re looking for private loans that offer grace periods,Sparrow is a great place to start. With our one-time application, you can automatically find rates fit for you. At the same time, you can easily compare student loans side-by-side. This can help you determine if the grace period is right for you. Take control of your future with Sparrow!
As you enter the student loan scene, you’ll hear the terms “credit” and “credit score” thrown around a lot. But what credit score is needed for a student loan, and why does it matter?
All student loans have qualifications that you have to meet. For some, one of those qualifications is having good credit. That is why it is so important that you know about your own credit and that you build it up.
Credit Requirement for Private Student Loans
There IS a credit requirement for private student loans. However, each lender has a different credit score needed to get a student loan. Rather than searching lenders’ credit requirements one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
Here are the credit requirements for top student loans:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
To get a student loan, you’ll typically need to have good to excellent credit. To check your credit, most lenders will perform a hard credit check. This is to see how risky it’ll be to lend you the money. Unfortunately, a hard credit check can impact your credit score. To mitigate this, some lenders offer pre-qualification. This process is helpful because you’ll get to see if you qualify or not WITHOUT having a hard credit check on your record. This process makes shopping around for private loans a lot easier, so take advantage of it when you can. In just two minutes, you can check your pre-qualification rates for student loans (for free and without hurting your credit score) by using Sparrow.Thanks to its design, you can compare 17+ student loan offers at once.
Credit Requirement for Federal Student Loans
There is no minimum credit score requirement for any of the federal loans. This makes federal loans a great option for most students since they either have no credit or bad credit. But they will run a credit check for PLUS loans. This is just to check if there is any adverse credit history. Adverse credit history includes bankruptcies, foreclosures, or delinquent accounts. As long as you don’t have that, you’re good.
All this makes federal loans a great first choice when looking for loans to pay for school. Additionally, federal student loans come with flexible repayment options and other benefits. These options and benefits will make repayment easier in the long run.
What Is the Minimum Credit Score Needed to Get A Student Loan?
Typically, it’s about 670 or higher, depending on the lender. Some lenders may have the minimum a bit lower. Others, a bit higher. Keep in mind that the higher your score is, the lower your interest rate will most likely be. The opposite is also true. The lower your credit score, the higher your interest rate on the loan.
You can check your credit score for free through your bank or credit card issuer. Websites like Credit Karma or Mint also allow you to see your score for free. For a more detailed report on your credit, visit annualcreditreport.com. By law, you are entitled to one free credit report per year from each of the three major credit bureaus: TransUnion, Equifax, and Experian. This credit report won’t include your credit score.
What If I Have Bad or No Credit?
If you’re worried about your poor credit score preventing you from being able to pay for college, don’t fret. While it may be more difficult, it isn’t entirely impossible. Rather than searching for lenders one-by-one, we recommend starting the process with an automated student loan search tool. After you complete the free Sparrow application, we’ll show you the rates and terms you’d qualify for with 17+ premier lenders.
Here’s is a list of the top 5 student loans for bad credit:
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Nonetheless, bad or no credit might make it a little harder to get a private student loan. While there are other criteria besides the minimum credit score, your credit score is still a big one. Additionally, if you don’t meet the qualifications set out by a lender, they can deny you a student loan. Still, you’re not completely helpless. There are other options.
Federal Loans
One of the best options is taking out a federal student loan. As mentioned earlier, there are no minimum credit score requirements for any of the loans. And they come with a lot of benefits like loan forgiveness and income-based repayment plans. All you have to do is fill out the FAFSA every year as soon as it becomes available on October 1st.
Cosigner
Adding a cosigner can help out a lot. As long as they have good credit, they can help lower your interest rate and get you qualified for a loan. Most students tend to have one of their parents co-sign with them, but it doesn’t have to be a parent. A relative or even a friend works too. As long as you trust them completely and they have a good credit score, it can be anyone.
It’s important to note that your cosigner will also take on the financial responsibility of the loan. Meaning that if you miss a payment, they’ll be responsible to make up for it. Missed payments will also impact their credit score. Because of this, you want to make sure to only take out what you need and make your payments on time.
Talk to lenders to see which will allow you to take out a loan with a cosigner.
Final Thoughts from the Nest
As you enter the adult world, your credit is going to become increasingly important. This is only the first time you’ll hear about it. It’s important, then, to check on your credit score and take advantage of your free credit reports. Starting this now will make student loans and any future financial decisions easier. To check your pre-qualification rates for student loans WITHOUT HURTING YOUR CREDIT SCORE, use Sparrow.
With all that in mind, congratulations! Welcome to adulting!
Shopping around for loans is already hard enough. Then, you add in interest rates and APRs, and it’s like a whole new world. A difficult one. But it doesn’t have to be. So, what are interest rates? What is an APR? And is an APR the same thing as an interest rate?
What Are Interest Rates?
Interest is the amount of money that you are charged for borrowing the loan. It is expressed as a percentage of the principal of your loan.
For federal loans, your interest rate will be fixed, meaning that it will never change over the life of the loan. The rates are usually determined by the federal government. Because of that, they are non-negotiable. They may change from year to year but that only affects any new loans and not any that are already taken out.
For private student loans, loan terms are more negotiable. Your interest rate will depend on your creditworthiness and your financial history. The better that is, the lower your rate will probably be. The worse, the higher. Interest rates can also either be fixed or variable.
What Is An APR?
An APR or annual percentage rate also calculates the interest on your loan. The difference is it also includes any fees or charges that you may incur. Thus, the APR better represents your borrowing cost. Or, the total amount of money it’ll cost you to take out the loan.
When it comes to private lenders, APRs are like interest rates. Your financial history can also impact how high or low your APR is going to be. Keep that in mind when looking around.
Nonetheless, lenders may define their APR and any related fees in different ways. For example, some lenders will add the fees into the principal and finance it like that. Others will simply calculate it as a percentage of the principal, in which case it gets added to the APR. It just depends.
It’s also important to note that every lender has different fees. For example, most lenders charge a loan origination fee. This is a fee that is charged for processing your loan application.
But, other lenders may not charge any fees at all.
Is APR the Same As Interest Rates?
No. The interest rate is calculated based on only the interest that you are going to have to pay. But, the APR is calculated based on the interest plus any other fees and charges there might be. So, looking at the APR may give you a better idea of the borrowing cost.
It’s like the difference between the tuition and the cost of attendance when looking at colleges. The tuition gives you a basic idea of how much money it’s going to be. But, the cost of attendance gives a more comprehensive view of how much you’ll really be spending. In that same way, the APR of a loan lets you know what your real borrowing cost is. This can help you make a better financial decision.
Why Is My APR Higher Than My Interest Rate?
Since it includes other costs and charges you’ll have as a result of accepting that loan, your APR will be higher. It doesn’t mean that the interest on the loan is higher, but it does mean the borrowing cost will be higher. In other words, you’ll probably spend more money than you thought you would.
However, this doesn’t mean that if the interest rate and the APR are the same, then the loan doesn’t have extra costs. As mentioned earlier, lenders handle their APRs in different ways. This means some charges may not get added into the APR but will still be a part of your loan in other ways. Then, even though the APR and interest rate are the same, you’ll most likely still have other fees and charges. Talk to your lender about any questions you may have about how they handle this.
Final Thoughts from the Nest
Interest rates and APR can seem like they’re the same thing, but in reality, they’re not. Knowing the difference will help you make a better-informed decision.
For a more simplified process when shopping for private student loans, use Sparrow. Sparrow allows you to compare real student loan offers through a single application. So, put your new knowledge on APR and interest rates to use by signing up here.
Whether you’re just applying for a student loan or you’re trying to refinance your student loans as a way to pay them off, you’ll often get the choice between a variable vs a fixed interest rate. You might be asking yourself, “what does that mean?”
In this article, we’ll take a look at what variable and fixed rates are, how the interest rates are determined, and the pros and cons of each type of rate. By the end, you’ll be able to determine the best interest rate option for you!
What is a Variable Interest Rate?
Variable interest rates fluctuate over the course of your repayment term. This means that your monthly payments can change on a monthly basis because of the interest rates’ fluctuation. However, the interest rate tends to start a little lower than fixed interest rates, depending on your lender. Private student loans typically have both variable and fixed interest rate options.
A fixed interest rate is simply a rate that doesn’t change. The interest rate you received when you took out the loan will remain the same throughout the span of your repayment period. Federal student loans are fixed.
Lenders have a wide range of criteria that they use to determine the variable or fixed rate of your student loans. Each lender is different but this section covers the overall idea of how most determine the rates.
How are Variable Interest Rates Determined?
You might be wondering if a variable interest rate means that a lender will change the interest rate whenever it feels like it. (I know I did.)
The simple answer is no. Variable rates are determined by two things: a fixed margin and a variable index.
A fixed margin is set by your lender based on your ability to pay. They assess this by looking at your creditworthiness as well as the creditworthiness of your cosigner, if you have one. Generally, a higher credit score leads to a lower fixed margin.
The variable index is based on a benchmark in the financial market, specifically the London Interbank Offered Rate (LIBOR). This rate is the average of the interest rates banks charge each other to borrow and lend money. As such, lenders would charge a market rate as well as the LIBOR rate on your student loans on a monthly basis. However, by 2023, LIBOR will be retired and replaced by the Secured Overnight Financing Rate (SOFR). This rate calculates the cost of borrowing cash overnight collateralized by Treasury securities.
For example, let’s say you have a $20,000 student loan with a fixed margin of 4% and an initial variable index of 1.5%, meaning that your overall variable rate is 5.5%. If the LIBOR, or whatever benchmark your lender, uses increases by 1% the following month, your variable interest rate for that month will be 6.5%. However, if that benchmark’s rate decreases by 2% the month after, your variable interest rate for that month will be 4.5%.
Similarly to the fixed margin in a variable interest rate, your creditworthiness (as well as your cosigner’s creditworthiness) could determine the fixed rate. Your lender might also have a standard fixed rate for student loan borrowers.
We discussed a few of the pros of variable interest rates, such as rates typically starting lower than fixed rates. Another advantage of variable interest rates is that you could save on interest if the rate doesn’t rise too much. Luckily, the LIBOR rates haven’t been on the increase in the last few years.
However, variable interest rates are a gamble since they’re subject to change throughout the repayment period. Since the amount fluctuates, you could find yourself having a bad month in which the variable rate increases heavily. This change can make it difficult to pay. Secondly, variable rates are nearly unpredictable, meaning that your monthly payments will change from month to month. Your monthly payments and total costs will be pretty unpredictable throughout the span of your repayment terms.
Pros and Cons of Fixed Interest Rates
Fixed rates are extremely predictable, since the rates are going to stay the same throughout your repayment terms. This quality allows you to plan accordingly for the future with the interest rates in mind.
However, variable interest rates could be lower than fixed rates during your loan’s repayment period. Accordingly, you might spend more money than if you had a variable interest rate. At the same time, fixed interest rates typically start higher than variable rates.
Which is Better?
There’s really no answer for that, since it is ultimately up to you to determine the best option fit for you. Many borrowers might prefer fixed loans because it’s a safer bet and because it will help them budget and plan for the future while they pay for their student loans. However, you might determine that you are in a good position to take on a variable interest rate with the possibility of saving more if the interest rate index is low or remains the same from month to month during your repayment period.
Different factors might weigh into your decision, such as your career path and your financial situation while in college, so it’s important to think about how that will affect you.
Determining the best interest rate for your student loan is simply up to you and how your finances are looking. After weighing the pros and cons of variable vs fixed interest rates, it will be easier to relate them back to you in deciding what works for you.
You don’t have to make this decision alone. Sparrow’s application allows you to find the best student loans with the best interest rates for you. The platform makes it easy for you to compare real pre-qualified rateswithout having to apply with lenders one-by-one. Save time by finding the ideal interest rate for you with Sparrow!
Sparrow aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
Forgetting to pay a bill, especially your student loans, can be scary. Automating your payments is an easy way to help you keep track of your student loans and never miss a payment. However, did you know that autopay can also save you money?
In this post, we’ll dive into what autopay is, the potential savings you can earn, and if automating your student loan payments is right for you.
What is Autopay?
Autopay is a convenient way to never miss a payment. On a monthly basis, autopay automatically withdraws money from the bank account your lender has on file.
Different lenders have different terms for autopay, such as auto debt, automatic debit payments, or direct debit.
There are three main ways to make automatic payments:
Standard Autopay by the Lender:Through this method, you simply give your bank account details to your loan servicer. From there, you authorize them to withdraw your payment every month.
Online Bill Pay: When using online bill pay, you enter your lender as a recipient. Then, you can select an amount that will be automatically paid to the lender each month. This method is typically offered by banks to customers who log into their accounts online or through a mobile app.
Credit Card Bill Pay: If your servicer accepts credit card payments, you will be required to make automatic monthly withdrawals. It is similar to online bill pay, but with a credit card.
Autopay can help you reduce the worry of whether or not you made a payment on time, no matter the method of making the payment.
How Much of a Discount Does Autopay Get Me?
The autopay discount varies by lender. Most lenders offer a 0.25% reduction in your student loan’s interest rate if you enroll in autopay for your monthly payments. 0.25% might not seem like a lot, but, depending on the repayment terms, it could save you quite a bit.
How Much Will an Autopay Discount Save Me?
Knowing how much the 0.25% interest rate discount will save you is important before deciding to enroll in autopay. Let’s dive into an example.
Let’s say we have a $30,000 student loan with an initial interest rate of 5% under a 10-year repayment term. Without the 0.25% autopay discount toward your interest rate, you would be paying $38,184 over the life of your loan. However, with the 0.25% autopay discount, you would be paying $37,745, saving you $439 throughout your entire repayment term.
What if we double the student loan amount to $60,000 with an initial interest rate of 5% under a 20-year repayment term? Without the 0.25% autopay discount, you would be paying $95,034 over the life of your loan. However, with the autopay discount, you would be paying $93,056, saving you $1,978 in the same time frame.
While the amount might seem small, it’s a decent chunk of money that you could use for some really cool things. $1,978 could be used to pay rent or to go on vacation, but even $439 could be used to go on a nice shopping spree, make a car payment, or invest it into the stock market.
How to Decide if Automatic Student Loan Payments are Right for You
Overall, your student loan principal and repayment terms determine the savings you can have from an autopay discount. While saving money on your student loans is appealing, it’s important to determine if opting in to autopay is a good idea for you.
Pros and Cons of Student Loan Autopay
Aside from saving you 0.25% on your interest rate, let’s look at some other pros and cons of student loan autopay.
Pros of Student Loan Autopay
You won’t miss your payments: You won’t end up in delinquency or default if you set up autopay since the payments will be made for you automatically.
Some lenders allow you to make greater-than-minimum payments: If you are in a financial situation that allows you to pay more than the monthly minimum, opting into greater-than-minimum autopay payments could allow you to pay off your loans faster.
Cons of Student Loan Autopay
Overdraft fees:You have to make sure that you have enough money in your bank account to cover the automatic payments. If you don’t, you’d have to worry about a late payment as well as an overdraft or insufficient funds fee. Make sure you are confident you won’t run into any issues with over-drafting before opting into autopay.
It’s hard to cancel:If you are having a hard time keeping up with the automatic payments, it might be difficult to cancel. Most times, you’ll have to contact your lender and do so in writing so they can stop. Not to mention that you will have to cancel well before your next repayment period if you want your automatic payments to stop sooner than later.
If you believe that it will be difficult to keep up with autopay on time, allowing your lender to make automatic payments toward your student loans might not be the best option for you.
How to Set Up Student Loan Autopay
Before you set up autopay, you’ll have to know who your loan servicer is. A loan servicer is the company that manages the loan for your lender. To find your student loan servicer, you can log in to your student loan portal to determine this information.
If you are unable to find the information that way, you can contact the lender directly to ask for the information. This will help you determine what your servicer offers when it comes to autopay discounts as well as the terms and conditions of automatic payments.
From here, make sure that you can afford to enroll in autopay. Go over your finances to make sure that you can budget enough money in your account in time for each autopay period. Some servicers allow you to choose your own repayment date, meaning that you could even set up autopay close to when your payday is, making it easier for you to know how much money you have after making a student loan payment.
Finally, enroll! As said earlier, many student loan servicers provide user-friendly online student loan portals with features that will allow you to enroll in autopay yourself. If your servicer doesn’t, you can call them so that they can set it up for you. Regardless, you will need to have your bank account information handy, such as your account number, your bank’s routing number, or your credit card if your servicer allows you to make credit card payments.
Final Thoughts
Determining whether or not to set up autopay is up to you. Everybody’s financial situation is different, and every servicer is different as well. Regardless, you can expect substantial savings on your student loans if you decide to enroll in autopay. You can use the savings to pay your student loans sooner, put it into a savings account, or even use it to invest into a company.
If you’re looking for a private lender with an autopay discount, Sparrow can help you find the best option for you. Sparrow makes it easy to find rates ideal for you and also makes it easier to configure an automatic payment schedule for each loan, saving you time (and as you now know, money!).
Figuring out how to pay for college is like walking through a minefield. You’re scared to even take a step because it may be the wrong one. But you don’t have to be! There are 3 big resources people use to help them pay for college: scholarships, grants, and loans. Let’s go over them.
What Are Scholarships?
Scholarships are usually merit-based awards, meaning that you are awarded based on your academic or extracurricular achievements. Private businesses and organizations normally give these out. Charities, non-profits, local Veterans clubs, local businesses, and big chains like McDonalds or Burger King are just some examples of places that offer scholarships.
There are a wide variety of scholarships. Because of this, the qualifications for each one are going to be different. On the upside, you can win one for just about anything such as writing an essay, making a video, being into video games, being a person of color, and more. You can look for them online through scholarship databases like FastWeb or Scholarships.com.
What Can I Use a Scholarship For?
Scholarships don’t need to be paid back. The money is completely yours to use for school. It is important to note that there can be conditions when it comes to how the money is spent. Some scholarships will give you the money and let you decide how to allocate it. Others will require that the money only be used for room and board or your books.
How to Apply to Scholarships
The variety in the different types of scholarships there are means that the application process is different for each one. Most of the time you’ll fill out an online form on their website. But, you may also need to write an essay or even do an interview. The details will be on their website, so, be sure to read and know the terms of the scholarship well.
Important Note About Scholarships
Unfortunately, there are scammers out there. It’s important then to know how to spot a scam. Some signs include:
They ask for your social security number
They ask for money
They guarantee that you’ll win
What Are Grants?
Grants are need-based awards usually given out by the government and private organizations. Because they are need-based, students have to demonstrate that they have a financial need.
Federal Grants
There are only 4 types of federal grants: the Pell Grant, the Federal Supplemental Educational Opportunity Grant, the Iraq and Afghanistan Service Grant, and the Teacher Education Assistance for College and Higher Education Grant. Each of these grants has specific requirements that you must meet in order to qualify.
Generally, grants do not have to be repaid. Though, if you drop out or change your enrollment or financial status, you will have to pay them back. If that does end up being your case, your school will contact you with details on how to start repayment.
To apply, fill out the FAFSA form every year as soon as it becomes available.
Private Grants
Private grants function a little like scholarships. Different businesses, organizations, non-profits, and other places may offer these. Because of this, the qualifications for each one will vary.
Grants also do not need to be repaid at all, so it’s good money to have for college. You can look for private grants online. Much like with scholarships, there are scammers. Keep in mind the same points about being able to tell the difference between a scholarship and a scam here, too. Details on each private grant’s application process will be on their website.
For more information on grants, feel free to read our article here.
What Are Loans?
A loan is money that you borrow. Unlike grants and scholarships, you will have to pay this money back with interest. There are both federal loans and private loans available. Depending on what type of loan you get, the terms will be different.
Federal Loans
With federal loans, there are two basic types: subsidized and unsubsidized. Subsidized loans are need-based loans typically available for undergraduate students. They usually don’t accrue any interest until after you begin repayment. During that time, the government pays interest on the loan. Unsubsidized loans are generally for both undergraduate and graduate students. Since these are not based on financial need, they are more accessible. Unsubsidized loans usually start accruing interest from the moment it’s disbursed. So, if you receive one in your freshman year, it’ll start accruing interest that same year.
Normally, federal student loan interest rates are fixed and predetermined. For both loans, repayment typically starts once you graduate or drop below half-time enrollment. The government will usually extend a six-month grace period at that time. This means you won’t have to start paying right away. The government offers different types of repayment plans and benefits to make this easier. For example, the income-based repayment plan will adjust your monthly payments based on your income to make it less of a financial strain on you. To apply for federal loans, all you need to do is fill out the FAFSA form as soon as it’s available each year.
Private Loans
Private student loans function a bit differently from their federal counterparts. They’re usually given out by banks or some other financial institution. Unfortunately, they don’t come with as many benefits as federal student loans.
Qualifying for a loan will depend on your lender and your financial situation. Factors like your credit score, your finances, or whether or not you have a cosigner can impact whether you’re approved for the loan. This is because lenders want to make sure that they will get their money back. Those same factors can also determine what kind of an interest rate you get. Unlike federal student loans, interest rates for private student loans aren’t predetermined. They can either be fixed or variable and can vary anywhere from 1% to 13%+.
The terms of repayment are up to the lender. Some may extend a six-month grace period so you don’t have to start paying right away. Others may not. Talk to your lender about the terms of repayment and see what else they offer.
Traditionally, you’d have to apply for each private student loan individually. This can be a hassle. Luckily, you don’t have to work like that anymore. Sparrow makes it easy to apply for private student loans by allowing you to compare real student loan offers through a single application. To get started, just create an account.
For more information on loans, check our article here.
Which Is Better?
Typically, you’ll want to try to get as many scholarships and grants as you can first since you don’t have to pay those back. Then, if you need more, get federal loans because they come with a lot of benefits and plans that’ll help make repayment easier. If you still need money after that, apply for private loans.
Final Thoughts from the Nest
Scholarships, grants, and loans are all great ways to help pay for college. Each one functions differently so it’s important to know the difference. Use this chart to help you as you start making decisions on how to fund your educational career!
Scholarships
Grants
Loans
Who gives them out?
Private organizations and businesses
Federal government and private organizations and businesses
Federal government and private organizations and businesses
Qualifications
Depends on the scholarship
Usually need to demonstrate financial need
Have good credit and financial history or have a cosigner with good credit and financial history
Do I have to repay?
No
No
Yes
How to Apply
Depends on the scholarship but you can use websites like FastWeb and Scholarships.com to help with finding and applying for scholarships.
Generally, all you need to do is fill out the FAFSA. If you’re looking for a private grant, it depends on the grant.
Generally, all you need to do is fill out the FAFSA. If you’re looking for private loans, use Sparrow to compare private student loans and apply.
Imagine you’re shopping around for student loans. You can’t seem to make a final decision on which to get because the interest rates are confusing. Understandably, you have a lot of questions. What are they? How does it affect your payments? And most importantly, what’s a good interest rate? Let’s go over it.
What Is Student Loan Interest?
Student loan interest is the amount of money that you pay for borrowing the loan. This interest is how lenders make a profit from giving you their money.
Does Student Loan Interest Accrue Monthly Or Daily?
It depends on the type of loan you get.
When in repayment, federal student loans accrue interest daily, whether they’re unsubsidized or subsidized. This means that they use the simple daily interest formula. How does this work? Let’s look at an example. You have a loan for $15,000 with a 6% interest rate. To figure out the daily interest, divide the interest rate by 365 and multiply it by your principal. In this case,
6% / 365 = .016%
.016% * 15000 = $2.4
So, your federal student loan will be accumulating $2.40 daily in interest.
It is important to note that this is different from compounding interest daily. If your loan was compounding daily, you’d be paying interest on the interest you accrued the day before. In this example, the interest is calculated based off of the initial principal amount of $15,000, so it’s accruing interest daily.
Interest that compounds daily would mean that on the first day the interest would be calculated based off of the $15,000. Then, on the second day, the interest would be based off of that same amount plus any interest you accrued the previous day, so $15,002.40.
Generally, your interest will accrue daily but not compound daily. Typically it’ll compound based on your payment period. For example, if you pay every 30 days, you’d have accumulated $72 in interest, so the interest will start accumulating based off of $15,072 instead of $15,000.
Similarly, private student loans accrue interest daily but they can also accrue interest monthly. It really just depends on the lender, so be sure to check with them for details on that.
5.28% for Unsubsidized Loans for graduate or professional students
6.28% for Direct PLUS loans for parents, graduate or professional students
These federal rates are actually at an all-time low and apply to any student loans disbursed between July 1, 2021, and July 1, 2022.
Where federal student loans are usually fixed and have a predetermined rate, private student loans tend to vary by lender. They are dependent on factors like your creditworthiness, your finances, and whether you have a cosigner. The rates typically range anywhere from 1% to 13% and can be either fixed or variable.
What Is the Impact of Interest Rate on Student Loans?
The most pressing matter would be the impact on your monthly payments. In that case, any interest accrued that month will be part of the payment that you’ll have to make, so it can make the payment higher. Additionally, know that your payments will pay off the interest first. Then,any money left over will be put toward the principal. As time goes on and you make your payments, there will be less interest and you’ll start to see your principal go down.
Of course, since you have to pay for interest as well, you will pay back more than you borrowed over the life of the loan. Usually, the higher the interest rate and the longer the length of the loan, the more money you’ll end up paying back. The opposite is also true. For example,
With a $15,000 loan at 6.03% over the course of 20 years, you’ll actually end up paying $25,852.80
With the same $15,000 loan at 6.03% but over the course of 10 years, you’ll pay $20,011.20
With the same $15,000 loan but now at 5.14% over the course of 10 years, you’ll pay $19,215.60
What Is A Good Interest Rate?
Because interest rates vary depending on different factors, there is no one perfect interest rate to base all of your options on. For the most part, though, any interest rate below 7% is considered good and any over 10% is high.
If you’d like to learn more about interest rates, check out this article.
Final Thoughts from the Nest
Interest rates depend on the type of loan you get, whether it’s federal or private, and your personal finances. This means that the interest rate that’s perfect for your friend may not be the best fit for your situation. Keep this in mind when looking around for loans. Be sure to exhaust your options on federal student loans first though. If you still need more money, use Sparrow to help you search for private loans. To get started, simply create an account.
In October 2021, the U.S. Department of Education announced changes to the Public Service Loan Forgiveness Program (PSLF), adding a temporary period in which borrowers are able to receive credit for payments that did not qualify for this program in the past. With the new changes to the program, over 100,000 borrowers now qualify for loan forgiveness and the Biden administration could potentially forgive up to $6.2 billion in student debt.
You might be wondering what this program even is or who qualifies for loan forgiveness under Public Service Loan Forgiveness. In this article, we’ll dive further into what the PSLF program is, what loans the program covers, what jobs might make you eligible for this program, and how you could potentially apply for this program.
What is Public Service Loan Forgiveness?
The Public Service Loan Forgiveness Program is a government program created under the College Cost Reduction and Access Act of 2007. The goal of the program is to ease the burden of student loan debt on qualified public service workers. It is also a way to encourage graduating students to enter careers that serve the public interest.
How Does Public Service Loan Forgiveness Work?
After making 120 on-time, qualifying, monthly payments on their Direct loans, or 10 years-worth of payments, while working for a qualifying employee, the remainder of a person’s federal student debt balance will be forgiven.
Unfortunately, private loans do not qualify for the program.
What Jobs are Eligible for Public Service Loan Forgiveness?
To qualify for the Public Service Loan Forgiveness Program, you’d have to be employed by a qualifying U.S. federal, state, local, or non-profit organization. Essentially, your job role wouldn’t be what makes you eligible for the program; whoever your employer is determines your qualifications.
Regardless, there are a plethora of full-time public service roles that will make you eligible. Here are a few examples:
Teacher, staff member, or administrator at a public school
Employee at a federal, state, or local agency
Law enforcement officer at the federal, state, or local level
Military serviceman
Social worker in a public service agency
Public health professional such as a doctor, nurse, or administrator
Employee at a 501(c)(3) tax exempt organization
Volunteering in a full-time role at AmeriCorps or the PeaceCorp also counts as qualifying employment for the program.
How Do I Apply for the Public Service Loan Forgiveness?
If you believe that you meet all the requirements for eligibility, you should fill out the Public Service Loan Forgiveness (PSLF) & Temporary Expanded PSLF (TEPSLF) Certification and Application annually or when you change employers to ensure that you’re on the right track. The PSLF Help Tool makes it easier to know if you qualify as well as what steps you can take to qualify for the program.
It’s important to keep in mind that the kind of loans that you have matters when applying for the PSLF program. As such, keep in mind that only Direct loans, including Parent PLUS loans and Grad PLUS loans qualify for the program. If you have any Perkins loans, loans issued by your college/university or Federal Family Education Loans (FFEL), you can consolidate them in order to make them eligible for the PSLF program thanks to the new waiver issued on Oct, 6, 2021. Consolidating allows you to combine multiple federal loans into one loan.
However, if you qualify for the Perkins loan forgiveness program, we suggest you move forward with that program and refrain from consolidating that loan, since it requires you to work in any full-time public service role for five years.
Again, private loans do not qualify for the program.
Also, keep in mind that in order to be eligible for the PSLF program, you must make 120 “qualifying” payments. Qualifying means:
A payment made after Oct. 1, 2007
Using specific income-based repayment plans
While employed full-time by a qualifying employer
As such, keep all of this information with you to ensure that you are indeed eligible for the program before applying.
How Much Can Be Forgiven With the Public Service Loan Forgiveness Program?
There’s no set amount that the program forgives. The PSLF program forgives the remaining balance of your Direct loans after making 120 qualifying payments.
How Does COVID Impact the PSLF Program?
The U.S. Department of Education has issued many COVID-19 relief efforts that address the economic impact of the pandemic on students and paying for student loans. Here are a few ways that COVID is impacting the PSLF program.
Student Loan Repayment Pause
In December 2021, the Department of Education extended the student loan repayment pause through May 1, 2022. This means that loan repayments are suspended until that date. At the same time, anybody making payments on their qualifying student loans through May 1 will face a 0% interest rate, allowing them to save money and pay back their loans faster. This wouldn’t be a good idea for those applying for the PSLF as not paying during this period will maximize the amount of debt that you can get forgiven.
Also, if an individual’s federal loans are in default, the Department of Education will stop collections on those loans through May 1.
For those qualifying for Public Service Loan Forgiveness, if you have non-defaulted Direct loans and work full-time for a qualifying employer, you can continue to earn credit toward the program as if you paid regularly, essentially making $0 payments during this period of time. At the same time, if you made any payments during the payment pause period (March 13, 2020 through May 1, 2022), you can get a refund and still earn credit toward the program.
Keep in mind that the Biden administration is considering extending the student loan repayment pause again.
Limited-Time PSLF Waiver
Earlier, we discussed the Department of Education announcing changes in October that allowed borrowers to receive credit for previously ineligible payments as well as the potential impact it may have on borrowers. Let’s talk about what that means.
This change mainly affects anybody with any type of federal loans that didn’t originally qualify for the PSLF, such as FFEL program loans, Perkins loans, or older loans such as the Federally Insured Student Loans or National Defense Student Loans. Anybody who now qualifies for this waiver must consolidate their federal student loans by Oct. 31, 2022 in order to be eligible.
Qualifying payment plans are waived as well, meaning that until Oct. 31, 2022, periods of repayment under any plan count. At the same time, past periods of repayment before consolidation count toward the PSLF program, as well as other periods of repayment that were made late or for less than the amount due.
Individuals that received Teacher Loan Forgiveness are also affected by this waiver. Any period of service that led to eligibility will also count for the PSLF. In the past, those initial five years of full-time teaching couldn’t count for the PSLF, but they will now for a temporary period.
What if I Don’t Qualify for Public Service Loan Forgiveness?
If you meet the requirements but somehow get a notice that you don’t qualify for the PSLF program, don’t give up. The new waiver makes it easier for more borrowers to qualify. Sometimes, because of your employer, you may not be able to apply.
You could potentially find other loan forgiveness programs that you may qualify for. For example, if your school closes while you’re enrolled or soon after you withdraw, you may be eligible for discharge of your student loans.
More resources and programs can be found on the federal student aid website.
Is Public Service Loan Forgiveness Worth It?
If you owe a large amount of student loan debt, this might be something to consider, as it will forgive a large amount of money after making 120 consecutive payments toward your student loan debt. However, 120 payments (or 10 years-worth of payments) is a long time and, over time, your loans will accumulate interest. At the same time, the program has received many complaints, since not many people have been able to receive student loan forgiveness under this program.
On the flip side, because of COVID-19’s impact on the student loan repayment process, it might be beneficial to at least consider this program, especially if you are passionate about public service. The PSLF program is worth it if you are truly invested in public service roles and intend to work in this sector in the long-run. However, deciding to work in public service simply to get debt forgiven under PSLF isn’t the most informed decision, since you won’t be passionate about this role and because, as is, 98% of PSLF applicants have found themselves rejected for forgiveness in the past.
Final Thoughts
The Public Service Loan Forgiveness program is a great option for borrowers that are currently working in public service roles or for students that intend to after graduation. However, it’s important to weigh out the pros and cons of the program, whether or not you’re eligible, and the current climate around student loans, before deciding whether or not to go through the 10-year process of qualifying for the program.
As the student loan crisis continues in the middle of the COVID-19 pandemic, there are multiple efforts by the federal government to alleviate the economic burden of student loans. This is definitely a program to consider if you need help paying off your student loans and if you are passionate about public service and making an impact at the federal, state, or local level.
If you’re considering taking out a private student loan to fund your education, it’s important to carefully review and compare the repayment terms offered by different lenders. Private student loan repayment terms can vary widely and can have a significant impact on the total cost of your loan, as well as your ability to manage your debt after graduation.
In this post, we’ll dive further into the different terms that are available depending on your private student loan, how longer terms affect monthly repayment plans, and the tools available to you to easily compare student loan repayment terms side by side.
Private Student Loan Repayment Terms
Private student loans accrue interest while you are in school. Federal student loans have the potential to accrue interest while enrolled in school, but it depends on the loan you take out, such as a federal unsubsidized loan. Regardless, most private and federal repayment plans don’t start until about six months after graduation.
Each lender is unique and as such, they will offer different repayment options. However, there are four common repayment plans.
Keep in mind that the repayment plan you select depends on your individual needs. Here’s a little more background on each one:
Immediate Repayment
With Immediate Repayment, you will be able to make monthly payments on your loan as soon as it is disbursed. Making monthly payments right after your loan is disbursed can help you minimize the amount of interest that accrues and save you money in the long run.
However, you’d be a college student while making these payments. If the stereotypes of eating ramen and pizza pockets to make ends meet tell us anything, it’s that it could be really difficult for many students to make consistent monthly payments. If you plan on having a job while in college, it might make sense for you.
Interest-Only
Your lender would allow you to only make interest-only payments while you are in school. With an interest-only repayment plan, the borrower only has to worry about paying back the interest that has accrued on the loan each month while in school. For example, if a loan of $50,000 accrued $50 in interest that month, you’d only be responsible for those $50 that month.
After you graduate, it might be easier for you to make monthly payments toward your student loans. Because interest will compound, making interest-only payments will reduce the total amount of interest that you pay over time. At the same time, it might also be more manageable to pay off the interest of your loans compared to making payments going toward your student loans and the accrued interest.
Similar to immediate repayment plans, it might be a financial burden to enroll in an interest-only repayment plan while you are in college since you would still have to pay interest on your loans while studying.
Fixed Monthly Payments
Fixed monthly payments, also known as partial interest repayment terms, allow borrowers to make fixed monthly payments while still enrolled in college. Fixed payments are typically between $20 and $50 and go toward your interest, helping you keep the overall debt amount lower by keeping the interest from accruing. For some students, this might be more manageable since they would have to pay a little bit of money that will go toward their interest rate, compared to other repayment plans.
However, by the time you graduate, you’re still going to find yourself having to pay more than you borrowed due to the partial interest that you didn’t pay with your plan. Yet, you could expect your loan balance to not grow as much thanks to at least paying some of that partial interest.
Full Deferment
A full deferment repayment plan is similar to how federal student loans work, in which students can expect to start paying off their loans post-graduation. Under this plan, you wouldn’t be responsible for paying off your student loans while you’re enrolled in school, giving you time to plan. Many lenders offer a six month grace period after graduation, making it easier for recent graduates to find employment without having to worry just yet of their student loans.
This repayment plan does have its drawbacks, particularly that your loan will accrue interest while you are studying. As such, your monthly payments may be bigger, and thus, it could take you longer to finish paying off your loans.
How is a Monthly Loan Payment Affected by a Longer Term?
Student loan repayment periods range in length, roughly between 10 to 30 years. As such, you’d think that with the long period of time you have to pay off your loans, your monthly payments will be low. While that is true, keep in mind that loans accrue interest. If you find yourself with a long-term student loan, you’ll still be paying a lot since you’ll also be paying for the interest of the loan. The longer the term, the bigger the interest. Shorter repayment periods tend to attack debt more aggressively, and thus, the monthly payments will be higher than they would be on a longer repayment period.
Compare Standard Repayment Terms Side-by-Side
How would a loan differ based on the repayment terms? Perhaps comparing terms side by side might be an easy way to see for yourself.
By using any student loan calculator online, you can determine how the standard loan repayment terms might affect your monthly payments, but also the long-term cost of the loan.
Let’s say you have a $30,000 loan with a 5% interest rate. Under a 10-year repayment term, you can expect to pay $318 a month. However, the lifetime cost of your student loan would be $38,184 paid over 10 years.
What if we use the same loan with the same interest rate but with a longer term, such as 20 years. While your monthly payments are significantly less, $198, the lifetime cost of your student loan would be $47,517 over 20 years.
What if we try one more, with the same loan, interest rate, but a shorter term, like 5 years? Your monthly payments will be $566. However, the lifetime cost of this student loan would be $33,968 paid over 5 years.
Since interest is compounded monthly, repayment plans with shorter terms will help you tackle more debt at a faster rate. Keep this in mind while you’re in the market for a student loan.
How to Figure Out Which Repayment Term Will Be Best for You
Aside from the loan simulator, there are many other resources that can help you find the best repayment plan for you.
The loan simulator, a tool created by the Office of Federal Student Aid, allows you to get a first-look at the federal student loan repayment plans you may qualify for if you’re looking to find repayment strategies, if you’re struggling with paying off your student loans, or if you want to potentially borrow more.
Sparrow, on the other hand, is a great resource if you’re looking into private student loans. Our platform gets you personalized rates and allows you to compare multiple loan offers from different private lenders side by side. Lenders on the platform offer a wide range of repayment options, such as immediate repayment, fixed monthly payments, interest-only payments, and full deferment payments.
Final Thoughts
Student loan repayment terms are complicated, regardless of whether you have public or private loans. The good news is that there are so many different options available to help you find the right repayment plans for you. It’s simply a matter of being able to compare your options and weigh out the right fit based on your needs as a college student and the loans that are available to you.
Take the next step in conquering your student loans by creating a free Sparrow account. Apply once and get real rates fit for your unique financial situation. The best part: the platform is completely free and won’t impact your credit score!
Now it’s time to sift through your financial aid offers and make your decision! Before you accept any aid, it’s important to truly understand what the offer in front of you really means.
We’ll break down the entire process of figuring out your financial aid award letter:
In this blog, we’ll primarily use the term Financial Aid Award Letter, but we want you to know that it can be called a variety of things, such as:
Aid Letter
Financial Aid Package or Aid Package
Merit Letter
Financial Aid Offer
And probably a few more!
This is not to confuse you, but just to make you aware that your institution may use another term.
What is a Financial Aid Award Letter?
A Financial Aid Award Letter is an offer from an institution that contains all the federal, state, and school aid you can access. This can include scholarships, grants, work-study opportunities, andfederal subsidized and unsubsidized loans. If you listed multiple schools on your FAFSA, you will receive financial aid award letters from each school you are accepted to.
When to Expect a Financial Aid Award Letter
The timeline of receiving financial aid award letters can vary. Typically, they arrive in March or April after you’ve received an acceptance from an institution. Some schools are more prompt than others, so make sure to be on the lookout for your award letters and keep track of who you’re still waiting on.
Understanding Your Financial Aid Award Letters
Before we can compare any financial aid award letters, we’ll want to understand what they all mean independently. Each institution will use a different format for their letters, but they will all contain roughly the same information.
Let’s use an example from CollegeCovered as a frame of reference.
In this award letter, you will see three separate sections.
Financial Aid
Estimated Cost of Attendance*
Total Estimated Balance
Financial Aid
This section shows both the scholarships and loans this student was awarded.
Estimated Cost of Attendance
This section shows the total estimated cost of attendance. This particular university broke this cost into two sections — the billable costs (ones that are concrete) and the indirect costs (what they estimate students will spend on other items).
Some of these costs you may not incur. For example, if you are choosing to live off campus, you would not incur the $8,020 per year housing cost. Oftentimes, universities will add campus health insurance to the estimated COA. But, many students choose to opt out of this and remain on a parent’s plan. Thus, the COA ends up lower. If there is a cost listed in the COA that you 100% will not incur, make adjustments where you see fit when examining the aid offer.
*Not all financial aid award letters will show the Cost of Attendance. This is often a category that gets left out. If this isn’t on your financial aid award letter, make sure to call the institution to verify the number or ask for a full breakdown before making any calculations or comparisons. Don’t rely completely on what is online as the information could be outdated.
Total Estimated Balance
This is the amount left over if you accepted all of the financial aid and incurred all of the costs listed in the COA. This is what the institution estimates that you would pay yearly.
Note that this estimated balance will likely not be 100% accurate for you unless you plan to accept all of the financial aid offered to you and incur all of the listed costs.
Figure Out the Net Price
Because the total estimated balance won’t always be what you’d actually pay, we recommend recalculating the net price. To do this, subtract the costs you would incur from the aid you would accept. Make note of these new net prices if they differ from the original calculations.
A Very Important Note:
If you are going to make any alterations to reflect what you’d actually pay, make sure to verify those costs before using them in your calculations. One example of this is housing. If the COA uses on-campus housing in its calculation but you plan to live off campus, don’t use one flat housing estimate across the board for all institutions.
For example, rent might cost $600/month in a small, rural town in Connecticut, but it likely won’t cost that in downtown Boston. Always call the university and ask for an estimate of what the average student spends on something before making your own estimates.
How to Compare Aid Offers
Now that you’ve calculated the net price of each institution, it’s time to take all the information you have and compare aid offers. We recommend the following steps:
Create a spreadsheet with a column for each school.
Record the following information for each school:
The COA
The free aid you won’t have to pay back (scholarships, grants, etc.)
This will give you an idea of the overall cost to attend each school, how much free aid you’ve been awarded at each, and how much you would potentially have to take out in loans for each school.
Is My Financial Aid Offer Good?
Most institutions don’t meet 100% of the student’s financial need. Additionally, most institutions will have loans somewhere in their aid package. So, if your award letter only covers a portion of your need and part of that aid is through loans, your offer isn’t far off from the norm.
On average, institutions meet 86% of student financial need.
The average need-based grant is $28,448.
The average aid package is $29,916 for a school where tuition and room and board total to $40,580.
You may also be able to find information about the average aid awarded at each specific institution via their website. This information can be helpful in seeing how your aid offer compares to their average. Ultimately, you’ll want to ask yourself what makes sense for you individually.
How and When to Appeal a Financial Aid Award
When comparing offers, you may notice that one institution offered significantly more aid than another. This is common and can happen for a variety of reasons.
While it may seem like a solid idea to negotiate the aid offered, experts don’t recommend pitting one institution against another. The only time you should do this is if you’re positive the institution will consider appeals where financial situations haven’t changed.
More often than not, institutions will only accept appeals on aid where a financial situation has changed since the FAFSA was submitted. For example, divorce of parents, death, unexpected medical expenses, and natural disasters are all circumstances that would warrant an appeal of a financial aid offer.
You can typically submit an appeal through the school’s financial aid office website. If you do, be prepared to provide additional information. Some institutions may ask for a detailed outline of your typical expenses, a written statement, or to see the other aid letters you received from other universities.
Accept Aid Intentionally
When you decide to accept aid, always accept it in the following order:
Scholarships/Grants (free money) → Work Study (earned money) → Loans (borrowed money)
Scholarships and grants don’t need to be repaid, so you’ll want to accept those first. (who doesn’t love free money?!) If offered work-study, it’s a good idea to accept that second. While it doesn’t guarantee you a job, work-study would provide you with the opportunity to have a part-time job on campus to help fund your education. Always accept loans last as they need to be repaid and will accrue interest over time, meaning you’ll pay more than what you’re borrowing.
Other Important Notes
Don’t guess on anything. Before accepting any financial responsibility of this scale, it’s important to understand what you’re agreeing to.
Financial aid award letters might have abbreviations or language you’re unfamiliar with. Always contact the institution’s financial aid office to ask what this means if you’re confused.
Final Thoughts
This phase of the college application and acceptance process can certainly be overwhelming. However, it’s one of the most important parts of the process. Understanding the financial responsibility you are about to take on is important, so make sure you take your time deciphering your financial aid award letters before committing to any one institution.
If your financial aid package doesn’t cover your total cost of attendance, it may be time to look into private student loans. When the time comes, we’ve got you covered. Fill out the free Sparrow applicationto see what private student lenders you qualify with.
Buckle up. Sit down. Grab a snack. Take a deep breath.
Whatever you have to do to get ready, do it, because we’re about to give you everything you could ever need to know about the FAFSA.
What is the FAFSA?
FAFSA is an acronym that stands for Free Application for Federal Student Aid. It is a form that collects information to determine a student’s eligibility for need-based aid. This can come in the form of grants, scholarships, work-study, and/or subsidized student loans.
Need-based aid is just as it sounds: financial aid based on financial need. It is given out based on finances not extracurriculars, achievements, or high school performance.
While the FAFSA is primarily used by the federal government to determine federal aid eligibility, it is also looked at by the state government and the majority of colleges and universities.
Who Should File the FAFSA?
We recommended that all undergraduate and graduate students fill out the FAFSA. Even if you think you may not qualify for any financial aid, you should still fill it out for a few reasons:
The FAFSA determines a student’s eligibility for need-based aid, but it can also provide access to non-need-based federal loans. Because federal loans generally come with lower interest rates than private student loans, you’ll want to take advantage of any federal student loans you can get.
Some schools only hand out aid to those who’ve completed the FAFSA. Thus, you could miss out on aid given by your college or university if you don’t fill out the FAFSA.
Many students express resistance to completing the FAFSA, deeming it a waste of time because they don’t need loans. However, filling out the FAFSA is still a critical step in the college process. Not filling it could leave you ineligible for some forms of free money such as scholarships and grants. And who doesn’t like free money?
Think of it this way: Even if you spend an hour filling out the form and get nothing, you’ve only lost an hour of your time. But, if you spend the hour and end up getting $1,000 in aid, in a way you’ve just made $1,000/hour. (Sounds like a pretty sweet wage to us.)
How is My Financial Aid Calculated?
The FAFSA utilizes a specific formula that takes into account your Expected Family contribution, student enrollment status, year in school, and the cost of attendance at the school.
Expected Family Contribution (EFC)
Your EFC is a number calculated by your college’s financial aid office to determine how much financial aid you are eligible to receive.
This number is calculated using a formula established by law and uses information such as your family’s income, assets, and benefits. It also takes into account whether you have another family member in college during the same year.
Oftentimes, people assume EFC is the estimated amount of money you or your family will be able to contribute to your education. However, this is not the case. This number estimates how much you could contribute to determine your eligibility for need-based aid.
Student Enrollment Status
The Student Enrollment Status is a basic understanding of how the student is completing school (full-time, part-time, etc). This gives the federal government an understanding of the student’s expenses for attending school. For example, attending school part-time is typically cheaper than attending full-time.
Your Year in School
You can file the FAFSA if you are a(n):
Undergraduate student
Graduate student
Professional student
Parent of a student (or soon-to-be student)
What differs here is the amount of money you can borrow.
You can borrow up to $20,500 each year in Direct Unsubsidized Loans. Direct PLUS Loans can also be used for the remainder of your college costs, as determined by your school, not covered by other financial aid.
Parent of a dependent undergraduate student
You can receive a Direct PLUS Loan for the remainder of your child’s college costs, as determined by their school, not covered by other financial aid.
Cost of Attendance
The Cost of Attendance (COA) is exactly what it sounds like: the total cost of attending at your respective college or university. The COA is an all-inclusive estimate of the total cost of attending that institution. It includes everything from tuition and fees to the cost of books, supplies, and transportation.
There may be elements of the COA that you end up not needing. For example, some universities offer health insurance and include this in the COA. Some students who plan to remain on their parent’s health insurance plan or have their own individual plan will opt out of the university-provided insurance. This would then lower the COA.
That said, the university’s full COA estimate is what will be used in calculating financial aid.
To calculate need-based aid, the the following formula will be used:
Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need
Federal aid will try to meet your financial need and supply non-need-based aid where possible. Non-need-based financial aid, however, will not take into account your EFC as it is trying to assist you financially regardless of how much your family earns.
You can get an estimate of your expected financial aid by using a financial aid calculator. Note that this number will not necessarily be what you receive, but it can give you a general idea of where you might land.
Who is Eligible for Federal Aid Through the FAFSA?
To be eligible for federal student aid provided through the FAFSA, you must:
Qualify for a college or career school education, which usually means also having a high school diploma or GED
Be enrolled, or accepted to enroll, in a degree program
Sign the required statements on the FAFSA, agreeing to use the money only for educational purposes and certifying that you aren’t in default on any other federal aid
Maintain good academic progress in school
Have one of the following citizenship statuses:
US citizen
US national
Green card holder
Refugee, Asylum-granted, Cuban-Haitian, Conditional Entrant, or Parolee
Battered Immigrant Status
T-VISA Holder
How Much Money Can I Get From the FAFSA?
The amount you can borrow in federal financial aid depends on your student status and the amount you qualify for. See the section above on student status for some more details and numbers on that.
The following table does a great job in breaking down the maximum amounts for each category of federal aid and the average amount.
First, you should create an FSA ID (Federal Student Aid ID). Your FSA ID is a username and password combination that allows you to access the FAFSA form electronically. It is also the login that will allow you to manage and sign loan contracts through the myStudentAid app.
Creating your FSA ID ahead of time can save you time when you go to fill out the FAFSA as it can take some time to receive if there are any errors or delays.
Once you have your FSA ID ready to go, you’ll want to collect all the information needed to fill out the FAFSA form. This will make the process a lot easier and smoother. Make sure you have the following information ready:
Your social security number (Always verify this, and never go off of memory. It is crucial that you enter this correctly on the FAFSA form.)
Your parent’s social security numbers (if you are a dependent)
Your Alien Registration number (if you are not a US citizen)
Tax Information such as tax returns including IRS W-2 information
If applying as a dependent, make sure you have your parent(s) tax information as well.
Records of any untaxed income such as child support, veteran benefits, etc.
Information on cash you may have, such as bank account (checking and savings) information, investments such as stocks and bond, ad business assets
While most people opt to complete the form electronically, there are 4 total options for filling it out:
By calling 1-800-4-FED-AID (they print and mail you the form; you mail it back for processing)
When do I file the FAFSA?
The FAFSA will become available to you on October 1st of the year before you plan to attend college. The exact deadline to file the FAFSA will change each year, but it is typically at the end of June.
That said, we recommend applying much earlier than the actual deadline and as close as you can to when the form opens. Most colleges operate on some form of a first-come, first-served basis and will deal out aid based on when the forms were received.
Other Common FAFSA Questions:
Do I have to pay to fill out the FAFSA?
No! As its name implies, it is free to fill out and submit the FAFSA.
Do you need a certain GPA for FAFSA?
To remain eligible for federal financial aid, students must maintain Satisfactory Academic Progress. This generally means obtaining at least a 2.0 GPA on a 4.0 scale (around a C average). That said, you don’t need to have a specific GPA to fill out the form.
Do You Have to Pay Back Aid from the FAFSA?
This depends on the type of aid you get. You will need to pay back any loans you accept, but you won’t have to pay back scholarships or grants.
This is why it’s important to always accept aid in the following order: free money (i.e. scholarships, grants), earned money (i.e. work-study), borrowed money (i.e. federal student loans).
Final Thoughts from the Nest
The FAFSA can seem overwhelming due to its length and complexity. However, preparing ahead of time can make the process more seamless. For the easiest process, come prepared with the information you need and fill it out electronically.
If you find that the financial aid package you ultimately receive doesn’t cover your total cost of attendance, private student loans may be the next step. In that case, make sure to fill out the Sparrow application to see what lenders you qualify with to get the best student loan.
Sparrow partners with financial institutions to provide students and their families with a streamlined search and comparison process that helps borrowers find the best private student loan offers in minutes.
We believe transparency is key to earning and maintaining borrowers’ trust. That’s why we take who we partner with seriously.
The lenders that borrowers choose are very important. The right lender could save borrowers money, time and stress. The wrong lender can be predatory, usury, and misleading. We pride ourselves on working with a diverse set of fantastic lenders to ensure that our borrowers receive the most competitive offers for their unique financial situation.
How We Select Lenders to Partner With
Our lenders are evaluated against a rigorous set of criteria to ensure that they truly are the “best companies” for private student loans and student loan refinancing. In order to be eligible for onboarding onto our marketplace, a lender must pass all 15 criteria explained below. After onboarding, each lender’s eligibility is re-evaluated on a quarterly basis.
Offers private student loans and/or student loan refinancing to schools eligible for federal funding under Title IX
Complies with relevant state and federal law: TILA, ECOA, FRCA, GLBA, UDAAP, FCT Act, and CAN-SPAM Act
Services loan payments internally or through reputable third-party servicers including: FedLoan Servicing, Nelnet, Navient, MOHELA, Edfinancial Services, OSLA, Great Lakes, and GSMR among others
Loan origination receives school or self-certification pursuant to Section 155 of the Higher Education Act of 1965
Does not have outstanding or unresolved litigation with the Consumer Finance Protection Bureau (CFPB)
Maintains a strong customer satisfaction rating on either Better Business Bureau and/or Trustpilot
Qualifies borrowers with limited (less than 2 years of active credit) or no credit history
Qualifies borrowers with limited or no annual income
Maintains necessary lenders licenses for states where loan products are provided
Provides at least one repayment option: Immediate, Fixed, Interest Only, or Fully Deferred
Offers cosigned and/or non-cosigned loans
Offers e-signature option for digital loan origination
Does not include prepayment penalties
Offers robust financial literacy programs and resources
Offers death and disability discharge
How We Score Potential Lenders
Our checklist serves as a baseline. We go well beyond it to identify lenders with whom we’d like to partner. The following below is a breakdown of the methodology we apply to identify compelling partnerships.
Affordability (35%)
Interest rate (30%)
Fees (5%)
Customer service (30%)
Borrower origination experience (15%)
Borrower repayment experience (15%)
Eligibility (20%)
Loan term (5%)
Minimum and maximum loan amounts (5%)
Minimum FICO score (10%)
Miscellaneous (15%)
Product availability (10%)
Regulations and compliance (5%)
Affordability (35%)
Affordability primarily considers the interest rates and loan fees that affect borrowers’ monthly loan payments. For many borrowers, the best loan is the one that costs the least over time. The following factors determine affordability.
Interest rate (30%)
We look at how competitive a lender’s interest rates are versus other lenders’ for various types of borrowers (i.e. borrowers with different FICO scores).
Why interest rate competitiveness matters for borrowers: Choosing a loan with a competitive interest rate can result in significant interest savings over the lifetime of a loan.
Fees (5%)
Fees can tack on costs to a borrower’s loan. None of the lenders on the Sparrow marketplace have prepayment penalties.
Why fees matter for borrowers: Borrowers should shop around to find the lowest-cost lender, accounting for interest rate and any associated fees.
Customer Service (30%)
Customer service considers how borrower-friendly a lender is in the origination and repayment processes. Customer service is a heuristic for the trustworthiness and credibility of a lender.
Borrower origination and repayment experience (15%)
Borrower origination and repayment experience addresses the ease at which lenders qualify, disburse and service loans. Borrowers ought to be able to expect friendly, non-predatory servicing as they work with their lenders to repay their loans.
Why borrower origination and repayment experience matters for borrowers: Because private student loans are a credit of last resort, borrowers have to be able to rely on lenders to originate and service a loan on-time. Having the wrong origination or servicing experience can weigh on borrowers for years to come.
Customer service rating (15%)
Customer service ratings show the quality of experience a borrower can expect from a lender. Sparrow studies Better Business Bureau and Trustpilot customer service ratings for student loan companies.
Why customer service matters: Borrowers should be able to trust their lenders and expect good customer service from them.
Eligibility (20%)
Eligibility considers a lender’s flexibility to meet the various needs of different borrowers.
Loan term (5%)
We evaluate the term options that lenders provide borrowers to repay their loans.
Why loan term matters: A broad range of loan terms offers flexibility for every borrower’s unique financial situation.
Minimum and maximum loan amounts (5%)
We assess the minimum and maximum loan amounts offered by lenders.
Why maximum and minimum loan amounts matter: A lender’s loan amount should be large enough to meet borrowers’ needs and small enough so that borrowers do not take on unnecessary debt.
Minimum FICO score (10%)
We look for lenders with low or no credit score minimums.
Why minimum FICO score matters: If borrowers’ credit score falls below the threshold, they will have trouble qualifying for a loan.
Other Factors (15%)
Sparrow looks at a range of other factors to determine a lender’s overall rating.
Product availability (10%)
Product availability describes the coverage lenders provide to students studying for different degrees (i.e. undergraduate, graduate, pre-professional, etc.) or coming from different circumstances (access to a cosigner).
Why product availability matters: Borrowers may benefit from borrowing loan products tailored specifically to their degree (i.e. JD, MD, BA, MS, etc.) or economic background (cosigned vs. non-cosigned loans).
Compliance and regulations (5%)
We ensure that all lenders on the student loan marketplace are legally compliant with federal and state law. We work with each of our lending partners in order to comply with requirements related to loan disclosures and terms, credit discrimination, credit reporting, and unfair or deceptive business practices.
Why regulations and compliance matter: Borrowers should have the confidence that Sparrow and its partnered lenders are compliant with federal and state law and will not be subject to usury or deceptive lending practices.
Sparrow’s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.
The government gives out billions of dollars in aid each year, some of that going toward students who received the Federal Pell Grant. But what is it? And how does it work?
What is the Pell Grant?
The Pell Grant is one of many federal grants the government provides to help students pay for their college expenses.
Who is Eligible for the Pell Grant?
Usually, undergraduate college students who demonstrate financial need are eligible for this grant. You can’t have already earned a bachelor’s degree or higher. However, in some cases, students working toward a post-baccalaureate degree in teaching may still be eligible to receive the Pell Grant. Talk to your school’s financial aid office for more information on this.
Other factors such as your enrollment status and how long you’re going to be in school also determine your eligibility.
How Much is a Pell Grant?
The full amount of the Pell Grant currently is $6495. This amount is subject to change each school year, but it’s usually around $6000. Keep in mind, though, that the amount you will receive will depend on both your cost of attendance (COA) and your estimated family contribution (EFC). The lowest you’ll ever receive is 10% of the full amount, so about $650 based on the current numbers. In special cases, students whose parent(s) or guardian(s) died in military service in Iraq or Afghanistan after 9/11 may be able to receive more money. Check with your school’s financial aid office for more information if you think this applies to you.
Do You Have to Pay Back the Pell Grant?
Generally, no. Since it’s a grant, you won’t have to pay it back. There are some exceptions to that rule:
If You Drop Out
Some students receive the Pell Grant to help them pursue a certain program. If this is your case and you end up dropping out, then you’d have to repay.
If Your Financial Need Changes
Receiving other scholarships and grants after accepting the Pell Grant reduces your need for financial aid. In that case, you might have to pay back any money that was already given to you.
If Your Enrollment Status Changes
If you switch from full-time to part-time, that would also be grounds for having to repay the grant money.
Don’t worry too much about this though. If you do have to repay the grant, your school will notify you. From there, you’ll have 45 days to either pay it back in full or enter into a repayment arrangement.
How and When to Apply for a Pell Grant
To be able to receive a Pell Grant, fill out the FAFSA form as soon as it’s available. Be sure to repeat this every year you’re in school to continue to receive the grant.
Pell Grant Disbursement
Usually, your college will receive your grant funds. They’ll automatically apply them to any school-related costs you have. You’ll receive any leftover money in payments called disbursements. Schools are required to give out at least two grant disbursements per year. Most schools typically do this once per term.
Another important detail is that the funds can only be used toward one school. For example, if you’re dually enrolled, you’ll only be able to use the money to help pay for the costs of one of the schools.
Additionally, you can only receive the Pell Grant for 12 terms or until you receive a bachelor’s degree. Your Pell lifetime eligibility used, or LEU, determines how many terms you have left. You can check this by logging into your Financial Student Aid account and going to the My Aid tab.
Other Federal Educational Grants
There are other educational grants that are a part of federal student aid. Here’s a quick overview of them:
Federal Supplemental Educational Opportunity Grant (FSEOG)
This grant is usually awarded to undergraduate students who have exceptional financial need and have not earned a bachelor’s degree or higher. The award amount can range anywhere from $100 to $4000 a year. It is important to note that not all schools participate in this. If your school does, they’ll only receive a set amount of money to give out to eligible students. Pell Grant recipients have first priority to receive the money. Because of this, be sure to fill out your FAFSA as soon as it’s available.
Iraq and Afghanistan Service Grant
This grant is usually available to students whose parent or guardian was a part of the U.S. Armed Forces and died as a result of military service in Iraq or Afghanistan after 9/11. You must have been either under 24 years of age or enrolled in college at least part-time at the time of their death. You also must be ineligible to receive the Pell Grant on the basis of your EFC. You do, however, have to meet the rest of the requirements for a Pell Grant. Because of the Budget Control Act of 2011, the award amount is currently about $6124 for grants disbursed between October 1, 2021, and October 1, 2022. Normally, the maximum award amount is the same as the Pell Grant.
Teacher Education Assistance for College and Higher Education Grant (TEACH)
This is usually for undergraduate, post baccalaureate, or graduate students who are enrolled in a TEACH Grant-eligible program. You have to agree to teach in a high-need field for 4 years at an elementary or secondary school that serves low-income students. Typically, you have to complete this service within 8 years of finishing your program. Failure to do so will turn your grant into a direct unsubsidized loan. As a result of the Budget Control Act of 2011, the current award amount is about $3772 for grants disbursed between October 1, 2021, and October 1, 2022. Normally, the grant can provide up to $4000 per year.
All of the grant awards are subject to change each year.
Final Thoughts from the Nest
A Pell Grant is a great way to get money for school, especially if you’re in a tough financial situation. The best part is you most likely won’t have to pay it back. So, be sure to fill out the FAFSA as early as you can to increase your chances of getting some stress-free money.
The FAFSA, or Free Application for Federal Student Aid, is the form you fill out to get financial aid from the U.S. Department of Education to help pay for college.
The information you provide on the FAFSA will determine your eligibility for thousands of dollars worth of financial aid. So, due to the nature of it, the form is big and asks for a lot of information. To make it more seamless, we’ve broken down the process of filling out the FAFSA into 6 simple steps.
Understanding FAFSA
FAFSA determines which students receive financial aid and how much they will get. Believe it or not, over 13 million students each year get more than $120 billion in grants when they file the FAFSA. (a.k.a. you better fill out the FAFSA!)
Note: We’re calling this the FAFSA process because you’re truly not finished with it until the final step when you complete entrance counseling. You could also call this the Federal Aid Process.
Completing the FAFSA Process in 6 steps:
Get Informed
Fill it Out
Compare Aid Offers
Reply to Aid Offers
Sign a Loan Agreement
Complete Entrance Counseling
Step 1: Get Informed
The FAFSA collects information to determine your eligibility for financial aid. Your Expected Family Contribution, year in school, enrollment status, and the cost of attendance at the school are used to determine your eligibility.
Expected Family Contribution: A number that indicates a student’s ability to pay for college.
This number is calculated using a formula established by law and uses information such as your family’s income, assets, and benefits.
Your Year in School: The amount you can borrow in federal student loans depends on whether you’re an undergraduate student, a graduate or professional student, or a parent.
Undergraduate student
You can borrow between $5,500 and $12,500 per year in Direct Subsidized Loans and Direct Unsubsidized Loans depending on what year you are in school and your dependency status.
Graduate or professional student
You can borrow up to $20,500 each year in Direct Unsubsidized Loans. Direct PLUS Loans can also be used for the remainder of your college costs, as determined by your school, not covered by other financial aid.
Parent of a dependent undergraduate student
You can receive a Direct PLUS Loan for the remainder of your child’s college costs, as determined by their school, not covered by other financial aid.
Cost of Attendance: The price tag (cost) of a year at school. This number includes everything from the basic tuition and fees to the cost of books, supplies, and transportation.
Enrollment Status: This indicates whether a student is full-time, three-quarter time, part-time, withdrawn, graduated, etc.
Step 2: Fill it Out
After you’ve taken some time to understand what you’re actually applying to, you’ll need to sit down and apply. We won’t sugarcoat it – completing the application is quite an endeavor. However, if you come prepared with all the information you’ll need to fill it out, you can bang it out in around an hour.
Make sure you have the following on hand:
Your social security number (Make sure you verify this and don’t just go off of memory. It is crucial that you enter this correctly on the FAFSA form.)
Your parent’s social security numbers (if you are a dependent)
Your Alien Registration number (if you are not a US citizen)
Tax Information such as tax returns including IRS W-2 information
If applying as a dependent, make sure you have your parent(s) tax information as well
Records of any untaxed income such as child support, veteran benefits, etc.
Information on cash you may have, such as:
Bank account (checking and savings) information
Investments such as stocks and bonds
Business assets
Having this information at the ready will help speed up the process of filling out the FAFSA form. You can complete the form here.
Step 3: Compare Aid Offers
After you’ve filled out the FAFSA, the financial aid office at your school will send you an aid offer. Sometimes referred to as an aid letter, this will detail what financial aid you can receive. The offer will include the types of aid you may get from federal, state, private, and school sources. This sum of financial aid is your financial aid package.
Now, it’s a good idea to figure out the net price for each school you applied to. This will help you determine which school will be the most affordable. To do this:
Find the cost of attendance on the aid offer. If you cannot locate it on the aid offer, contact the school’s financial aid office.
Subtract grants, scholarships, and any savings you plan to put towards college from the total cost of attendance . This is known as your net or out-of-pocket cost.
Compare the net costs and amount of debt you would be taking for each school.
Step 4: Reply to Aid Offer
Once you’ve decided where you want to attend, you will want to reply to the aid offer.
Accept financial aid in this order: free money (i.e. scholarships, grants), earned money (i.e. work-study), borrowed money (i.e. federal student loans).
When accepting federal student loans, you want to accept a subsidized loan before an unsubsidized loan. This is because subsidized loans do not start accumulating interest until after you leave school.
Federal loans will typically have more favorable terms and conditions than private loans (interest rates, repayment periods, etc.). Evaluate your federal loan options and accept what makes sense before deciding on a private loan.
A few additional things you will want to be aware of:
Some scholarship and grant programs have specific requirements to remain eligible. If you receive a scholarship that renews year over year, make sure you’re informed of the ongoing requirements.
Accepting work-study is a great idea, but be realistic with yourself. Make sure to balance your time between work and studying.
Step 5: Sign Loan Agreement
Okay, now you’ve decided what part(s) of your financial aid package you want to accept. (deep breath, only 2 more steps…we promise)
To receive federal student loans, you will need to sign a document called the Master Promissory Note (MPN). Signing the MPN signifies you agreeing to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education. It also details the terms and conditions of the loan(s).
Entrance Counseling is the final step in the FAFSA process.
Through entrance counseling, you will learn what a loan is, how interest works, the terms and conditions of your loan, your options for repayment, and how to avoid default. Once you have completed counseling, a record of it will be sent to your school so your loan money can be disbursed.
After completing all these steps, you will have completed the FAFSA process and accepted financial aid. Following each step carefully is the most important part. If you have any questions, make sure to pause and find the answer before proceeding. (now deep breath #2 – you got this!)
You got accepted into your dream school. You’re so excited you can hardly contain it. A few days go by and the reality sets in. How am I going to pay for this?
You log into your school’s payment portal and look at the total cost of attendance. Before you panic, let’s break down all the steps you’ll need to take to pay for college.
Before College
Step 1: Complete the FAFSA
Each year, the U.S. Department of Education offers financial aid to college students. The FAFSA, or Free Application for Federal Student Aid, is a form you will need to fill out to be considered for this aid.
The FAFSA determines which students receive financial aid and how much they get. The information you provide in the form is also used by colleges and universities to determine eligibility for their scholarships and aid programs.
The FAFSA opens each year on October 1st. Students should fill out the FAFSA the year before they plan to start school. For example, if you plan to be in school by October of 2022, you’ll want to fill out the FAFSA in October of 2021.
We recommend that prospective students fill out the FAFSA as soon as they can after it opens. Note that you do not need to know exactly where you plan to enroll to fill out the FAFSA. In fact, you will likely fill out the FAFSA before you even apply to some schools.
Most people elect to fill out the FAFSA online, although there are other ways to complete it. For a more in-depth guide to the FAFSA, check out 6 Simple Steps to Fill Out the FAFSA.
Step 2: Apply for Grants and Scholarships
Grants and scholarships are also known as “free money” because they don’t need to be repaid. They tend to be merit-based, need-based, or a combination of both.
What does that mean?
Merit-based → awarded based on academic achievement or excelling in an interest, trait, or talent
Need-based → awarded based on financial need
The amount of money you can get in scholarships and grants ranges quite a bit. Some grants and scholarships will cover the cost of books, and others will cover the entire cost of tuition. According to Education Data, students receive $7,500 worth of scholarships and grants, on average.
To find college scholarships and grants, you can do the following:
Ask your high school guidance counselor for local resources. Local organizations such as Veterans Clubs, Rotary programs, and small businesses may offer scholarships.
Look to your employer or your parents’ employers. You’d be surprised how many companies offer scholarships!
Research organizations that cater to identities you hold, such as:
Ethnicity-based organizations
Women’s/Men’s Clubs
Volunteer or Service-based organizations (nonprofits, community organizations, civic groups)
Note that deadlines for each scholarship will be different. We recommend making a Google Sheet to track each scholarship or grant you plan to apply to, the deadline, and the materials required to apply.
Step 3: Get a Work-Study Job
After filling out the FAFSA, you may qualify for work-study. Work-study is a federal aid program that provides part-time jobs to college students with financial need. Qualifying for this program doesn’t guarantee you will receive a job, but it does open the door to various job opportunities not all students have.
To read more about work-study, check out this article.
Once you’ve selected which school you want to attend, look through their job portal online to find work-study jobs available to you.
Note: Again, not all students will qualify for work-study. Only those who demonstrate significant financial need based on their FAFSA will be eligible. If you are not eligible for work-study, there will still be other job opportunities you can take advantage of on or off campus.
Step 4: Examine Your Savings
Taking out private student loans is part of the average person’s college experience. But, as much as you can, you want to minimize how much you need to take. Examine your savings and see how much you can put towards paying for college.
Additionally, be smart about what you spend leading up to college. Maybe you just had a high school graduation party and received generous gifts. Instead of spending that money, consider putting it towards paying for college. (Trust me, your 22-year-old graduated self will thank you.)
Step 5: Take out Federal Student Loans
After filling out the FAFSA, you will receive a financial aid package from the schools you applied to. Within these aid packages, you may see grants and federal student loans.
Federal student loans tend to have lower interest rates and more favorable terms in comparison to private student loans. Thus, many students opt to take whatever federal loans are offered to them.
You should remember to accept federal financial aid in the following order: grants/scholarships (free money) → work-study (earned money) → loans (borrowed money)
Loans should always be accepted last after any scholarships, grants, or work-study.
Step 6: Borrow Private Student Loans
The average college student will take out private student loans to cover their remaining balance. But, private student loans should always come after federal loans as they need to be repaid and tend to have higher interest rates.
Each private loan will offer different elements that will vary in importance depending on the person. This means that there isn’t a single best private loan option; it varies by person.
Finding the best private student loan for you is a seamless process on Sparrow. Create an account, and in under 3 minutes, you can compare all your loan options in one place.
Payment Deadline Reminder
May 1st is the deadline for accepting a college’s offer for fall admission and for paying the tuition deposit to enroll.
This deadline is crucial to keep in mind because it impacts other parts of the process of paying for college. Be proactive and do things earlier than you think you may need to.
Every Summer While in College
Register and Pay for Classes
To be considered a full-time student and pay the same tuition rate, you need to make sure you enroll in classes. Try to register for classes as soon as your university will allow you to.
Before enrolling, consult with an advisor to ensure you’re taking the right classes to stay on track to graduating on time. If you plan ahead, you may be able to graduate early which would save you a lot of money in the long run.
Universities will typically send out tuition bills in July or August with the expectation that they are paid by the fall. If you have questions or concerns about when your tuition will be due, reach out to your university’s financial aid office.
Submit FAFSA for Next Year
If you’re using the FAFSA for any financial aid or loans, it will need to be resubmitted every year that you’re in college. This is because your financial situation may change from year to year, thus impacting the amount of money you qualify for.
If you submitted the FAFSA previously, you may be eligible to submit a Renewal FAFSA rather than having to fill out the entire form again. To reapply, simply log into the FAFSA portal online and click FAFSA Renewal.
Find a Job or Work-Study
If you previously qualified for work-study but haven’t accepted a position, check for opportunities for the next school year. If you didn’t qualify when you initially filled out the FAFSA, but your financial situation has changed, you should resubmit the FAFSA as you may qualify now.
If you aren’t eligible for work-study, looking for an on or off campus job may help you pay for college or manage expenses such as books or food.
After You Leave School
Review Your Loan Repayment Plan
Regardless of whether you have federal or private student loans (or both!), you’ll want to review your repayment plan options. Find one that works for you and stick with it!
This is also a good time to determine how you want to allocate funds to make payments. We recommend using the Debt Avalanche method as it is most effective, but this won’t be for everyone. Do some research on the different methods and again, find one that works for you and stick to it!
Find a Job
Most of us attend college with the hopes of finding a job we love. Of course, we hope that it can financially support us as well. You will likely start the job search before graduating, but if you haven’t, post-grad is a great time to start looking.
Use sites like LinkedIn and Indeed to find roles that both suit you and will help you pay off your loans.
Consider Refinancing Your Loans
If your interest rates seem out of this world (and not in a good way), you may want to consider refinancing. Refinancing would allow you to take out a new loan with a lower interest rate to cover all of your initial loans. If the concept of refinancing sounds overwhelming, check out our guide.
Summary
There is no one-size-fits-all solution to paying for college. You may end up with enough scholarships and grants to completely cover your college costs. Or, you may not get as much through the FAFSA as you expected, leaving you to take out more in private student loans.
Either way, there is no one solution to paying for college. This means that however you decide to pay for school, as long as it works for you, you’re making the right decision.
If the cost of the new shoes you just bought is higher than your credit score, let’s chat.
Your credit score impacts your ability to take out loans as well as the interest rate associated with them. If your credit score isn’t as high as you’d like it, or if it isn’t in the range necessary to open a new line of credit, here’s 5 ways you can improve your credit score.
Pay All Your Bills On Time
This one probably sounds like a no-brainer, but making all of your credit payments on time is crucial. Even if you’re just making the minimum payment, paying on time shows lenders that you’re able to keep up with your credit accounts.
Payment history makes up roughly 35% of your credit score1, so making even one late payment could impact your score quite a bit. A few ways to help prevent making late payments include:
Putting a reminder in your phone for a few days before your bill is due every month
Setting up automatic payments so the money comes out directly from your checking account (only do this if you’re sure the money will be there every month to avoid overdraft fees!)
Pay Off Your Debt
This one is also a no-brainer and much easier said than done, but paying off your debt can raise your credit score significantly. You should aim to have around a 30% or less credit utilization ratio. This ratio is the amount that you owe across all credit accounts compared with the total amount of available credit.
Source: Better Pockets
For example, you may have 3 credit cards all with a $1,000 limit. This means your total amount of available credit is $3,000 ($1,000 limit x 3 credit cards = $3,000).
If you owe $100 on the first credit card, $200 on the second credit card, and $300 on the third credit card, you would have a 20% credit utilization ratio ($600 compared to the $3,000 limit).
Paying off the money you owe can help lower your credit utilization ratio which shows lenders that you’re being responsible and not maxing out all of your available credit accounts.
Applying for a new line of credit will cause a “hard inquiry.” Hard inquiries occur when a creditor requests to look at your credit file to determine the level of risk you pose as a borrower.2 This hard inquiry can actually harm your credit score for the first few months after it occurs. If you’re concerned about your credit score, it’s best to stay away from anything that may harm your score even if it’s just temporary.
In the event that you do need a new line of credit and want to shop around for the best offers, it is best to do so in a 45 day period. This is because FICO, the most commonly used credit scoring model, considers similar loan-related inquiries that have occurred within 45 days of each other as a single inquiry in the scoring process.
For example, if you shopped around for a student loan with five different lenders over a period of 45 days, FICO would consider those five hard inquiries as one hard inquiry for credit scoring purposes. FICO is able to process your rate-shopping as exactly that: rate-shopping for one loan, not you attempting to take out five separate loans. As you can imagine, attempting to take out five separate loans would raise some red flags to FICO, as where rate-shopping does not.
Keep Credit Card Accounts Open
Closing any credit card accounts you currently have open, for any reason, may not help your credit score in the way you think. Every time you open a line of credit, it adds to the length of your credit history. Credit history is important in calculating your credit score because it proves to lenders that you’ve been able to manage your credit consistently over time. Thus, even if you don’t use a credit card, keeping the account open can help contribute to proving your credit worthiness.
You may want to consider closing your credit card account, however, if the card has an annual fee that you simply can’t afford.
Pay Attention to the Credit Report
1 in 8 Americans is unaware of their credit score.3 Don’t worry – we won’t let that be you.
Numerous credit card companies, banks, and other financial institutions now offer free credit score reports. If yours doesn’t, you can use the Annual Credit Report to get a free copy of yours every 12 months from each of the three credit bureaus.
Knowing your credit score is important for a variety of reasons. Not only is it important to understand where you are financially, but it’s important to check for errors, fraud, or potential identity theft. If something just doesn’t look right about your credit report, it’s important to inquire. This level of attention to detail could be the determining factor in you qualifying for a new loan or line of credit.
Summary
If your credit score it’s quite where you want it, don’t fret. There are numerous ways to increase it. What’s important is that you remain consistent and dedicated to these methods. If you do, you will notice your score increasing over time.
If you’re worried about how your credit score may impact your ability to take out a student loan, we got you covered there, too. There are lenders that will lend to folks with no credit or bad credit. Check out your options here.
There’s no feeling like the feeling of finally getting your financial aid package. Congrats!
As you’re going through your financial aid package, you might see something along the lines of “Federal Work-Study” and an amount attached to it. What exactly does that mean?
In this article, we’ll break down what federal work-study is and if it’s a good idea to accept it.
What Is Work-Study?
Work-study is a federal aid program that provides part-time jobs to undergraduate and graduate students with financial need. While work-study aid won’t completely cover the cost of college, it can help you lower the amount you need to borrow.
Who is Eligible for Work-Study?
To qualify for work-study, you must demonstrate financial need, which is determined by the information you provide on the FAFSA. Both full-time and part-time undergraduate, graduate, and professional students are eligible for the work-study program.
That said, you may qualify for work-study but be ineligible to receive it if your school does not participate in the federal work-study program. Around 3,400 postsecondary institutions participate.
Additionally, receiving federal work-study aid in your financial aid package does not guarantee you a job in the program. The funds will only be available to you if you secure a work-study job through your college or university.
Jobs in the Work-Study Program
If you receive federal work-study aid, it is your responsibility to find a job within the program if you actually want to receive the funds. The jobs available will differ from school to school, although most schools offer both on-campus and off-campus opportunities.
Some common on-campus opportunities include working as a library assistant, a department receptionist, or as a cashier at your school’s dining hall. Some common off-campus opportunities include working for non-profit organizations and public agencies, providing support in a variety of areas. That said, the exact work-study job you take on will depend on what your college/university offers and what off-campus opportunities are available to you.
Remember, just because you received work-study aid in your financial aid package does not mean that you will automatically get a job. Some schools might match students with a job on-campus or off-campus, but most will require that you seek out these opportunities for yourself. You should speak to your financial aid office to learn more about what the process looks like at your school and what opportunities are available.
How Much Does Work-Study Pay?
The amount of money you make through a work-study job depends on when you applied for work-study, your level of financial need, and the funds your school has for the work-study program.
That said, jobs under the work-study program will pay at least $7.25 per hour, per federal regulations. If the state minimum wage is higher, you’ll earn at least that amount. According to a 2020 report by Sallie Mae, the average work-study award was about $1,847 for students with an eligible job.
Keep in mind that in order to receive the entire amount of work-study aid you are eligible to receive, you must work enough hours to earn it. For example, if you received up to $1,847 in work-study aid, and the wage of your work-study job is $7.25 per hour, you will need to work around 254 hours total to earn the entire aid award. That said, some colleges and universities may cap the amount of hours you can work per week, often to ensure that students can balance their paid work and their classwork. If you have questions about how much you can work, reach out to your school’s financial aid office.
What Can You Spend Work-Study Aid On?
Unlike other forms of financial aid, you’ll be paid directly by check or direct deposit into your bank account. However, you can always opt to have the money credited into your student account to cover the cost of tuition or housing.
Regardless, there really isn’t a requirement to use your work-study funds for anything specific, so feel free to spend your hard-earned money on groceries or other expenses you need to cover.
Should I Accept Federal Work-Study Aid?
Before accepting any aid, weigh out all the financial aid offered to you andaccept it intentionally. When it comes to it, accept your aid in the following order:
Always accept loans at the end as they may be more costly in the long run with the accrued interest that will add up post-graduation. Work-study will at least give you an opportunity to fund your education by way of a steady job on or off-campus. The less money you have to borrow, the better.
Frequently Asked Questions About Federal Work-Study
Is Work-Study the Same as an Internship?
No, work-study is not the same as an internship. While work-study is a need-based, federally-run program. Internships are often conducted by public and private companies and do not consider your financial need when hiring. Also, while work-study jobs are always paid, internships are often unpaid opportunities.
What are the Disadvantages of Work-Study?
While there are few disadvantages of receiving work-study aid, some of the commonly reported ones are:
Jobs may be scarce or competitive to receive.
Compensation may be lower than other non-work-study jobs on or off campus.
There may be a cap on the number of hours you can work per week.
Does Work-Study Count as Income on the FAFSA?
Work-study funds are considered taxable income, however, it won’t be counted in the calculations that determine your financial aid eligibility in future years. So, make sure to report earned work-study aid as income, but rest assured that it won’t count against you when filing the FAFSA in future years.
To Wrap Up
Sometimes, participating or not participating in the program might impact a student’s decision to attend a certain college/university. But, you’re taking an important step in trying to learn more about what your aid means before accepting it. Way to be proactive in your collegiate journey!
If you haven’t already done so, fill out the FAFSA as soon as possible. Filling out the form sooner might mean more work-study aid. When it comes to the federal work-study program, it’s important to reach out to your college/university’s financial aid office to determine what jobs are available.
With rising college costs, student loans are placing a strain on more and more people’s lives. Student loan refinancing can help with that. This is what you need to know about when to refinance your student loan:
What is Refinancing?
Refinancing is when a lender agrees to pay off your current loan(s) in their entirety. You’ll then take out a new loan to pay this lender back. A big reason why refinancing is popular is that you can change the terms of this new loan. For example, you can secure a lower interest rate or change the repayment plan.
How Does Student Loan Refinancing Work?
When you refinance your student loans, you combine one, some, or all of your current loans into single a new loan. You can do this with both federal and private loans. By doing this, you can choose new terms for the loan such as:
Changing the length of the loan
Getting a new interest rate
Switching from variable to fixed rates
How to Find the Best Student Loan Refinance Option
Finding the right refinancing option should be a simple. Use Sparrow to find the best student loan refinance option for you. Sparrow shows you the most important information and simplifies the entire process.
There are certain aspects that lenders look at to see if you’re qualified for refinancing. The main things you want to keep in mind are having a steady income, a good credit score, and a good payment history.
Steady Income
Lenders look at your income to ensure you’ve got enough money coming in each month to pay off your monthly payments. You want enough to be able to support your current lifestyle in addition to making payments on your loan. A good way to determine this is by looking at your debt-to-income ratio. Take your monthly debt and divide it by your monthly income. The lower the number, the better condition you are in.
Good Credit
Your credit score is another important factor that lenders use to access whether or not you qualify for student loan refinancing. You want to have a credit score at least in the high 600s. The higher, the better. A high credit score helps lenders know that they can trust to make timely payments on the loan. On top of that, a good credit score will allow you to access lower interest rates.
Lenders want to make sure that they can trust you to make payments on time. Because of that, you’ll want to make sure that you maintain a strong payment history on all debts, particularly your student debt. For example, if your record shows that you’ve always made payments on time, you’re more likely to qualify. On the other hand, a record of missed payments might make lenders think twice about letting you borrow money.
How Much Will I Save?
The amount of money you’ll save depends largely on your personal situation and the terms of your new loan. However, people can save anywhere between hundreds to tens of thousands of dollars over the life of the loan.
Borrowers who usedSparrow to refinance reduced their interest rate by 2.29 percentage points on average, saving them around $17k over the life of their new loan.
When should I refinance my loans?
There are certain factors to look at to see if now is the right time to refinance your loans. Here are some of them:
Good Financial Situation
Has your financial situation improved since you got your loans? Do you have a better income or credit score? Are you currently in a good financial position? If so, now would be a good time to refinance your student loans.
You Have Private Student Loans
Refinancing when you have private student loans has little to no downsides, as long as you can secure better terms. If you have private student loans, it might be a good move to refinance.
Student loan interest rates can change based on the Federal Reserve’s actions. When the Federal Reserve cuts interest rates, it might be a good time to refinance your student debt while rates are low. Similarly, if you’ve been waiting to refinance and it looks like the Federal Reserve will be hiking interest rates in the near future, you may want to take advantage of the current situation by refinancing. Assuming you can get a lower rate and better terms, refinancing is typically a smart move since you are almost guaranteed to save money over the lifetime of your loan.
If your current interest rate is high or variable, refinancing is a good option. You may be able to switch over to a lower fixed rate, which can help make handling your monthly payments a lot easier.
Can I Refinance My Student Loans More Than Once?
Yes. There is no limit to how many times you can refinance your loans. Additionally, there are typically no fees for refinancing your student loans. So, if your credit score or income has recently improved, you can consider refinancing as many times as you want until you’ve got the best student loan for your financial situation.
Why Shouldn’t I Refinance My Student Loans?
Just like there are many reasons why you should refinance, there are just as many for why you shouldn’t. Here are some of them:
You plan to use federal loan benefits
If you refinance your federal loans, you’re turning them into private loans. This means giving up the option to participate in programs that come with having a federal loan such as federal student loan relief or income-based repayment plans. If you would still like to take advantage of those benefits, then don’t refinance.
You are Pursuing Loan Forgiveness
People who refinance their loans don’t qualify for federal loan forgiveness programs such as the Public Service Loan Forgiveness Program. If this is something you’re hoping to do, then don’t refinance your loans.
You Recently Declared Bankruptcy
It’s not impossible to refinance after declaring bankruptcy, but it can be harder. Most lenders won’t consider lending to you until 4-10 years have passed since you went bankrupt.
You Don’t Have a Good Financial Situation
If you don’t have a steady income or good credit, then it’s not a good idea to refinance your student loans now.
There’s a lot to think about when deciding to refinance your student loans. At the end of the day, though, if you’re in a good position to make this move, then do it. Refinancing could save you a lot of time and money over the lifetime of the loan.
Sparrow is a great place to get started. Sparrow is the fastest way to compare real, personalized student loan rates. Complete the Sparrow application to get prequalified offers from 15+ lenders through one application.
Understanding how credit works may feel impossible.
A great place to start is by learning the difference between a hard and soft credit inquiry. We’ll give you all the ‘deets below.
Important Note
Before we dive in, we want to note that credit inquiries are also often referred to as “credit pulls” or “credit checks.” In this article, we’ll refer to them as “credit inquiries.”
What is a Hard Credit Inquiry?
A hard credit inquiry occurs when a financial institution checks your credit report when making a lending decision. For example, this may happen if you decide to apply for a mortgage, credit card, or student loan.
When doing a hard credit inquiry, lenders are attempting to assess how you have handled your credit in the past. This can include how you’ve managed your debts, whether you’ve made payments on time, or if you seem to have fumbled your way through paying your debts.
To a lender, each new credit application indicates a potential new debt. Thus, your credit score may temporarily drop after a hard inquiry.1 Don’t panic, though. FICO says hard inquiries typically only lower credit scores by 0-5 points. Generally speaking, one hard inquiry won’t cause too much trouble, but several hard inquiries could. (We’ll touch on this below.)
This hard inquiry will remain on your credit report for up to 2 years. Generally, this doesn’t bring down credit scores the whole time. For people that keep up with their debt payments, credit scores tend to come back up within a few months.
What is a Soft Credit Inquiry?
A soft credit inquiry occurs when an individual or company checks your credit as part of a personal curiosity or background check. For example, this may happen if you decide to check your credit score or if an employer checks it before hiring you.
Because these inquiries are not associated with a new potential debt, they will not impact your credit score in any way. Unlike a hard inquiry, a soft inquiry will only be visible to you in your credit report.
How Many Hard Inquiries is Too Many?
How much a hard inquiry impacts your credit score is dependent on your credit health. Lenders see multiple credit applications in a short timeframe as a sign of risk.
Think of it this way: If you applied for 10 credit cards in a one week span, something might be off. It could indicate a need for additional credit, a lack of secure funds, or an inability to pay off other debt. To lenders, this isn’t ideal.
Thus, one or two hard inquiries likely won’t have too much of a hit on your credit score, but having several in a short amount of time likely will.
There are some exceptions to this. For example, having hard inquiries from a mortgage and student loan at the same time likely won’t hit your credit score as hard as if you applied for 10 credit cards in the span of 3 weeks.
So, there isn’t a finite number of hard inquiries that is considered “too many.” Rather, you should try to think about what the hard inquiries are for and how that makes you appear as a potential borrower.
Can You Remove Hard Inquiries?
You can only remove hard inquiries in certain circumstances.
First, you should check your credit report from all three bureaus at least once a year. You can do this for free at AnnualCreditReport.com. (Remember: Because this is a soft inquiry, it won’t impact your score to check it!) Understanding your credit score and where it’s at is the first step to bringing it up.
When looking at your credit report, try to make note of any hard inquiries that don’t seem to make sense. While uncommon, there could be hard inquiries you don’t recognize, and of course, you would want to dispute those.
If you do see one you don’t recognize, reach out to the respective creditor. You should be super careful when it comes to sharing credit information over the phone or online with someone. Always use the contact information in the credit report. This will ensure that the creditor you call is actually who they say they are.
The creditor will then be able to verify the unfamiliar hard inquiry. Oftentimes, it is simply from something we forgot, but it doesn’t hurt to verify it. If the hard inquiry does end up being a result of fraudulent activity, you can:
Report it to law enforcement
Enact a fraud alert or security freeze with your creditor
Dispute the inquiry to have it removed from your credit report
Why Your Credit Score Matters
Your credit score is a large part of your financial wellness, and it takes some time to build. Monitoring changes in your credit score helps you manage it better and keep your score as high as possible.
Deciphering your student aid package is already like reading IKEA furniture instructions. Confusing.
One of the biggest points of confusion for prospective college students is the difference between subsidized and unsubsidized loans. Understanding the difference is important as it impacts your interest, repayment, and overall student debt.
What Are Direct Subsidized and Unsubsidized Loans?
Both Direct Subsidized and Direct Unsubsidized Loans are forms of federalfinancial aid offered by the U.S. Department of Education to support students in paying for higher education.
Neither Direct Subsidized or Direct Unsubsidized loans require you to make payments while in school.
Direct Subsidized Loans
What is a Direct Subsidized Loan?
Direct Subsidized loans are available to undergraduate students who are deemed eligible. The US Department of Education pays the interest on Direct Subsidized loans during certain periods such as:
When you’re in school (if at at least half-time status)
For 6 months after you graduate or leave school (This is called a grace period!)
If you need to defer your loans (postponing loan payments)
During these periods, interest won’t accrue and your principal balance won’t grow (this means that your loan amount isn’t getting bigger – ideal scenario!).
Who is Eligible for Direct Subsidized Loans?
In order to qualify for Direct Subsidized loans, you must meet all of the federal student aid requirements. Filling out the FAFSA will allow you to see if you qualify.
It’s important to note that Direct Subsidized loans are only available to undergraduate students who demonstrate financial need. This is one of the major differences between Subsidized and Unsubsidized loans. Each respective university will determine how much students can borrow in Direct Subsidized loans as the amount cannot exceed the determined financial need.
You are also only eligible to receive Direct Subsidized loans for 150% of your program length. This means that, for example, if you are in a 4-year program, you can only receive Direct Subsidized loans for 6 years (4 * 150%).
How Much Can I Borrow in Subsidized Loans?
There is a limit in how much you can borrow in Direct Subsidized Loans. The following chart breaks down the annual limits which are based on your year in school.
Year in School
Direct Subsidized Loan Limit
Undergrad Year 1 Annual Limit
$3,500
Undergrad Year 2 Annual Limit
$4,500
Undergrad Year 3 Annual Limit
$5,500
Lifetime Subsidized Loan Max
$23,000
Direct Unsubsidized Loans
What is a Direct Unsubsidized Loan?
Unsubsidized loans differ from subsidized loans in that interest begins to accrue as soon as the loan amount is disbursed (sent out) and you are responsible for that interest. So, if you use a Direct Unsubsidized loan to pay for your freshman year of college, interest will accrue on that loan for the entirety of your college career and beyond.
Who is Eligible for Direct Unsubsidized Loans?
Direct Unsubsidized loans are a tiny bit more flexible than Direct Subsidized loans in that they are available to both undergraduates and graduate students, and you don’t need to provide financial need in order to secure one.
Similar to Direct Subsidized loans, each university will determine how much you can borrow in unsubsidized loans based on the cost of attendance and the other elements of the financial aid package. So, for example, if the cost to attend your university was covered by scholarships and a Direct Subsidized loan, you might not be able to secure a Direct Unsubsidized loan.
How Much Can I Borrow in Unsubsidized Loans?
Unlike subsidized loans, unsubsidized loans don’t have a maximum eligibility period. They do, however, have a borrowing limit just like subsidized loans. This is where things could get a bit confusing, so stick with us.
Unsubsidized loan limits are based on your year in school, but also factor in how much you received in Direct Subsidized loans and your dependent status. So what does this mean?
Let’s use the chart and scenarios below to illustrate this.
Year in School
Dependent Status Students
Independent Status Students
Undergrad Year 1 Annual Limit
$5,500
$9,500
Undergrad Year 2 Annual Limit
$6,500
$10,500
Undergrad Year 3 Annual Limit
$7,500
$12,500
Graduate/Professional Degree Annual limit
N/A
$20,500
Subsidized
$31,000
$57,500 for undergrads$138,500 for graduate/professional students
Scenario 1: Sara, a 1st year undergraduate student who filed as an independent
Sara receives $1,500 in Direct Subsidized Loans
Sara would be eligible for up to $8,000 in Direct Unsubsidized loans
($9,500 – $1,500 = $8,000)
Scenario 2: Michael, a 3rd year undergraduate student who filed as a dependent
Michael receives $2,000 in Direct Subsidized Loans
Michael would be eligible for $5,500 in Direct Unsubsidized loans
($7,500 – $2,000 = $5,500)
Are Subsidized or Unsubsidized Loans Better?
In general, Subsidized loans will be a better option as interest won’t be accruing as it would with Unsubsidized loans.
However, if you aren’t eligible for Direct Subsidized loans because you don’t demonstrate enough financial need, then Direct Unsubsidized loans will be the better option (and your only option likely).
Either way, federal loans in general will likely be the best loan option in comparison to private lending options. Thus, you should take out what you can in federal loans before dipping into private loan options.
Final Thoughts
Federal Direct Subsidized and Unsubsidized loans are great options to explore if you are offered them. If federal loans don’t cover your financial need entirely, it may be time to explore private loan options.
You may have heard the news – the federal student loan forbearance period has been extended again until student loan forgiveness litigation is resolved or debt is forgiven.
If you’re feeling out of the loop after reading that, here’s a quick recap of how we got here:
COVID happened (no further explanation needed)
Loan payments…while in a pandemic? No way.
Federal student loan payments were suspended, without interest, until February 1st, 2022, then later extended again until May 1st, 2022, and again until September 1st, 2022, and again until December 31st, 2022.
Now, amidst a motion to forgive up to $20,000 in student loan debt per borrower, litigation is preventing it from moving forward. As a result, payments have been paused again until 60 days after litigation is resolved or debt is forgiven. If neither happen by June 30th, 2023, payments will resume 60 days after that.
What Does This All Mean?
With President Biden’s executive action to extend the forbearance period, your federal loans will not require payments or accrue interest until 60 days after litigation is resolved or debt is forgiven, or 60 days after June 30th, 2023 if neither occur before then.
Previously, borrowers planned to resume payments on January 1st, 2023. Now, you can hang tight until an announcement is made about when payments will resume.
During this time, payments are not required. However, you can still make payments.
Let’s break down all of the options that come with this extended forbearance.
Pausing Payments
If you want to take advantage of the extended forbearance period and temporarily pause payments on your loan, you don’t need to do anything. The Education Department instructed all federal loan servicers to automatically place all federal loans into a forbearance without interest.
Continue Making Payments
If you want to continue making payments, you absolutely can. If you do, you will pay 0 new interest on your loans during this period. This will save you money in the long run. You can continue making payments as you typically would.
If You’re Behind on Payments
If you’ve been behind on payments and your loans have entered either loan rehabilitation, default, or a separate forbearance, this section is for you.
If you are currently in loan rehabilitation, the original and extended forbearance periods will count towards the nine months included in rehabilitation.
If your loans have ended up in default, the typical collections activities will be suspended until the extended forbearance period is up. You can, however, get a refund for any forced student loan payments made between March 13, 2020 and now.
If your loans were already in forbearance before this period, any interest that accrued will still be added onto your loan principal when repayment begins. No new interest will be calculated during the new forbearance period.
If You’re Working Towards PSLF
The new forbearance period won’t reverse any progress you’ve made towards the PSLF program. As long as you are continuing to work with a qualifying employer and meeting the other requirements, you are all set.
You can choose whether or not you want to make payments during the new forbearance period. If you do, however, it won’t get you ahead on payments.
If Your Income Has Changed
If you experience a shift in income and want to continue making loan payments, we recommend opting for an income-driven repayment plan. This plan will remain in effect even after the forbearance period is up.
If You Have FFEL Loans
If you have FFEL loans, you can receive the no-interest forbearance *if* the government owns the loans. Most FFEL borrowers will not qualify under this, as the majority of FFEL loans are commercially held. You can verify whether or not you qualify by logging into your studentaid.gov account.
Final Thoughts
If you are having any confusion or difficulty navigating this new information, your best bet is to reach out to your loan servicer. Ultimately, they have control over your loan and can provide the best support for your individual needs and situation.
The Parent PLUS loan program was launched in 1980 through the Higher Education Act, giving high-asset families a bit of liquidity to cover their Expected Family Contribution (EFC). Since then, the program has expanded to cover other demographics, providing a wider audience with federally-sponsored college financing.
If you’re considering borrowing a Parent PLUS loan to cover the cost of your child’s education, there are several factors to consider. This guide explains everything you need to know, from the eligibility criteria, to the interest rates, to how to navigate repayment.
A Parent PLUS Loan is a type of Direct loan provided by the U.S. Department of Education that allows eligible parents to borrow money to pay for their child’s education.
Be the biological or adoptive parent (or sometimes stepparent) of an undergraduate, dependent student who is enrolled at least half-time at an eligible school
Have a decent credit history (although there are other additional requirements you can meet to get around this)
Note that grandparents and legal guardians are not eligible for Parent PLUS loans unless they have adopted the student.
The student you borrow for must also:
Be a U.S. citizen or eligible non-citizen
Nothave any previous student loan defaults on their record that haven’t been resolved
Credit Requirements
When you borrow a Parent PLUS loan, your credit history will be checked. To pass, you must not have any of the following on your record within the 2 years prior to applying:
One or more debts that are more than 90 days overdue that total more than $2,085
A collection or charge off
You must also not have any of the following within the 5 years prior to applying:
A loan default
A discharge of debts via bankruptcy
A foreclosure
A repossession
A tax lien
Any wage garnishment
A write-off of a federal student aid debt
Can You Get a Parent Plus Loan with Bad Credit?
If you are concerned about meeting the credit requirements of a Parent PLUS loan, there are some ways to get around it:
Prove extenuating circumstances. If you believe your credit is insufficient due to extenuating circumstances, you can submit adocument to the U.S. Department of Education. The document will require you to detail the circumstances leading to poor credit history. For example, situations of divorce or excessive medical bills may contribute to extenuating circumstances. While this doesn’t guarantee you eligibility, it is always worth a shot.
Obtain an endorser. An endorser is an individual who agrees to sign onto the loan alongside you, taking legal responsibility for the loan just like you. In the realm of private student loans, this is called a cosigner.
Adding an endorser to the loan can help you qualify if your credit is not as established as it could be. Note that the endorser cannot be the child you are borrowing for.
To borrow a Parent PLUS loan, complete the online application. Note that the application will instruct you to complete the FAFSAprior to completing the Parent PLUS loan application.
Parent PLUS loans can cover up to the cost of attendance minus other aid your child receives. For example, if the cost of attendance at your child’s school is $30,000, and they received $10,000 in additional aid, you may be eligible to borrow up to $20,000 in a Parent PLUS loan.
Note that you do not have to accept the full amount given. For example, if offered $20,000, you can choose to only borrow $15,000.
What Are the Interest Rates?
Parent PLUS loan rates change annually. For loans disbursed on or after July 1, 2022 and before July 1, 2023, the interest rate is 7.54%. This interest rate is fixed, meaning it will remain the same throughout the life of the loan.
Are There Fees?
Parent PLUS loans do come with a loan fee. This loan fee is a percentage of the amount being borrowed and is deducted from each disbursement over the life of the loan. While the loan fee can and does change, it has remained at 4.228% the last two academic years.
So, for example, if you borrow $10,000, $422.80 will be deducted due to the loan fee, and $9,577.20 will be disbursed to the school. That said, you will still be responsible for repaying the entire $10,000.
Parent PLUS Loan Repayment
Repaying a Parent PLUS loan is the legal responsibility of the borrower – the parent. While you may ask your child to contribute to repayment, it is ultimately your responsibility. Before borrowing a Parent PLUS loan, take the time to understand what that means for you in terms of repayment and to discuss repayment with your child.
Do I Have to Make Payments While My Child is Still in School?
When borrowing a Parent PLUS loan, you will have the option to request adeferment. This deferment would excuse you from making payments while your child is enrolled and for an additional six months after your child graduates.
However, if a deferment is not requested, you will be expected to make payments immediately after the loan is disbursed.
Regardless of whether you decide to make payments while your child is in school, interest will continue to accrue on the loan.
Standard 10-Year Repayment Plan: You make equal monthly payments for 10 years. With a standard repayment plan, you’ll pay less in interest and pay off your loans faster than you would on other plans.
Graduate Repayment Plan: You make small monthly payments over the course of 25 years, with the monthly payment increasing every two years. Graduated repayment plan would result in smaller monthly payments upfront that gradually increase over time.
Extended Repayment Plan: You make equal monthly payments for the entire 25-year repayment period. With the Extended Repayment Plan, you will have smaller monthly payments, but you will pay more over the life of the loan.
Income-Contingent Repayment Plan: You make payments that are set based on your income (typically 10-20% of your income). With an income-contingent repayment plan, you will likely pay more over the life of the loan in comparison to the standard repayment plan. Note that you will only qualify for income-contingent repayment if you consolidate your Parent PLUS loans.
What If I Can’t Repay My Parent PLUS Loan?
If you’re struggling to make payments on your Parent PLUS loan, there are a few things you can do:
Refinance the Parent PLUS loan(s) to a private student loan. By refinancing your federal student loan through a private lender, you may be able to score a lower interest rate or longer repayment period, which could in turn, lower your monthly payment.
Switch repayment plans. If you are currently on the standard repayment plan, consider switching to the extended repayment plan. By doing so, your monthly payments will decrease, which may make it more manageable to repay.
Request a deferment or forbearance. Deferment and forbearance both allow you to temporarily postpone payments. You will need to be able to prove financial or other hardship, however, to qualify. Additionally, interest will still accrue during these periods, which could increase your monthly payment after you return to repayment.
Before making any decision regarding your Parent PLUS loan(s), contact your loan servicer. They can help you determine the best course of action to remedy your situation.
Can I Transfer My Parent PLUS Loan to My Child?
Parent PLUS loans cannot be directly transferred to a child. However, you can have your child refinance the loan through a private lender to remove your name from the loan.
Note that each student loan forgiveness program will have its own unique requirements. To ensure you are eligible for a certain forgiveness program, make sure to read its eligibility requirements carefully.
A Parent PLUS loan is a great option for parents who want to help support their children through their education. Before agreeing to any loan, however, it’s a good practice to compare interest rates across all loans. In fact, you may be able to score an even lower interest rate with a private student loan.
The bad news: Unfortunately, there’s several mistakes we see students make when dealing with their student loans.
The good news: We’ve compiled them into a list with steps on how to avoid those mistakes so you don’t make them.
Here we go!
1. Borrowing Too Much Money
These aren’t in any specific order, but this one definitely deserves to be first. Borrowing too much money is a classic student loan mistake.
Just because you can borrow it, doesn’t mean you should. Borrowing money may be a quick fix to pay for your dream school, but it’s important to consider the reality that that money will have to be paid back eventually.
How to Avoid:Think realistically about what it would look like to pay this amount back after you graduate. Always look for grants and scholarships first before even considering student loans.
2. Not Looking Around for The Best Rates
All too often, college students take out a loan at the first lender they find after a Google search. (you can’t see us right now, but we’re screaming)
Once you commit to taking out a loan somewhere, you can’t really back out. So, if you decide to borrow $10,000 from Lender A at an 8% interest rate, only to find Lender B five minutes later who would offer you $10,000 at a 4% interest rate, you’re locked into Lender A. This is why searching for the best rates is crucial.
How to Avoid:We usually save our shameless plugs for the end, but we’re putting it here, upfront: Use Sparrow. In less than 5 minutes, we’ll find the lender with the best interest rate for you, without you having to do the search yourself.
3. Relying on Student Loans for Unnecessary Expenses
Student loans are intended for school-related expenses such as tuition, textbooks, and campus housing. However, students often pull from their available student loan funds to pay for spring break vacations or shopping trips.
While tempting, this isn’t a great use of debt.
How to Avoid:Only use your student loan debt for school-related expenses.
4. Going to Private Loans Before Federal Loans
Private student loans tend to have both higher interest rates and less favorable terms and conditions than do federal loans. While the private loan route may be a bit more simple than the federal route (we get it, the FAFSA is an absolute animal), it ultimately isn’t where you want to start.
How to Avoid:Always exhausted your federal loan options before dipping into private student loans. Be sure to fill out the FAFSA before the deadline, and always examine your aid package carefully to decide which aid you want to accept.
5. Thinking the Federal Aid Options are The Only Options
While exhausting federal aid options first is incredibly important, it’s important to understand that federal aid isn’t the only option. Always pursue aid in the following way:
When looking at your federal student loan options, it’s also important to consider their interest rates and terms. While rare, some private student loan options may have lower interest rates than some federal loan options. Most private student loans, however, will accrue interest while you’re in school. Federal student loans tend to not accrue interest while you’re in school. So, if you opt for a private student loan over the federal student loan that’s offered to you, be sure to check both the interest rates and the terms to determine which option will be better for you in the long run.
Again, be sure to use Sparrow to confirm before making any move to commit to one lender over another.
How to Avoid:Before accepting federal aid, students should apply for any and all scholarships and grants they can get their hands on.
6. Not Taking Advantage of Opportunities to Save Money
Many lenders offer ways to save money on your student debt, but they can be easy to miss. These opportunities come in a variety of forms such as automatic payment discounts and GPA rewards.
For example, Sallie Mae, a large private lender, offers a 0.25% discount on student loans if the borrower opts in to automatic payments.
Similarly, Discover Student Loans offers a one-time cash reward for new borrowers who earned a 3.0 GPA in college or graduate school.
While these may be small bits of money here and there, we don’t miss ANY free money in this house.
How to Avoid:Actively look for opportunities to save money. Contact your lender and ask if they provide any discounts or rewards to borrowers.
7. Never Looking into Refinancing
The idea of refinancing can be scary, but that doesn’t mean you shouldn’t look into it. If your interest rate seems a bit high, or if your credit has improved greatly since you took out the loan, you may be able to secure a refinance loan at a much lower interest rate which would save you money over time.
How to Avoid:Consider refinancing if it makes sense for you. Don’t sit with a loan at a super high interest rate if you feel like you may be able to get lower! Looking into refinancing can’t hurt.
8. Postponing Payments When it Isn’t Necessary
There are options to delay repayment, but you shouldn’t use them if you don’t absolutely need them. Even with a deferment or forbearance, interest will still continue to accrue on some loans. Delaying repayment will only put you in more debt.
How to Avoid:If you can afford to make payments, keep making them. Only request a deferment or forbearance where absolutely necessary.
9. Never Making Extra Payments/Only Paying the Minimum
If you make only the monthly payment, it will take you the full repayment period to pay off your student debt. While that technically works out in the end, you’ll end up paying a lot more in the long run, especially if your interest rate is on the higher side.
How to Avoid:Make more than the minimum monthly payment when possible. Any extra money you can throw at your loans will help hack away at the interest, and eventually the principal balance, saving you money over time.
10. Not Considering the Bigger Picture
When looking into student loans, remember to think about them as a real part of your future. If you choose to accumulate $50,000 in student loan debt, you will eventually have to pay that back. It’s important to be realistic about how this will impact your future self.
Many students blindly agree to student loans year after year without actually knowing how much debt they are agreeing to or how they will actually pay it back.
How to Avoid:Always think about the future and consider how student debt will factor into that.
While it’s a lot to think about, you should ask yourself:
What career do I plan to pursue? Will the average salary for that career support me in making loan payments?
Do I plan to move out immediately after school? Will my career support both rent and loan payments?
Summary
While some of these mistakes are fixable, others aren’t that simple. Thinking ahead when it comes to these mistakes will help prevent you from making them.
As if paying for undergrad wasn’t bad enough, now you have to pay for grad school! (*cries in student debt*)
One of the options you may have for paying for grad school is a Grad PLUS loan. Let’s break down what a Grad PLUS loan is, who is eligible for one, and what it’s like to actually borrow one.
What is a Grad PLUS Loan?
A Grad PLUS loan is a federal loan, funded by the federal government, designed specifically for students pursuing graduate or professional school.
Who is Eligible for a Grad Plus Loan?
In order to be eligible for a Grad PLUS loan, students must:
Fill out the FAFSA
Exhibit creditworthiness
After filling out the FAFSA, lenders will check the student’s credit history to determine eligibility. Students with good credit history often find it easier to borrow from this program. Similarly, students with poor credit history often find it more challenging to borrow from this program.
Having poor credit doesn’t mean you’re out of luck, though. Typically, bringing on a creditworthy cosigner allows students with poor credit to borrow funds through a Grad PLUS loan.
Unlike some undergraduate student loans, demonstrating financial need is not part of the eligibility requirements for Grad PLUS loans.
How Much Can I Borrow in a Grad PLUS Loan?
Grad PLUS loans can cover the entire cost of attendance minus any other financial aid a student has.
For example, if the cost of attendance at your respective grad school was $30,000 and you received $10,000 in university scholarships, you could potentially pay the entire remaining $20,000 through a Grad PLUS loan.
What are the Interest Rates on Grad PLUS Loans?
Grad PLUS loans have a fixed interest rate set by the federal government. This fixed interest rate can shift, however, as the government makes changes to the interest rate each academic year.
The interest rates on Grad PLUS loans do tend to be higher than other federal student loans. For example, for the July 2019 – July 2020 academic year, the rate was 7.08%.1
What Fees are There for Grad PLUS Loans?
One major fee you should be aware of when taking out a Grad PLUS loan is the origination fee. An origination fee is an upfront fee a lender charges to process a new loan. On a Grad PLUS loan, this origination fee tends to be around 4.3% of the total loan amount.
For example, if you are borrowing $20,000 in a Grad PLUS loan, you will pay $860 in origination fees. This fee will show up as part of your outstanding loan balance.
What are the Repayment Options for Grad PLUS Loans?
The typical repayment plan for Grad PLUS Loans is the standard repayment term of 10 years. This operates similarly to federal undergraduate student loans.
You may also be eligible for the typical repayment plans offered by the Department of Education such as the income-driven repayment plan, pay-as-you-earn plan, or graduated repayment plan.
Similar to federal undergraduate student loans, there is a grace period of 6 months after you graduate (or leave school) before payments are required.
It’s important to think realistically when choosing a repayment plan. While it may be ideal to make large payments each month, it may not make sense financially to do so. Pick what makes most sense.
Final Thoughts
As always, you should try to borrow as little as possible, and always look for scholarships and grants first. When loans become the final option, make sure to compare loan rates with Sparrow before jumping into any student loan.
Someone applies for Federal Aid and receives a whopping $0. Or, better yet, they apply with what they believe is a significant level of need and receive very little.
Why is this? Let’s break it down.
Your Expected Family Contribution
When you fill out the FAFSA, you will enter information regarding you and your family’s financial situation. This may include information such as taxed and untaxed income, assets, benefits (such as unemployment), and more. With that, you will also be asked about your family’s size and the number of family members that will be attending college during that same year.
This information is then used to calculate what is known as your EFC, or your Expected Family Contribution. The formula to find your EFC is established by law.
The name of this metric is slightly misleading in that your EFC is not the amount of money you or your family will have to pay for college or the amount you will receive in aid. This metric is used by financial aid staff to determine the amount of aid you are eligible to receive.
The Cost of Attendance (COA)
The next metric used in calculating your aid is your COA, or Cost of Attendance at the school you choose to attend.
At most 2- and 4-year institutions, your COA will be calculated based on the entire school year (fall and spring semester). For career schools or programs that operate on a different structure, such as an 18-month certificate program, the COA may cover a different time period than a year.
If attending at least half-time, the COA will estimate the total of the:
Tuition and fees
Room and board (living expenses and housing)
Books and supplies
Transportation
Loan fees
Miscellaneous expenses
Allowance for childcare expenses
Disability-related expenses
Costs for study-abroad programs
Note that in this COA calculation, there may be expenses you don’t end up incurring. For example, many universities offer their own health insurance. Many students who are still on a parent’s plan will opt out of the university-sponsored insurance, thus, removing the cost of that from the overall COA. However, the university’s estimated COA is what will be used in your Federal Aid calculations.
Need-Based Aid
These two metrics are then used to determine your financial need with a very simple formula:
Cost of Attendance (COA) – Expected Family Contribution (EFC) = Financial Need
The result is then used to determine how much need-based aid you are eligible to receive (pending that you meet other eligibility requirements).
Need-based aid is slightly limited in that you cannot receive more need-based aid than the amount of your financial need.
For example, if your COA was $30,000 and your EFC was determined to be $16,000, your financial need would be $14,000. Therefore, you wouldn’t be eligible to receive more than $14,000 in need-based aid.
After your need-based aid is assessed, your institution will determine how much non-need-based aid you can get, utilizing the following formula:
Cost of Attendance (COA) – Financial Aid Awarded So Far* = Eligibility for Non-Need-Based Aid
*This includes aid from all sources such as your school, private scholarships, etc.
Non-Need-Based Aid is calculated without your EFC in mind. It looks strictly at how much of the COA is not being covered by other financial aid.
Let’s use the same example from above.
If your COA was $30,000 and your EFC was determined to be $16,000, your financial need would be $14,000. Therefore, you would be eligible to receive no more than $14,000 in need-based aid.
Let’s say you were awarded $10,000 in need-based aid. The institution would then do the following calculation to determine your eligibility for non-need-based aid:
$30,000 (COA) – $10,000 (Financial Aid Awarded So Far) = $20,000 (Eligibility for Non-Need-Based-Aid)
These numbers could get a bit more funky-looking if you had private scholarships or other sources of aid, but for simplicity’s sake, this would leave you eligible for $20,000 in non-need-based aid.
Non-Need-Based Federal Aid comes in the following forms:
Direct Unsubsidized Loans
Federal PLUS Loans
Teacher Education Access for College and Higher Education (TEACH) Grants
Crunching the Numbers
All of these different metrics and formulas are used to determine the amount of aid you receive in your aid package. Note that these formulas largely calculate how much you are eligible for and in no way guarantee that you will receive that full amount.
Summary
That was a lot of calculations, but hopefully this gif is entirely unrelatable after reading this.
While you won’t have much of a hand in actually calculating any of these metrics, it’s important to understand how the numbers you see in your aid package got there. For tips on how to navigate your financial aid award letter, check out our blog that breaks it down!
Looking at your student loan balance is like biting into a chocolate chip cookie only to realize it’s actually oatmeal raisin. Can be really shocking when it isn’t what you expect.
With the way interest compounds on student loans, the total debt can increase pretty rapidly before your eyes. Refinancing your student loans could be a viable option to lower your interest rates, monthly payment, and overall money spent. That said, there are several things to consider before making the jump to refinance your student debt.
What Does it Mean to Refinance Your Student Debt?
Put very simply, refinancing your student debt means replacing your current student loans with a new loan with a lower interest rate.
Refinancing could look like this [note: this is a very basic example]:
Loan 1: $10,000 at 7.5% interest rate
~insert magical refinancing here~
New Loan: $10,000 at 5.25% interest rate
Notice that the new loan is for the same amount of total debt, however, the interest rate is lower. This would save you money in the long run as less interest would accrue.
Is Refinancing a Good Idea?
Based on our example, refinancing may seem like a perfect route for you. Still, you should consider the following circumstances about when you should and should not refinance.
When You Should Refinance Your Student Debt
If the savings will be significant. If you can qualify for a better interest rate, it’s a good idea to refinance. A lower interest rate can save you money in the long run as less interest will accrue over time. Note: Contrary to popular belief, you don’t need to have a perfect credit history to qualify for a lower interest rate.
If you have student loans with high variable interest rates. Variable interest rates are just as it sounds – they vary. It is challenging to predict what payments will be with a variable interest rate because it’s always changing. Whether your variable interest rate is currently high or low, it may be a good idea to refinance if you can secure a lower fixed rate.
If the economy supports low interest rates. Interest rates are impacted by economic factors. If the rate environment is good, rates may be lower, and it may be a good idea to take advantage of that.
If your finances have improved. If your financial situation has improved since you first took out your loans, you may qualify for a better interest rate on a new loan. This could be in the form of a higher paying job or improved credit score — both of which will help you secure a lower interest rate.
When You Should Not Refinance Your Student Debt
Believe it or not, there are situations where it isn’t a good idea to refinance your student loan debt.
If you’re planning to pursue student loan forgiveness. If you are pursuing a program such as Public Service Loan Forgiveness, you should not refinance your student debt as it would make you ineligible for the program.
If you have Federal Loans and may experience a drop in income. When you refinance federal student loans, you lose the option to participate in federal repayment programs such as income-driven repayment and federal loan relief options. These may be important to you if you have volatile income or are planning to be unemployed.
If you’ve declared bankruptcy recently. It is significantly more difficult to refinance your student debt if you have declared bankruptcy. While not impossible to refinance under these conditions, many lenders will require around 4-10 years to have passed since the bankruptcy filing before lending.
If you’ve had to default on student debt. Defaulting on a student loan is a red flag to private lenders as it tells them that you may not be able to make consistent loan payments. This may make it more challenging to find a lender to refinance with.
Questions to Ask Yourself Before Refinancing
With that in mind, you should ask yourself the following questions before deciding to refinance your student debt.
1. What is my current interest rate, and what could I qualify for?
Take a good look at the interest rates assigned to the loans you currently have, and compare them to the interest rates you’re likely to qualify for. Is there a big difference?
While there’s a chance that the interest rate might be the same, or maybe even worse, recent data has shown that refinance rates for well-qualified borrowers are hitting all-time lows. In the beginning of May 2021, borrowers with credit scores of 720 or higher were seeing interest rates of 3.6% on a 10-year fixed rate refinance loan1 [hint: this is a good rate!].
Borrowers refinancing at such low rates are likely saving thousands of dollars over time. If you think you’d qualify for a lower interest rate, refinancing may be a good decision!
2. Is my income stable?
Financial stability is important for a few reasons:
Credit evaluation
Available repayment options/Ability to make payments
Credit Evaluation
If you’re looking to refinance your student debt, you will be seeking a new loan entirely. Part of the process of securing that new loan is being evaluated by the lender to determine your interest rate and loan terms. Your credit score and financial history will factor into those elements of your loan. If this area isn’t up to par, you might not be able to receive a better loan than what you already have.
Available repayment options/Ability to make payments
If part of your plan to refinance your student debt involves federal loans, you will want to make sure that you’re able to make payments without the federal repayment options. Plans like income-driven repayment aren’t available with private student loans. If that is a necessity to you and your financial health, you may want to reconsider refinancing federal loans.
3. What is my reason for refinancing?
Knowing your goals and intentions with refinancing is important so that you can ensure your new loan aligns with these goals. Most often, people refinance to reduce the overall amount paid over time. Others are more focused on securing a lower monthly payment and don’t mind a longer repayment period.
Either way, it’s important to make sure that you’re clear on your goals for refinancing so your new loan can help support those goals.
4. What does my credit history look like?
When you go to get a new loan, lenders will review your credit score, income, and any other outstanding debt to develop an idea of your likelihood to pay back the loan. The stronger you look to the lender, the more likely you are to get a competitive interest rate and loan terms. If you don’t look so hot (financially, of course) to the lender, you may not be able to refinance with the terms you were hoping for or without a cosigner – neither of which are ideal.
Final Thoughts
Refinancing certainly has its pros and cons, and ultimately, isn’t for everyone. Before refinancing, make sure you are clear on why you’re doing it. When you’re ready to go ahead and refinance, check out Sparrow’s application to simplify the process.
The longer your loans sit, the more interest accrues. The more interest that accrues, the more your overall debt grows. The more your overall debt grows, the larger your payments. (You see where this is going…)
Here’s a comprehensive list of things you can do to pay off your student debt faster, helping you save money over time.
Consolidate and Refinance
Refinancing your student loans means replacing your current student loan(s) with a new loan with a lower interest rate. When you refinance more than one student loan, you can also consolidate them into one loan, meaning one monthly payment.
This can look like:
Loan 1: $10,000 at 6% interest rate
Loan 2: $24,000 at 7.25% interest rate
– refinance and consolidate –
New Loan: $34,000 at 3.25% interest rate
Note that the overall loan amount is still the same, however, the interest rate is significantly better and thus, will accrue less interest over time, meaning less money spent.
You should only refinance loans where you can secure a lower interest rate. If you can get a lower interest rate, refinancing can be one of the most effective ways to reduce student debt.
Apply Raises and Bonuses
As you establish yourself professionally within your career, you may receive a raise or bonus. Oftentimes, this extra chunk of change is put towards a physical object like a TV or better car. Putting this money towards your student loans will likely be a better option in the long run.
Think of it this way: If you’ve been fairly comfortable financially under a $50,000 salary, continue operating under a $50,000 salary even if you get a raise to $60,000. Putting the extra $10,000 a year towards your student loans can make a massive dent in your student debt over time.
Cut Back on Extra Expenses
Take some time to think about where all of your money goes each month. Creating a simple expense tracker in Excel or Google Sheets can be a great way to see this information all in one place. Then, think critically about the necessity of each of these expenses.
Does coffee 5 times a week make sense and align with my financial goals? Can I cut that back to 2 times a week?
A $3 coffee 5 times a week is $15 a week. If you did this 50 of the 52 weeks in a year, you’d be spending $750 a year on coffee.
Do I need cable TV or can I live comfortably with just Netflix?
The majority of adults living in America pay $51-$100 a month on cable television1. This amounts to $612-$1200 per year.
Let’s say you did both of these and cut out coffee and cable. You’d save a potential $1,950 per year. If your loan payment was $200/month, this could quite literally take over half a year off your repayment period.
Reminder: If getting coffee 5 times a week brings you immense joy, you don’t have to remove it from your life! Think of what doesn’t bring you joy and try to reduce how much you spend in those areas first. Or, simply adjust your habits to support your financial goals, too. You might love getting coffee 5 times a week, but if changing that to 2 times a week still brings you joy and supports your financial goals, it may be the best option.
Make More Than the Minimum Payment
Take whatever your monthly payment is and add a little bit more to it. Even if you can only afford an extra $20-$30 a month, it all adds up over time.
A tip for doing this without even thinking? Set up your bank account for an automatic transfer to savings that aligns with when you get paid. Then, every time your paycheck hits your bank account, this extra bit will be taken out as if it was never there. (Out of sight, out of mind, right?)
Utilize a Chunk of Cash
This won’t be accessible to everyone, but occasionally we get a cash windfall from picking up a side hustle, a refund, or a generous gift. You may be tempted to spend it on the pair of shoes you’ve been eyeing or a vacation with your friends, but putting it towards your student loans could help keep you on the fast track to financial freedom.
A fairly common example of a cash windfall is our yearly tax refund. While this amount varies for everyone, this can be a great chunk of change to throw down on your student loans. Fact of the matter is, it might not be money you were relying on or factoring into your monthly budget as it’s challenging to know just how much you’ll be getting in tax returns. This makes it a prime bit of money to direct right to your student debt.
Pick Up a Side Hustle
The amount of money you generate from a side hustle will vary depending on what side hustle you pick up and how much time you’re able to put towards it.
This can be anything from:
Selling old clothes on sites like Poshmark, Curtsy, Mercari, and Facebook Marketplace
Dog walking
Babysitting
Working for InstaCart or DoorDash
To:
Starting a side business on Etsy
Starting a seasonal landscaping business
Flipping furniture
USA Today found that the average side hustle generated between $507 and $746 per month3. This is massive when thinking about student loan payments. Being able to throw an additional $750 a month towards your student loans will make a great impact over time.
Make Payments Every 2 Weeks
Interest on student loans accrues daily. So, by the time you get around to your monthly payment, your loan has already accrued quite a bit of interest.
Making your payments biweekly instead of monthly can help you get ahead of the interest. Simply divide your monthly payment in half, and then pay that amount twice per month.
Summary
While you may not be able to do all of the strategies we listed above, at least 1 should apply to you. Even throwing 1 strategy into the mix can help you pay off your student debt faster.
If you feel ready to refinance your student debt, we’re here to help.
You may be wondering what the difference is between scholarships, grants, work-study programs, and loans. The four main types of financial aid differ in terms of structure and eligibility. Here is the basic information you need to know about the different types of financial aid:
The Basics: Comparing Financial Aid Options
Scholarships: Financial aid you don’t need to pay back. Based on academic or other achievement.
Grants: Financial aid (generally offered by the government) that you don’t need to pay back. Based on financial need or specific criteria (underrepresented demographics or specific academic interests).
Work Study: Program that allows students to work part-time to earn money for educational expenses. Based on financial need and availability of positions.
Loans: Borrowed money that must be repaid with interest. Based on lender and type of loan.
Which Type of Financial Aid is Best?
When considering financial aid offers, you may be comparing all of these types of aid at once. What we always recommend is accepting aid in the following order:
Scholarships and/or Grants (free money)
Work-Study (earned money)
Loans (borrowed money)
Scholarships and grants are the best option as they don’t need to be repaid. However, it’s unlikely that you’ll cover the entire cost of college with just scholarships and grants.
If offered work-study, it’s a great idea to accept that second. This money is earned, meaning that you don’t need to repay it over time.
Loans should always be accepted last, with federal loans accepted first before dipping into private loans. This is because private loans will need to be repaid with interest, which could rack up the principal balance quite a bit. Your eligibility and rates vary based on lender and type of loan. Find the best student loan rates.
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Scholarships come from a variety of sources such as local organizations, charities, businesses, colleges and universities, the government, and various foundations.
Who is Eligible for Scholarships?
Eligibility for scholarships vary based on each scholarship’s specific criteria.
Some scholarships are strictly merit based, meaning that you don’t need to demonstrate any level of financial need to be considered. Others are strictly need-based and ask applicants to prove financial need in order to qualify.
That said, there are scholarships for nearly everything you could imagine. From the Asparagus Club Scholarship to the National Potato Council Scholarship, there’s something for everyone.
Each scholarship will require a different application process. Some may require you to complete an application or write an essay, and others may just require you to submit basic demographic information.
Grants
Grants are a similar type of financial aid to scholarships. They both typically don’t need to be repaid and they can come from a variety of sources. Oftentimes, when going through the college financial aid process, most students see grants come up when examining their federal aid.
So, while grants can come from your college or a local nonprofit, we’ll frame this section around federal grants as the non-federal grants don’t differ too much in nature from scholarships.
Where Do Grants Come From?
Federal grants come from the U.S. Department of Education in the following forms:
We won’t dive deep into each one because that could be its own blog in itself.
Who is Eligible for Grants?
Similar to scholarships, the eligibility requirements for grants vary for each specific one. While some non-federal grants may be awarded strictly for merit, almost all grants from the federal government require you to demonstrate some level of financial need.
There may also be things you need to do to maintain your eligibility if the grant is intended to be renewed every so often. For example, a grant that issues $5,000 per academic year for tuition costs may ask you to resubmit your financial information to determine whether you still demonstrate the financial need necessary to be eligible.
Work-Study
Work-study is a federal aid program that provides part-time jobs for undergraduate and graduate students with financial need. The money they earn from these jobs allows them to pay for educational expenses.
While qualifying for work-study does not guarantee a student a part-time job while in school, it does mean that there are federal funds dedicated to paying that student should they decide to participate in a work-study job.
Where Does Work-Study Come From?
Work-study is provided by the federal government via federal student aid. After filling out the FAFSA, students may see work-study as part of their financial aid package.
Who is Eligible for Work-Study?
To be eligible for this type of financial aid, you must first plan to enroll in a college or career program. Additionally, you must submit the FAFSA and demonstrate financial need.
Work-study is available to both part-time and full-time students, as well as undergraduate, graduate, and professional students.
Loans
The last type of financial aid is a loan. They are often referred to as “borrowed” money. With loans, you borrow an amount from a source and must pay it back over time with interest. Your eligibility and rates vary based on lender and type of loan. Discover the best loan option for you.
The latest rates from Sparrow’s partners
See a rate you like? Click Apply and we’ll take you to the right place to get started with the lender of your choosing.
Compare your personalized, pre-qualified rates from these lenders in minutes.
Federal loans come from the federal government and generally have lower interest rates, better terms and conditions, and more flexible repayment plans.
Private student loans come from a private lender such as a bank or other financial institution. Private loans generally have higher interest rates, less favorable terms, and a less flexible repayment plan, however, they are valuable because they can fill in any gaps where the cost of attendance isn’t covered by other aid.
Who is Eligible for Loans?
Student loan eligibility varies based on your lender and type of loan. Submit one personalized form and find out what loans YOU qualify for in minutes.
A scholarship is a form of financial aid given to a student to support paying for their education. Scholarships are typically awarded based on academic or other achievement.
Scholarships come in a variety of sizes and structures. For example, some scholarships may award students $100 to pay for books while others may award $10,000 for tuition costs. Sometimes scholarships are one-time checks, and other times they provide funds on a more consistent basis.
Scholarships, unlike loans, do not need to be repaid. However, it is always important to read the fine print when accepting a scholarship. Some scholarship programs require additional work, engagement with the program, or service after the program concludes.
Summary
This was a LOT. *virtual high-five for getting to the end of this*
It may be overwhelming attempting to absorb all of this information about the various financial aid options. The good thing is that there are various options. Of course, start with seeking out scholarships and move up the ladder until private loans are the remaining option.
And when/if you do get there, know that we’ve got your back here at Sparrow, where you can compare loan rates in the click of a button!
The academic year is the portion of the year while classes are in session, typically from around August to May.
Acceleration
Loan acceleration is when your lender demands immediate repayment of the outstanding balance of your loan. This can happen in circumstances such as:
If you receive loan money, but do not attend any classes at the school where the loan was disbursed.
If you use the loan money to pay for things other than educational expenses at the school you agreed to attend.
If you default on your loan.
If you make a false statement which allows you to receive loan money you are not actually eligible for.
Age of Majority
The age of majority is the age at which a minor is considered an adult. The age of majority will vary based on the country and state you are located in. In most cases, the age of majority is 18.
Aggregate Limit
An aggregate limit, also called a cumulative limit, is the total amount you can borrow from a lender or loan program. For example, if a lender has an aggregate limit of $100,000, you cannot borrow more than $100,000 total from that lender.
Amortized
When a student loan is amortized, it means that a portion of the monthly payment is put towards the loan principal, while the other portion is put towards the interest. An amortization schedule is a record of loan payments that shows how the loan balance will decrease over time with regular payments.
Annual Taxable Income
Annual Taxable Income is the amount of gross income the Internal Revenue Service (IRS) deems subject to taxes.
Application Fee
An application fee is a one-time, up-front fee you pay to apply for a loan. Application fees are usually non-refundable.
APR
An Annual Percentage Rate, or APR, is the interest rate applied to a student loan, plus additional fees. APR is expressed as a percentage and is calculated on a yearly basis.
APR Cap
An APR cap is a limit on how high an interest rate can rise on a variable rate loan. For example, an APR cap may read, “18.00%.” This means that during the duration of your loan, your interest rate will never rise above 18.00%. APR caps provide borrowers with protection.
Autopay Discount
An autopay discount is a discount on your student loan interest rate for opting into automatic payments.
Award Year
An award year is the school year in which financial aid can be applied to fund your education. In most cases, the award year is July 1st to July 30th of the following year.
Borrower
A borrower is an individual who has taken out some type of loan (i.e. private student loan, federal student loan, etc.).
Borrower Benefits
Borrower benefits are cash “give-aways” sponsored by lenders. Scholarships, referral awards, or cash-back upon graduation are all types of borrower benefits. The terms of eligibility for the benefit are set by the lender.
Collection Agency
A collection agency is a company used by student lenders to collect debt that is in default or past due.
Collection Costs
Collection costs are fees incurred when your debt is recovered by a collection agency.
College Application
A process by which prospective students apply for acceptance at a college or university.
Consolidation
In terms of student loans, consolidation is the process of combining multiple student loans into one. This can be done through either a federal Direct Consolidation Loan or a private student loan refinance.
Cosigner
A cosigner is someone who agrees to sign a loan alongside the borrower, taking legal responsibility for paying back the loan if the borrower does not. A cosigner is often a family member or friend but can be anyone who is willing to cosign.
Cosigner Release
A cosigner release allows a cosigner to be removed from a loan after you prove you’re capable of making payments on your own. Lenders specify their own criteria of how you qualify for a cosigner release. If a cosigner is released from your loan, the loan will be removed from the cosigner’s credit report.
Cost of Attendance
The cost of attendance is the total amount it will cost to attend a school.
Credit Bureau
Companies that collect credit ratings on individuals from various creditors and make that information available to financial institutions. The three main credit bureaus are Experian, Equifax, and TransUnion.
Credit Check
A financial institution or company may examine a person’s credit history and financial behavior through a process called a credit check. The purpose of the credit check, in terms of student loans, is to determine an applicant’s eligibility for private loans as well as the interest rates they qualify for.
There are two types of credit checks: hard and soft. A soft credit check doesn’t affect your credit score. A hard credit check does affect your credit score. Soft credit checks occur when a borrower checks their rates with a lender. Hard credit checks occur after a borrower has seen their pre-approved rates and submits a formal application for approval.
Credit History
A record of an individual’s credit usage, activity, and bill payments. Credit history is used to indicate whether or not someone can responsibly make payments on their debt.
Credit Report
Credit bureaus prepare credit reports which contain a detailed description of a person’s credit history. This information is used by lenders to determine an individual’s overall creditworthiness.
Credit Score
A credit score is a number between 300 and 850 that represents an individual’s credit worthiness. Credit worthiness is used to describe the willingness of a lender to trust you to pay back your debts. The higher your credit score, the more a lender will consider you able and responsible enough to repay them back.
Creditworthiness
Creditworthiness is a lender’s ability to trust you to pay back your debt. A borrower deemed creditworthy is one that lenders deem able and responsible enough to may loan payments until the debt is paid off.
CSS Profile
When applying to college or university, you will likely utilize the College Board website. A CSS profile is an account with the College Board that includes all of your student information, family finance information, and more. This profile can help you qualify for institutional aid (aid that comes directly from the school you want to attend).
Debt Consolidation
Debt consolidation is the process of combining some or all of your student loans into one new loan. You can consolidate federal student loans through a Direct Consolidation loan or through student loan refinancing. You can consolidate private student loans through student loan refinancing.
Debt-to-Income Ratio (DTI)
An idea of how much monthly income goes towards debt. The DTI is typically calculated by adding up the monthly debt payments and dividing by the total pre-tax monthly income (gross).
Default
Default occurs on a student loan when payments are missed for 270 days (around 9 months). There are consequences associated with default such as the entire unpaid loan balance being due immediately, the default being reported to credit bureaus which can damage your credit score, and the lender pursuing legal action against you.
Deferment
When loan payments are postponed. Borrowers must apply for federal loan deferment, and it typically can only last for up to 3 years. If eligible for a deferment, the borrower may also not be responsible for paying the interest that accrues in the meantime while they are not making payments.
Delinquency
If a single student loan payment is missed, student loan delinquency occurs. The status will remain until the past-due balance is paid completely including any late fees.
Dependency Override
A process by which a dependent student can request to be classified as an independent student for financial aid purposes, given certain circumstances such as, but not limited to:
An abusive family environment (ie. sexual, mental, or physical abuse)
Incarceration or institutionalization of both parents
Abandonment by parent(s)
Parents lacking the mental or physical capacity to raise the child
Parents location is unknown and they cannot be located
Parents are hospitalized for an extended period
An unsuitable household (ie. child is removed from the household and placed in foster care)
A married student’s spouse dies
A married student gets divorced
Dependent
Dependent students are those that rely on a parent or guardian for financial support.
Direct Consolidation Loan
A Direct Consolidation Loan is a federal loan consolidation option that combines multiple federal loans into one big loan and payment. These loans have fixed interest rates determined by averaging the interest rates on the loans being consolidated, rounded up to the nearest ⅛ of one percent.
Direct PLUS Loan
Direct PLUS Loans are broken into two categories: Grad PLUS Loans and Parent PLUS loans. A Direct PLUS Loan is commonly referred to as a Grad PLUS loan when made to a graduate student or Parent PLUS loans when made to a graduate student’s parent.
Disbursement/Disbursed
Disbursement occurs when student loan funds are sent to your school.
Disclosure
A disclosure is intended to reveal information about terms, lenders, rates, and more. A disclosure may inform prospective borrowers about how rates are calculated for a specific lender they are looking into.
Discounts
A discount is a benefit that lenders provide you to lower your monthly payment. Lenders provide discounts to encourage good borrowing behavior.
For example, some lenders offer a discount (0.25%) if you turn on ACH automatic payment. For you, this discount is great because it results in loan savings. For a lender, an automatic payment provides them with a greater guarantee that they’re going to get their payment on-time.
Discretionary Forbearance
Forbearance can also be referred to as a general forbearance or a discretionary forbearance.
Discretionary Income
In general, discretionary income is the amount of money you have left after taxes and necessary expenses.
When used to describe income-based repayment plans, the PAYE plan, and loan rehabilitation, discretionary income refers to the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.
When used to describe income-contingent repayment plans, discretionary income refers to the difference between your annual income and 100% of the poverty guideline for your family size and state of residence.
Early Action
Early action allows you to apply well before a school’s normal application deadline, thus receiving a decision earlier than the traditional response date. Applying early action is not binding.
Early Decision
Early decision allows you to apply well before a school’s normal application deadline, thus receiving a decision earlier than the traditional response date. Applying early decision is binding. This means that if you apply early decision and are accepted, you are agreeing to commit to that school.
Educational Expenses
Educational expenses are school-related expenses such as tuition, enrollment fees, room and board, meal plans, etc.
Eligible Program
In terms of federal aid, an eligible program is one with organized instruction that meets the length requirements necessary to lead to an academic, professional, or vocational degree or certificate.
Eligible Noncitizen
You are considered an eligible noncitizen if you fall into one of the following categories:
You’re a U.S. National or lawful permanent resident with a green card.
You’re a conditional permanent resident.
You have an Arrival-Departure Record from the U.S. Citizenship and Immigration Services, showing one of the following statuses:
Refugee
Asylum-granted
Parolee
Conditional entrant
Cuban-Haitian Entrant
You hold a T-nonimmigrant status or your parent holds a T-1 nonimmigrant status.
You are a “battered immigrant-qualified alien” who is a victim of abuse by your citizen or lawful permanent resident spouse or parents, or you are the child of a person designated under the Violence Against Women Act.
You are a citizen of the Republic of Palau, the Republic of the Marshall Islands, or the Federated States of Micronesia.
Eligibility
Eligibility refers to the requirements that a borrower must meet to be approved for a loan from a private lender. If the borrower meets the requirements, they may be eligible.
FICO score is an example of an eligibility requirement. Most lenders require that borrowers have above a certain FICO score to be eligible for a loan.
Emancipated Minor
An emancipated minor is someone who has been legally deemed an adult by the court of their state. Emancipated minors are considered independent students for student loan purposes.
Employment History
An employment history is a record of an individual’s past and current employment. Some private student lenders use employment history to determine eligibility for a loan.
Endorser
An endorser, sometimes required for federal PLUS loans, is someone who signs onto the loan alongside the borrower, agreeing to pay it back if the borrower fails to do so.
Enrollment Status
Enrollment status, often reported by the school you attend, indicates whether you are (or were) full-time, three quarter-time, half-time, less than half-time, withdrawn, graduated, etc.
Entrance Counseling
A federal program designed to ensure that borrowers understand the responsibility that comes with borrowing a student loan. The online program teaches borrowers what a loan is, how interest works, what the repayment options are, and how to avoid delinquency and default. Entrance counseling must be completed before loan money can be disbursed.
Exit Counseling
A federal program designed to ensure that borrowers understand their loan repayment obligations and are prepared for repayment. Exit counseling must be completed upon leaving school or dropping below half-time.
Extended Repayment Plan
An extended repayment plan includes a repayment term of up to 25 years. This can lower your monthly payments substantially, however, you will pay more in interest over time than you would with a shorter repayment plan such as a 10-year plan.
FAFSA
FAFSA stands for Free Application for Federal Student Aid. It is a form that the federal government and colleges use to determine how much aid a prospective college student is eligible for.
Federal Financial Aid
Federal financial aid is provided to you after completion and submission of your FAFSA. This aid can include grants and scholarships, work-study programs, and loans.
Federal Student Loans
The U.S. Department of Education is the government body overseeing all federal student loans. Federal student loan eligibility is determined by your FAFSA.
Federal Student Loans
Federal student loans are those issues by the U.S. Department of Education. These loans are granted after a prospective or current student fills out the FAFSA.
Federal Student Loan Repayment Plans
Federal student loans have 4 main repayment options:
Standard Repayment
Graduated Repayment
Extended Repayment
Income-Driven Repayment (IDR)
Federal Student Loan Servicer
A loan servicer is a company assigned to handle the billing on federal student loans on behalf of the federal government. There are 9 servicers that are most commonly used:
Nelnet
Great Lakes Educational Loan Services, Inc.
Navient
FedLoan Servicing
MOHELA
HESC/EdFinancial
CornerStone
Granite State
OSLA Servicing
Financial Aid Award Letter
A financial aid award letter provides details on the monetary assistance a prospective student can receive, specifically in the form of federal aid. This letter comes from each specific institution that the student has applied to.
Financial Need
In general, financial need is the difference between the cost of attendance and your ability to pay. For federal aid, financial need is calculated by subtracting your Expected Family Contribution (EFC) from the overall cost of attendance (COA).
Fixed Rate
An interest rate that does not change over the life-time of your loan. Fixed rates remain the same for the entire length of a loan.
Forbearance
Forbearance allows borrowers to postpone student loan payments, however, it differs from deferment as the borrower is still responsible for paying the interest that accrues in the meantime. Borrowers can pay the interest as it accrues or allow it to be capitalized and added to the loan balance overall.
FSA ID
A username and password combination used to log in to U.S. Department of Education systems online.
Grad PLUS Loans
Grad PLUS Loans is a type of federal student loan for graduate or professional students.
Graduate Student Loans
Both federal and private student loans have options for graduate students. Federal loans for graduate students include Direct Unsubsidized Loans and Direct PLUS Loans. Eligibility for federal student loans is needs based. Eligibility for private student loans is credit based.
Graduated Repayment Plan
A graduated repayment plan starts your loan payments off at a lower amount and slowly increases them every 2 years. A graduated repayment plan will still land you with your loans completely paid off after 10 years, but you will pay more in interest over time in comparison to a Standard Repayment Plan.
Grant
Financial aid that doesn’t need to be repaid. Federal grants are given out based on financial need and a list of other requirements. State and school based grants are available as well, but vary by state and institution.
When you are enrolled in half of the expected course load, often 6 credit hours per semester.
Income
The amount of money you make per year. Household income includes the amount married couples make together.
Income-Based Repayment Plan
IBR is an option for federal student loan borrowers who took out loans after July 1, 2014. It sets monthly payments at 10% of the discretionary income with a repayment term of 20 years.
Income-Contingent Repayment Plan
ICR sets payments at the lesser of either:
20% of discretionary income OR
Whatever your fixed payment would be with a 12 year repayment period
Income-Driven Repayment Plan
Income-driven repayment options depend on your income and family size. This can reduce your monthly payment significantly if your income is low.
Independent Student
When used in terms of federal student aid, an independent student is someone who is at least one of the following:
Born prior to January 1, 1999
Married
A graduate or professional student
A veteran
A member of the armed forces
An orphan
A ward of the court (an individual who is deemed by the courts to be unable to manage their own affairs and has been placed under the legal control or protection of a guardian by the courts)
An individual with legal dependents other than a spouse
An emancipated minor
An individual who is homeless or at risk of becoming homeless
Interest
Interest is the amount of money a lender charges you for borrowing a loan. It is the “extra” money you pay the lender for the opportunity to use their funds.
Interest is typically expressed as an annual percentage rate (APR). You may see a lender differentiate between interest rate and APR. There is a subtle difference. APR is the annual cost of a loan to a borrower, including fees. Interest rate is the annual cost of a loan to a borrower, excluding fees.
Interest-Only Payment Plan
Under this payment plan, you’ll only pay the interest that accrues while you’re in school. After graduation, you’ll make full monthly payments. This plan saves you money in interest over time.
Interest Rate
Federal and private student loan interest rates are calculated differently.
Federal loan interest rates are set by Congress each year. Private lenders set their interest rates based on a variety of factors, typically including the creditworthiness of the borrower.
Iraq and Afghanistan Service Grant (IASG)
Iraq and Afghanistan Service Grant is a federal grant that provides money to students whose parent(s) or guardian(s) died as a result of military service in Iraq or Afghanistan.
Legal Guardianship
A court designation that authorizes an individual to care for someone in place of parents. If you have a legal guardian, you qualify as an independent for federal aid purposes, meaning you do not need to report your parents’ income on the FAFSA.
Lender
The organization or company you borrow money from.
Loan
Money given to an individual in exchange for repayment of the money, usually with interest.
Loan Discharge
Removal of the obligation to repay a loan, often granted for extenuating circumstances.
Loan Forgiveness
Removal of the obligation to repay a loan, often granted after working in a particular industry.
Loan Limits
The minimum and maximum student loan debt that private lenders are willing to refinance.
Loan Originator
Someone who takes a prospective student loan borrower’s application, reviews it, handles the approval process, provides the loan agreement, and disburses the funds. Lenders work with third-party loan origination services to provide borrowers digital lending experiences.
Loan Principal
Principal, also known as the principal balance, is the amount still owed on a student loan or refinance loan.
Loan Rehabilitation
The process by which a borrower can bring their student loan out of default by abiding by certain repayment requirements.
Loan Servicer
The company who handles loan collection, customer service, and loan maintenance.
Master Promissory Note
The Master Promissory Note (MPN) is a legal document in which borrowers agree to repay their federal student loans, including any interest that accrues, to the U.S. Department of Education.
Merit-Based
Merit-based aid is aid that does not factor in a student’s financial need. Rather, it is based on factors such as academic performance, extracurricular achievements, etc.
Monthly Payment After Graduation
After graduation, you’ll be expected to begin making full monthly payments on your student loans. The size of these monthly payments depends on your loan term, APR and principal balance. Some lenders provide a six month “grace period” before full payments begin. During the “grace period” payments aren’t due but interest accrues.
For loans with a fixed interest rate, monthly payments after graduation are set ahead of time. For loans with a variable interest, monthly payments after graduation are estimates, as the interest rate may increase or decrease during the duration of your loan.
Monthly Payment During School
During school, you may be expected to make payments on your student loans. The size of these monthly payments depends on your payment plan. If you don’t make monthly payments during school, your loan balance will rise. There are three popular types of in-school monthly payments.
You may only pay the monthly interest on your loan while you’re in school. This plan is called “Interest Only.” You may pay a fixed amount while you’re in school that only covers part of the monthly interest that you owe. This plan is called “Partial Interest.” You may pay full monthly payments while you’re in school. This plan is called “Immediate.”
Origination Fee
Fee charged by a lender to cover the cost of processing the loan. The fee is usually expressed as a percentage of the loan size. You will not have to explicitly pay the lender the origination fee. The fee is deducted from the amount of money the lender disburses to you.
For example, if a loan has a 1.00% origination fee and you’re looking to borrow $10,000, your origination fee will be $100. Assuming no other expenses, you’ll receive $9,900 ($100 deducted for the origination fee) but have to pay back the full $10,000.
Out-of-State Student
A student who is attending school outside of their state of legal residence.
Parent PLUS Loan
Student loans offered by the federal government to parents who want to borrow money for their child’s education.
Parent PLUS Loan Refinancing
Borrowing a private loan at a lower interest rate to cover the cost of your current Parent PLUS debt. The new loan, with a lower interest rate, allows you to save money.
Payment Plan
A payment plan is a way to pay back a loan over an extended period of time. For private student loans, there are four common payment plans: Deferred, Immediate, Interest Only, Partial Interest.
Deferred payment: You’ll pay nothing during school but your loan balance grows.
Immediate: You’ll make full monthly payments while in school.
Interest Only: You’ll only pay the interest on your loan while you’re in school.
Partial Interest: You’ll make a fixed monthly payment while you’re in school that only covers part of the interest that you owe.
As a guiding rule, the more you pay toward your loan today, the less you’ll pay in the future.
Pay As You Earn (PAYE)
A repayment plan in which your monthly student loan payments are reduced to 10% of your discretionary income and never more than your payment on a standard 10-year repayment plan.
Prepayment Penalty
Prepayment refers to paying off your full student loan balance earlier than scheduled. Some private lenders have a prepayment penalty, a fee charged for paying off debt faster than agreed upon. Note that student loan lenders are not allowed to charge a prepayment penalty.
Prequalification
The process a lender takes to determine if a borrower is eligible for a loan. If the borrower is eligible, the prequalification process will determine at what rates the borrower qualifies. Prequalification requires a soft credit check which does not impact a borrower’s credit score.
Principal
The amount you initially borrow and agree to pay back.
Private Student Lender
Banks, credit unions, or other financial institutions that lend money to students.
Private Student Loans
Loan funded by private lenders. Private student loans typically require a soft credit check to determine eligibility, as where federal loans do not.
Public Service Loan Forgiveness
A loan forgiveness program designed for people who pursue a career with the federal, state, local, or tribal government or for an eligible not-for-profit organization. Those who qualify and are accepted will receive forgiveness for their entire remaining balance after they’ve made 120 qualifying monthly payments on their loan.
Refinancing Student Loans
Refinancing is a process in which you take out a new private loan at a lower interest rate to replace all of your other loans. This typically also comes with a more favorable repayment term.
Repayment Term
A repayment term is the length of time a borrower has to repay their debt in full.
Revised Pay As You Earn (REPAYE)
Under REPAYE, the term of a borrower’s loan is extended. This typically means extending to a 20 year repayment term for undergraduate loans and a 25 year repayment term for graduate loans. Under REPAYE, the monthly payment is also usually capped at 10% of the discretionary income.
Satisfactory Academic Progress (SAP)
Successful completion of the coursework necessary to progress toward an eligible certificate or degree.
Scholarship
A type of financial aid that you don’t have to pay back. These can be based on merit, financial need, or a combination of both.
Spouse Loan Consolidation
A process that involves combining all of you and your spouse’s loans together into one new loan instead of keeping separate loan accounts. PenFed Credit Union is the only lender that offers this option of Spouse Loan Consolidation.
Standard Repayment Plan
Standard Repayment Plans are the default repayment plan for federal student loans that require a fixed monthly payment with the goal of paying off the loan in full in 10 years.
Student Loan Consolidation
Consolidation involves combining multiple student loans into one loan, typically through a Direct Consolidation Loan or a student loan refinance.
Student Loan Grace Period
When you initially take out a loan, you typically don’t have to start making payments on it immediately. Oftentimes, payments will be automatically deferred until 6 months after graduation, however, this grace period varies depending on the loan you have and your specific lender.
Student Loan Interest Tax Deduction
A tax deduction for student loan borrowers that allows them to deduct all or some of the amount they paid in interest on their student debt from their income.
Subsidized Student Loan
Direct Subsidized Loans are federal student loans available to students with financial need. There is no credit check for these loans, and interest does not accrue while you are in school and for the first 6 months after you leave school.
Total and Permanent Disability (TPD) Discharge
A form of student loan forgiveness given to borrowers who are unable to repay their debt due to a permanent mental or physical disability.
Total Interest Expense
Total interest expense is the amount of interest that accrues across the entirety of a borrowing period. It is the total cost of borrowing a loan, excluding one-time fees (i.e. origination fee).
For a fixed rate loan, total interest expense is set to a specific monetary amount (assuming the borrower makes minimum monthly payments on-time during their payback period). For a variable rate loan, total interest expense is an estimate. Because the interest rate of a variable rate loan either increases or decreases over time, it’s impossible to know exactly how much interest will accrue over a borrowing period.
Tuition
Fees associated with learning at a college or university.
Type of Interest Rate
There are two types of interest rates for student loans: fixed and variable. A fixed rate loan has the same interest rate for the entirety of the borrowing period, while variable rate loans have an interest rate that changes over time.
Borrowers who prefer predictable payments generally like fixed rate loans, which won’t change in cost. The price of a variable rate loan will either increase or decrease over time, so borrowers who believe interest rates will decline tend to choose variable rate loans.
In general, variable rate loans have lower interest rates and can be used for affordable short term financing.
Undergraduate Student
A student pursuing a degree at their first level of higher education. In other words, a student at a college or university who has not yet earned a degree.
Unsecured Loan
Unsecured loans are those that don’t require any form of collateral. These loans tend to have higher interest rates as they are riskier to the lender. Student loans are a type of unsecured loan.
Unsubsidized Student Loan
Direct Unsubsidized Loans are sponsored by the Department of Education and available to both undergraduate and graduate students. These loans are not needs based. There is no credit check requirement for these loans, however, the government does not cover the interest for you at any point. Interest starts accruing immediately after the loan is originated.
Untaxed Income
Income excluded from taxation by the Internal Revenue Service (IRS).
U.S. Department of Education
A Presidential cabinet-level department of the U.S. government that is administered by the U.S. Secretary of Education. The budget of this department supports the grants, loans, and work-study programs provided to students and families to pay for college education.
Variable Rate
Variable rates are interest rates that fluctuate over the life of a loan. The rate typically changes on a monthly, quarterly, or annual basis.
Work-Study Programs
Work-study programs are provided to students with financial need based on their FAFSA. The programs provide job opportunities to these students that are typically part-time and flexible, specifically designed to be easier to manage alongside a college education.
Even thinking about your student debt can be overwhelming, but knowing how you’re going to pay it off is important.
Let’s review the 3 main strategies for paying off debt and their general effectiveness.
1. (Least Effective) The Shotgun Approach
The Shotgun Approach is where you pay just a bit more than the minimum payment each month on all of your debts. When you think about it, this may seem quite effective because you’d be making progress on all of your debts at once.
In reality, this isn’t as effective of a strategy, and frankly isn’t recommended, because it will take you much longer to get rid of any single debt. Additionally, your loans are likely not all at the same interest rate. With the Shotgun Approach, you’d be throwing money towards your loan with a lesser interest rate when you could be throwing larger chunks of money towards your loan with a higher interest rate.
Pros:
You would make progress on all of your loans.
Cons:
It will take you a lot longer to pay off any one debt.
You won’t be throwing as much money as you could towards your debt with the highest interest rate.
You will likely pay more over time.
Bottom Line: This isn’t a very effective method, and we don’t recommend it.
2. (Medium Effectiveness) The Debt Snowball Approach
The Debt Snowball Approach is the second most effective method and operates under the following steps:
Look at all of your debts, and find the one with the lowest balance.
Calculate your monthly minimum payments.
Pay that minimum monthly payment on every loan you have.
Put all extra money you have into the smallest debt you owe until you pay it off. Once you pay off that loan, the monthly payment you’ve allotted for it is now “extra” money in your pocket.
Roll over that “extra” money to your next smallest loan.
Continue this process until all debt is paid off from smallest balance to biggest balance.
Source: Moolanomy, Dave Ramsey’s Snowball Approach
The Debt Snowball approach is ranked at medium effectiveness because it is a proven method for paying off student debt, however, it isn’t the best. Your largest student loan will accrue interest rapidly as it compounds. So, you could save yourself some money over time by opting for the Debt Avalanche method which we’ll discuss next.
Pros:
The initial psychological boost from paying off a loan in full could help you with paying off the others.
This method is effective for people who might not have as much money right after graduating. You can start small with payments on your smallest loan and work your way up as your career stabilizes financially.
Cons:
Your largest debt will be accruing interest while you pay off your smallest debt, which could increase fairly rapidly depending on your interest rate.
Bottom Line: It’s okay, but we wouldn’t recommend.
3. (Most Effective) The Debt Avalanche Approach
The Debt Avalanche approach has been deemed the most effective strategy for paying off student loan debt. It operates with the following steps:
Look at all of your debts, and find the one with the highest interest rate.
Make the minimum monthly payment on each debt you have.
Pay extra on only the highest interest rate until the debt is paid off. This will allow you to get rid of the highest interest rate first.
Source: JackieBeck.com
Pros:
Your loan with the highest interest rate would be paid off first, saving you a decent amount of money in the long run.
You will save more money in the long run with the Debt Avalanche approach in comparison to other repayment strategies.
Cons:
This method isn’t the best habit-former.
This method can be intimidating and less motivating. Starting with paying off your largest balance could leave you feeling like you aren’t making much progress.
Bottom Line: This is by far the best option for debt repayment due to its ability to save you money in interest.
The Difference Between Debt Snowball and Debt Avalanche
The Debt Snowball and Debt Avalanche approaches might sound pretty similar. So what is the difference?
In very simple terms, the Debt Snowball method is focused on lowering the number of loans you have and the Debt Avalanche method is focused on lowering the overall amount you will owe. While both are useful strategies and effective in their own regard, one method might be easier or more effective for you personally.
The Debt Snowball method focuses more on maintaining motivation and the overall balance size as where the Avalanche Method focuses on saving money on interest.
Source: Art of Thinking SMART
Which Method Should I Use?
It might be confusing trying to decide which method to use, and ultimately, it comes down to which one fits your financial goals best. While we definitely recommend the Debt Snowball or Debt Avalanche methods over Debt Shotgun, there are pros and cons to each one. You may find that you need the psychological boost of Debt Snowballing, or that saving money on interest with the Debt Avalanche method makes most sense for you.
With both the Debt Snowball and Debt Avalanche methods, there are free worksheet templates online to help you break down the payments over time. This can help you visualize what each method would look like to decide whether one fits your financial goals better.
Either way, having a strategy in general and sticking to it will set you up for success.
Forbearance, deferment, and forgiveness all have some element of not making payments on your student loan. If deciphering the difference seems a bit challenging, read on as we break it down!
What is Loan Forbearance?
Loan forbearance provides you the opportunity to suspend loan payments temporarily for no more than 12 months at a time. Typically, people choose to do so in times of severe financial stress.
While payments are postponed, you will not be responsible for paying the interest that is accruing. When the forbearance period ends, you will be responsible for that interest however.
Federal Student Loan Forbearance
With a federal loan servicer, you can request a general forbearance for up to 12 months for a Direct, FFEL, or Perkins loan. If your financial hardship continues after the 12 month period, you can request an additional forbearance of up to 12 months. Borrowers are allowed 12 months of forbearance at any given time, but can only request forbearance up to 3 years total.
Whether or not you are granted a forbearance is at the discretion of the loan servicer. Oftentimes, for situations such as unexpected major medical expenses, unemployment, or intense financial difficulty that prevents the borrower from making loan payments, forbearance will be granted.
You can request a general forbearance by calling the loan servicer or filling out a form online, however, the specific process may differ from lender to lender.
Private Loan Forbearance
Private lenders are generally less flexible when it comes to forbearance. This makes sense with what we know about private lenders (less favorable loan terms, higher interest rates, etc.) in comparison to federal loans.
Some private lenders will grant you forbearance for similar circumstances that prevent you from making loan payments. However, these forbearance periods typically come in 2 month increments and cannot exceed 12 months total (quite different from federal forbearance!). Additionally, private lenders may charge a fee for each month you are in forbearance.
What is Loan Deferment?
Similar to loan forbearance, loan deferment allows you to temporarily postpone loan payments.
The difference between loan forbearance and deferment is that in deferment, you may be responsible for still paying the interest that accrues during the deferment period.
For example, even if you aren’t paying your typical $125/month loan payment, you will still be required to keep paying the $25/month in interest. (random numbers just for example’s sake!)
Federal Student Loan Deferment
Some federal loans will require you to pay interest during the deferment period, and others will not. Here’s a full breakdown1:
Federal Loan Types That Will Not Require You to Pay Interest in Deferment:
Direct Subsidized loans
Subsidized Federal Stafford loans
Federal Perkins loans
Subsidized portion of Direct Consolidation loans
Subsidized portion of FFEL Consolidation loans
Federal Loan Types That Will Require You to Pay Interest in Deferment:
Direct Unsubsidized loans
Unsubsidized Federal Stafford loans
Direct PLUS loans
Federal Family Education Loan (FFEL) PLUS loans
Unsubsidized portion of Direct Consolidation loans
Unsubsidized portion of FFEL Consolidation loans
With a federal loan deferment, there are various circumstances that would make a borrower eligible, such as:
Cancer treatment deferment
Economic hardship deferment
Graduate fellowship deferment
In-school deferment
Military service and post-active duty student deferment
Parent PLUS borrower deferment
Rehabilitation training deferment
Unemployment deferment
You can request a federal loan deferment by submitting a request form to your loan servicer.
Private Loan Deferment
Private student loan deferment is a bit more complicated. Many lenders do offer some form of deferment, although it doesn’t look quite like it does for federal loans.
Many private lenders will offer assistance programs first such as relief while in school. Even with that, the interest on the loan will continue to accrue and capitalize at the end of the deferment period. You can lessen this interest by paying interest-only payments while it accrues, however, this isn’t always accessible if deferring for financial reasons.
To defer a private student loan, you’ll need to contact your individual lender as the process varies. Typically, it will require the submission of a form to see if you are eligible.
What is Loan Forgiveness?
Loan forgiveness has become an especially hot topic ever since President Joe Biden announced his desire to forgive a portion of the federal student loan debt.
Loan forgiveness means that you are no longer required to repay some or all of your loans. (Yup, free of student debt.)
Loan forgiveness programs have existed well before Biden’s announcement of such and come in a variety of forms, typically via federal student loan programs such as:
We won’t do a deep dive into each one of these as some are fairly uncommon in comparison to the others. One of the most common forgiveness programs, however, is the Public Service Loan Forgiveness Program (PSLF).
Public Service Loan Forgiveness Program (PSLF)
The Public Service Loan Forgiveness Program offers loan forgiveness for borrowers with federal Direct Loans that pursue employment by a government or not-for-profit organization. Borrowers that are accepted will only be responsible for making 120 qualifying monthly payments on their loan while working full-time for their qualifying employer. After those payments, PSLF forgives the remaining loan balance.
It’s important to note that not everyone who applies will be granted loan forgiveness. Some resources state that only 2.41% of applicants are granted forgiveness through the PSLF program2.
Federal vs. Private Loan Forgiveness
When discussing loan forgiveness, people are often referring to federal loan forgiveness. At this time, there aren’t many, if any, systems in place for private loan forgiveness.
Summary
While we all certainly hope that moves are made in regards to forgiving our student debt, forbearance or deferment might be the most viable option if experiencing financial hardship that prevents you from making loan payments.
Neither deferment nor forbearance will impact your credit score as both are done with the approval of your lender. So, know that whatever decision you make, it will be okay. We’ve got your back.
You make a loan payment. The total debt goes down.
Then you come back the next day. The loan amount is back up to where it was before your payment.
Having some deja vu?
This is because of interest. Let’s break down what interest is, how it works, and why your total loan balance may be going up so quickly.
What Is Interest?
Interest is essentially the amount you pay a lender to use their money to pay for college. When a lender decides to give you money, they make a profit off of the interest paid over time on top of the original loan amount.
Most lenders understand that students will not be able to make loan payments while in school and often don’t require payments until a few months after you leave school. However, this does not mean that interest isn’t accruing on the overall debt amount. This means that the amount you owe can go up, and fairly rapidly if you don’t pay close attention to it.
How Does Interest Work?
It’s one thing to understand the concept of interest, but it’s another thing to really understand how it’s calculated. Let’s break it down.
(As a refresher before we get started, principal is the initial amount you agreed to pay back. Interest is the price you pay to borrow that money. For example, if you borrowed $30,000 to pay for college, and your loan balance is currently $40,000, $30,000 of that is principal, and $10,000 of that is interest.)
When you make a required monthly loan payment, you’re making a payment on the interest before any money goes toward reducing your principal. Whatever is left over after paying the interest is then put towards the principal balance. Over the life of your loan, the interest paid will go down each month, which subsequently allows you to put more towards your principal.
To break this down even further, we’ll use an example with some simple numbers.
Say you borrowed $100 from a lender some years ago, and your balance is now $120. You owe $100 in principal and $20 in interest. If you make a $10 payment towards your debt, you will be paying $10 towards the interest on your debt, bringing your overall total debt down to $110. However, the amount you just paid hasn’t chipped away at actually paying back what you initially borrowed. You simply paid part of what the lender is charging you to borrow that money.
How Does Interest Compound?
Interest is typically compounded daily. So what exactly does that mean?
The annual interest rate is divided by 365 (the days in the year) to get your daily interest rate. That is how much your interest will compound daily. The kicker is that if you aren’t making loan payments, the interest is compounding on a larger and larger amount.
This is what that can look like: (Get ready for some *quick maths.*)
Let’s say you borrowed $10,000 from a lender with a 5% interest rate.
Your daily interest rate would be roughly 0.014% (5% ÷ 365).
On day 1, your total loan debt would be $10,000.
On day 2, it would be $10,001.40.
For day 3, your interest would be calculated based on this new amount of $10,001.40, meaning…
Day 4, your total loan debt would be $10,0002.80.
At the end of a year, you would have accumulated a decent chunk in interest.
This compounding takes place when you are in school and beyond, so, you can imagine how this number can increase so rapidly if you aren’t making payments while in school.
How Much Interest Will I Pay?
This will vary from person to person depending on your total loan amount and the interest rate.
The average student loan accrues $26,000 in interest over the course of 20 years1. This interest ends up being around 67.1% of the average borrower’s total cost of repayment. This means that over half the amount paid over time is strictly from interest.
For a specific calculation based on your individual loan information, we recommend using Sallie Mae’s Accrued Interest Calculator.
What is Considered a High Interest Rate?
This might lead you to ask about what is considered to be a good interest rate. The reality is, interest rates vary greatly by lender and type of loan. So, it’s hard to say what is good and what isn’t.
Generally speaking, anything at or above 10% is considered a very high interest rate for student loans. Interest rates at 7% and below is a much better place to be.
Between 2006 and 2021, the average federal student loan interest rates were:2
4.66% for undergraduates
6.22% for graduate students
7.27% for parents and grads who take out PLUS loans
In May 2018, the average private loan interest rates were:3
6.17% for borrowers with 5-year variable-rate loans with a cosigner and beginning repayment immediately
7.64% for borrowers with 10-year fixed-rate loans with a cosigner beginning repayment immediately
How Can I Lower the Amount of Interest that Accrues?
The best way to prevent your total debt amount from rising so rapidly is to make at least the minimum monthly payments. On top of that, you can also save on interest by making biweekly and surplus payments.
If possible, you should always aim to pay off the interest that has accumulated to keep the loan at its initial amount.
Final Thoughts from the Nest
Interest is almost always part of taking out a student loan. Making educated decisions about what loans you take out and the interest rates associated with them is the most important piece to this equation. Always be sure to compare your loan options before agreeing to any one lender.
If you already have a student loan and struggling to make payments or think you may be able to get a lower interest rate, it may be time to consider refinancing.
Federal student loans have various repayment options. While the best repayment option for any loan is the one you can commit to paying consistently and on time, there are options that will allow you to pay less interest or less money overall.
Standard Repayment
The standard payment plan is available to all borrowers and is great for those who want to pay off their debt in the shortest period of time. With a standard student loan payment option, you would make equal monthly payments for 10 years. You’ll pay less interest and pay off your loans faster than you would on other plans.
Subsidized and Unsubsidized Federal Stafford Loans
all PLUS loans
all Consolidation Loans (Direct or FFELP)
Pros of Standard Repayment:
Shorter repayment period compares to other options
Less interest over time
Cons of Standard Repayment:
You may have higher monthly payments compared to the other options
Your monthly payment would remain the same even if your income dropped
Income-Driven Repayment
Income-driven repayment plans use your income to determine your monthly payment amount. This amount is typically 10-20% of your income and can be as low as $0 if you’re unemployed. With income-driven repayment plans, your loan term is extended, usually to around 12-25 years. When this term is up, the remaining balance you owe will sometimes be forgiven. (However, you would be required to pay taxes on the forgiven amount, so you aren’t totally off the hook there.)
There are various income-driven repayment plans. Each of these options has its own specific requirements in order to qualify, but they’re all ideal for people whose monthly income is too low to pay the standard monthly repayment.
There are 5 different income-driven repayment options offered by the government for federal student loans.
Pay As You Earn Repayment Plan (PAYE)
Revised Pay As You Earn Repayment Plan (REPAYE)
Income-Based Repayment Plan (IBR)
Income-Contingent Repayment Plan (ICR)
Income-Sensitive Repayment (ISR)
Pay As You Earn Repayment Plan (PAYE)
The PAYE plan makes your monthly payment 10% of your discretionary income. The payments are reevaluated every year and updated if your income or family size changes for any reason. If you haven’t repaid your loan in full after 20 years, the remaining balance will be forgiven.
Eligible Borrowers:
If you are a new borrower from either on or after October 1, 2007 and received a Direct Loan disbursement on or after October 1, 2011
Eligible Loans
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidated Loans not including PLUS loans made to parents
Revised Pay As You Earn Repayment Plan (REPAYE)
The REPAYE plan makes your monthly payments 10% of your discretionary income and is recalculated every year in the same way the PAYE plan is. For undergraduate loans, your remaining balance will be forgiven after 20 years, and for graduate loans, 25 years.
Eligible Borrowers:
Any Direct Loan borrowers with an eligible loan type
Eligible Loans:
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidated Loans not including PLUS loans made to parents
Income-Based Repayment Plan (IBR)
An IBR plan sets monthly payments at either 10% or 15% of your discretionary income, neither amounting to more than what you would pay under the 10-year standard repayment plan. Payments are reevaluated every year based on changes in income and family size. Depending on when you received your first loan, your remaining balance will be forgiven after either 20 or 25 years. It’s important to note that you may have to pay taxes on this forgiven amount.
Eligible Borrowers:
Those with high debt relative to their income
Eligible Loans:
Direct Subsidized and Unsubsidized
Subsidized and Unsubsidized Stafford Loans
All PLUS loans for students
Consolidation Loans not including PLUS loans made to parents
Income-Contingent Repayment Plan (ICR)
The ICR plan sets monthly payments at whichever is lesser: 20% of discretionary income OR the monthly payment you’d have on a plan with a fixed payment over 12 years, adjusted to your income. Payments are reevaluated and updated based on changes in your income, family size, and the amount of your Direct Loans. Outstanding balances are forgiven after 25 years.
Eligible Borrowers:
Any Direct Loan borrower with an eligible loan type
Eligible Loans:
Direct Subsidized and Unsubsidized
Direct PLUS loans for students
Direct Consolidation Loans
Income-Sensitive Repayment (ISR)
The ISR plan sets monthly payments based on your annual income with the caveat that the loan be paid in full within 15 years.
Eligible Borrowers:
Only for FFELP Program loans
Eligible Loans:
Subsidized and Unsubsidized Stafford Loans
FFELP PLUS Loans
FFELP Consolidation Loans
Pros and Cons of Income-Driven Repayment
Pros of Income-Driven Repayment:
Your monthly payments would likely be more affordable
Your monthly payments would decrease if your income decreased, so you wouldn’t be locked in to paying a certain amount each month even if an unforeseen circumstance arose in relation to your finances
Cons of Income-Driven Repayment:
The amount you pay could be more than the standard repayment plan depending on the plan you choose
You may pay more in interest with a longer repayment period
These repayment options have various elements needed to qualify which could make them inaccessible to some borrowers
Graduated Repayment
Graduated repayment plans allow borrowers to start their payments off at a lower amount and gradually increase to the full payment over a 10-year period. This plan is ideal for people who plan to start their career at a lower income level or who don’t plan to dive into full-time work immediately after graduation.
Eligible Borrowers
All borrowers are eligible for this plan.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
all PLUS loans
all Consolidation Loans (Direct or FFELP)
Pros of Graduated Repayment:
The 10 year repayment period allows you to pay off your loans faster compared to other plans
Your payments might align better with the entry-level wages many new graduates experience
Cons of Graduated Repayment:
You would pay slightly more over time in comparison to the standard repayment plan as more interest would accrue while you’re making smaller payments
You could be in a tough spot if your income doesn’t grow over time as you expect
Extended Repayment
Extended repayment options are available to all borrowers except those with Federal Direct Loans or Federal Family Education Loans that owe less than $30,000. This option allows for either a fixed or graduated payment, leading to full repayment by the end of a 25 year period.
This option is ideal for borrowers who have a hefty total loan amount and need a smaller monthly payment.
Eligible Borrowers
If you’re a Direct Loan borrower, you must have more than $30,000 in outstanding Direct Loans.
Eligible Loans
Direct Subsidized and Unsubsidized Loans
Subsidized and Unsubsidized Federal Stafford Loans
all PLUS loans
all Consolidation Loans (Direct or FFELP)
Pros of Extended Repayment:
Lower monthly payments in comparison to other plans
You have the option to choose either fixed or graduated payments
Cons of Extended Repayment:
There is no option for loan forgiveness as with the income-driven repayment options
The longer repayment period would cause you to pay more interest over time in comparison to the other plans
So Which Option is Best for Me?
This is a big question, and it may be overwhelming to try to find the answer.
Our answer? The option that you can commit to paying both consistently and on time. Missing loan payments could hurt your credit score and thus your ability to engage in other life milestones such as financing a home or purchasing a vehicle.
You can use the government’s Loan Simulator to figure out which plans you may qualify for and how much you’d pay monthly and in the long run under each plan.
For the 2021-2022 academic year, the average interest rate for federal student loans was 3.73% for undergraduates, 5.28% for graduate students, and 6.28% for parents and graduate students taking out PLUS loans. While it’s challenging to determine the average for private student loans simply due to how much the interest rates vary, they tend to be even higher.
Finding ways to lower your student loan interest rate could lower your overall monthly payment and save you money over time. Here’s how to lower your student loan interest rate for both federal and private student loans.
Can I Get a Lower Interest Rate on My Federal Loans?
Interest rates on federal student loans are set by Congress each year and are technically considered law. Unfortunately, this means that borrowers of federal student loans can’t negotiate their way into a better interest rate.
However, you may be able to get a small reduction on your interest rate by opting into automatic payments. If you agree to make payments on your loan through autopay, a system that automatically takes the monthly payment amount straight from your bank account, you may be able to secure around a 0.25 to 0.50 percentage point reduction in your interest rate.
If you’re confident this method wouldn’t send you into a spiral of overdraft fees, it may be a good option to enroll in auto-debit payments to save you a bit of interest.
Note: Be sure to check with your federal loan servicer to see if they offer interest rate discounts for setting up autopay.
Can I Get a Lower Interest Rate on My Private Loans?
Interest rates on private loans are set by the lender themselves and based on a variety of factors such as your credit score and income. This means that the rates are not set in stone as with federal student loans. Private lenders may be open to negotiation or reevaluating your interest rate.
Proactive Steps to Lower Your Private Loan Interest Rate
If you’re thinking about taking out a private student loan, there are a few things you should do beforehand that will help you secure a lower interest rate when you apply:
Take a Look at Your Credit Score
Interest rates are calculated based on a variety of factors, one of which being your credit score. Ensuring you have a solid credit score before applying for a private loan will help you get a lower interest rate.
Although each lender is different, in general, private lenders look for credit scores around 660 or above. While you can still get a private loan with a bad credit score, your interest rates will be higher. If your credit score isn’t great, don’t worry. There are things you can do to raise it.
Find Someone Willing to Cosign
A cosigner is someone who signs onto the loan alongside the borrower, agreeing to pay back the loan if the borrower doesn’t. Having a cosigner with a good credit score can help you secure a lower interest rate on your private loan because lenders will assume less risk. Given that most young people have a limited credit history, cosigners are very common for private student loans. In fact, around 90% of undergraduate students use a cosigner for their student loans.
The only “risk” to having someone cosign is that they are technically equally responsible for the loan, meaning that if you fail to make payments on the loan, it could hurt their credit score.
Compare Interest Rates Carefully
As always, before jumping into any private loan, it’s important to compare multiple private lenders to find the lowest rate. Complete Sparrow’s application to compare real rates from more than 10 different lenders to make sure you’re getting the best rate possible.
Lowering Your Interest Rate If You Already Have a Loan
If you already have a private student loan, you can lower your interest rate by:
Opting Into Automatic Payments
As with federal loans, many private lenders also offer a discount for opting into an autopay system. While the rate may only drop by 0.25 to 0.5 percent, every bit makes a difference.
Even if you only saved $10 a month from this decrease in interest, that would be $1,200 over the course of a 10-year repayment.
Refinancing Your Student Loans
If you have a stable income and plan to pay off your student debt quickly, you should consider refinancing for a lower interest rate.
Refinancing your loan is the process of taking out a new loan with a lower interest rate to pay off the loan you currently have. By doing this, you can reduce your payments and save on interest.
Borrowers can also choose to consolidate their federal student loans through a Direct Consolidation Loan. The new interest rate will be the average of the rates on the loans you are consolidating. However, you’ll want to consider some of the benefits associated with federal student loans that you’d be giving up, such as income-driven repayment, the possibility of loan forgiveness, and other federal borrower protections.
Negotiate with the Lender
This method won’t guarantee you any savings in interest, but it’s always worth a shot. Look around online for private lenders offering competitive interest rates and present it to the lender you’re already working with. The lender might be willing to make alterations to the rate you previously agreed upon in an effort to keep you as a customer.
Final Thoughts from the Nest
Finding a way to lower your student loan interest rate is one of the best ways to save yourself money in the long run. While not all methods will work for everyone, it’s likely that if you’re trying different approaches, you’ll find at least one that will work.
We wanted to know what financial regrets college students had so you can avoid them.
So, we asked the realest of the real. The best people we know…Our friends.
Here are their top financial regrets from college.
1. Not Thinking More About Savings
This was by far the most popular response, and it went both ways: saving too much and not saving enough.
Some students/grads wished they hadn’t panicked as much about money and instead, just budgeted to have a better understanding of where they were financially. Often, they missed out on experiences they wouldn’t have again because they felt the need to save every single dollar.
On the other hand, several students expressed that they didn’t save enough or at all. While they might have worked while in school, most of their money went out the window. By graduation, they were left with very little to show for all their working hours.
How to Avoid:Make a budget or expense tracker. While it may be tedious, keeping track of all the money that comes in and goes out will help you see where you’re at financially. If that seems a bit overwhelming, commit to moving 10-20% of each paycheck over to your savings to start.
This will help ease your mind when it comes to understanding your finances because you’ll be able to see exactly where your money is going. Then, you’re able to give yourself a budget for fun things while also saving some too.
For budgeting, we recommend Mint, and for automated savings, we recommend Acorns.
2. Spending Money on the Wrong Things
So many students from our poll expressed regret associated with spending money on more material objects like late night food or clothing rather than experiences like attending a game or concert on campus.
The reality is, once you graduate, the only thing you can take with you are the memories. Sure, grabbing food late at night is fun, but so is being able to spontaneously agree to Uber off campus with your friends because you have the money to do so.
How to Avoid: Before purchasing material items, ask yourself if it’s completely necessary or if you’ll use it more than 30 times. For example, pencils for class are a material item but completely necessary, and you’ll use them more than 30 times. A $50 Halloween costume, however, isn’t necessary, and you’ll probably only wear it once. Ditch the costume and save the coin for something more meaningful.
3. Not Understanding Loans
This regret showed up in two ways in our poll: not understanding the difference between loan options and agreeing to one loan option without knowing about the others.
This is definitely an overwhelming part of the college process, and we don’t blame anyone for not knowing the difference between loans or fully understanding how they work.
That said, taking the time to answer these questions before agreeing to borrow from any one lender will likely save you a ton of time and money in the long run.
How to Avoid:Take a bit of time to read a few articles, watch some YouTube videos, or listen to some podcasts that explain the difference between loan options. Don’t commit to any one lender unless you feel confident in that decision.
4. Buying Every Textbook
*cue the sad tunes*
As a former college student myself, it took me a full two semesters to realize that buying books from the campus bookstore was costing me way more money than it should. I was also shocked to learn that I didn’t actually need to purchase every single book that was recommended to me.
My first semester, I purchased every book on every syllabus and probably didn’t open half of them. The folks in our poll shared a similar sentiment.
On average, college students pay more than $1,200 per year for textbooks.1 This is an exorbitant amount of money that is largely unnecessary to spend.
How to Avoid: When you get your syllabi the weeks leading up to classes, you may see books listed as “required.” Unless you get an email from the professor restating that requirement prior to class starting, we recommend waiting to get it until the first day of class. More often than not, professors won’t need you to have the book on the first day and will give you some time to get it.
This will allow you to look at all of your options before buying it from one place. Always do an initial google search for “[Book Title or ISBN] free pdf.” You will be surprised how many books are already online for free! If that doesn’t yield any promising results, we recommend using Slugbooks.com which will allow you to enter the book title or ISBN and compare prices across all online options.
Summary
The financial aspect of college is hard. There’s no way to sugarcoat it. But, by sharing financial regrets, we hope we can prevent you from making the same mistakes.
So, from one college student to another, cheers to making informed financial decisions.
It is always recommended that students exhaust all scholarship options before accepting any federal financial aid or loans. But where do you look for scholarships?
Sallie Mae is one of the most well-known private student loan companies in the game. To support students in making smart financial decisions, Sallie Mae also offers a free Scholarship Search tool.
After registering, the tool will send you customized alerts to notify you of new available scholarships that match your unique profile. You can also manually search for scholarships that match your interests, skills, and activities.
And wait – it gets better! All students registered with Sallie Mae’s Scholarship Search tool will be automatically entered to win $1,000 in their monthly sweepstakes.
Scholarships.com is one of the most established scholarship websites, having reported nearly $19 billion in scholarships. The site allows you to create a profile then uses that information to match you with scholarships you should apply to.
You can also search by college, state, and a variety of other areas to narrow down your search.
Chegg is well-known for it textbook rentals and homework help, but it’s also a great resource for scholarships. In total, Chegg offers more than 25,000 scholarships and tutors to help review students’ scholarship essays.
Fastweb is a unique scholarship search engine, claiming to have over 1.5 million scholarships in its database. Similar to how Scholarships.com works, you can create a profile and the tool will find the scholarships that best match your background. Fastweb will even email you those matches along with the deadlines so you can keep up and never miss a scholarship!
Niche.com provides insight on colleges and universities using over 140 million reviews and ratings from real students and families. The site also offers a wide variety of scholarships, using a similar matching process to Scholarships.com and Fastweb.
Niche will pair students with scholarships that match their background, interests, and qualifications. A large majority of the scholarships on Niche are also no-essay (oh yeah!).
Cappex provides a wide variety of scholarship opportunities, but what makes it most unique is its Calculator Tool. The tool allows students to calculate their chances of getting into prospective schools. While not the end-all-be-all, the tool is helpful because it can allow you to see whether or not you might get into schools that offer more scholarship money and how much additional leg work you might need to do.
Cappex’s database offers more than $11 billion in scholarships, allowing students to search via a variety of factors.
Insider Tips from the Nest:
Create a new, separate email account just for applying to scholarships. This is important for a few reasons:
Your regular email won’t be flooded with scholarship emails.
You can put all of your essays and application materials into folders (like on Google drive!) and keep them in one place.
You won’t have to individually unsubscribe from every single scholarship website after you’re done, you can just log out of the email!
Summary
Beyond scholarship websites, you should always check your high school’s website (if applicable) as well as the website of your prospective schools. Each school will handle scholarships differently, though, so always ask a staff member for guidance!
Your student loan debt increases every single day because interest compounds daily. If you are looking to pay off your debt faster, making monthly payments won’t be most effective.
Here’s two simple hacks that can help you pay off your student debt faster.
You’re Paying Off Your Debt Inefficiently
If you’re making monthly payments on your student loan debt, you aren’t making the most efficient payments possible. Now, we aren’t saying monthly payments are a bad thing, but you could be paying more efficiently – and why wouldn’t you want to do that?!
Lenders determine a specific repayment period and divide the total principal amount plus the interest the loan will accrue into monthly payments. Borrowers then make those monthly payments overtime and pay off their loan.
However, with student loans, interest accruesdaily. This doesn’t align super well with monthly payments. You could be making monthly payments on your loans for years without making a dent in the principal because it’s hard to really get ahead of the interest.
Monthly payments work, but we want to give you the best options, not just the ones that work, so we can all make the smartest financial decisions.
Let’s break down the two main things you can do instead to pay off student debt faster.
Biweekly Payments
Biweekly student loan payments are simple.
If you typically pay $500 once a month, you would instead pay $250 twice a month.
Because there are 52 weeks in a year, you would end up making 26 payments (or 13 full months worth of payments) instead of the 12 you’d make with monthly payments. Not only does this mean an additional payment, but you’re able to keep up with the interest which means paying down your loan faster.
Continuing with the example of $500 monthly payments, biweekly payments would look like this:
Monthly Payments:
$500/month
x 12 months
$6,000 total
Biweekly Payments:
$250 every other week
x 26 weeks (52 weeks / 2)
$6,500 total
Paying more each year would save you both money and time as you’d pay your loan off faster than your initial repayment period.
Here’s another example from StudentLoanPlanner for a $50,000 loan with a 5.7% interest rate:
Another pro of biweekly payments? Most people get paid biweekly, and thus, making biweekly payments works great with their budget (keeping the money out of sight, out of mind!)
Surplus/Greater than Minimum Payments
This may sound fairly obvious, but putting any extra money you can onto your loans could save you thousands of dollars over time.
If you pay only the minimum monthly payments on your loan, it will take you the full repayment period. However, if you added even an additional $100 a month to your payments (or $50 every biweekly payment!), you could save yourself some serious coin.
Let’s look at some numbers to conceptualize just how big of a difference this can make
Total Current Balance: $50,000 at a 5% interest rate
10-year repayment plan
Minimum Monthly Payments: $530
Total Paid Over 10 Years: $63,639
10-year repayment plan
Minimum + $100 Extra/Month: $630
Total Paid: $60,820
Time Saved: ~1.9 years
Now, imagine if you were able to add $200 or maybe even $500 on some of those months instead of $100. Incorporating surplus payments can save you a lot of money and time.
Summary
Making monthly payments is a good way to pay off student debt, but making biweekly surplus payments is even better. If you’re struggling to allocate funds in your budget to this extra bit of money, due to high interest rates or unfavorable loan terms, it might be time to consider refinancing your student debt.
The term “refinancing” is one we hear a lot in the realm of student loan repayment, but how many of us know what it actually means?
Refinancing is actually surprisingly easy to understand: a lender will pay off your existing loans and give you a new one with a lower interest rate or shorter repayment plan. It’s basically a chance to swap your current loan for a better one, with better terms.
In the long run, the goal of refinancing is to help save you money. And the best part is, you are allowed to refinance as many times as you like, free of cost. Most lenders allow you to refinance both your federal and private student loans.
Let’s say you took out a student loan of $50,000 at an interest rate of 5% during undergrad and you plan on paying it off over the next 10 years at a monthly rate of around $530. By the time you finish paying it off, you will have actually paid $63,640 — the original $50,000 plus $13,640 in interest.
On the other hand, if you refinance at an interest rate of 2.5% over the same ten-year period, you can reduce your monthly payments to $471, and pay only $6,562 in interest, saving $7,078 over the lifetime of the loan.
Most lenders require you to have a good credit score (in the mid 600s). Lenders also want proof of a stable income and cash flow to support your new loan.
If your credit score has improved since taking out your original student loan, you may be well-positioned to refinance.
If your credit score is poor, you may struggle to find a lender willing to help you refinance because you will be viewed as a higher risk. If this sounds like you, consider adding a creditworthy cosigner to your application to increase your changes of qualifying for a lower rate.
Change in interest rate and loan term
Before you refinance your student loans, consider the change in interest rate and loan term. A lower interest rate means you will pay less interest each month, resulting in a lower total payment.
The loan term dictates how long you will be paying back the loan. A shorter term typically means a higher monthly payment, but allows you to get out of debt faster. On the other hand, a longer term usually means a lower monthly payment, but increases the amount of interest that you have to pay throughout the lifetime of the loan.
Type of loans
When you refinance, you are essentially applying for a private loan. If you already have private loans, refinancing is a great way to decrease the amount of interest you pay on your loans.
If you have federal loans, however, you’ll want to weigh the reduction of your interest rate with the loss of federal student benefits that you’ll miss out on when you refinance with a private lender, such as:
Income-driven repayment plans
Income-driven repayment plans readjust the amount you pay as your income falls. This keeps your repayment from ever totaling more than 10% of your monthly income, and it can help you stay financially secure.
Loan forgiveness
Federal student loans have some loan forgiveness options, such as the Public Service Loan Forgiveness and Teacher Loan Forgiveness. When you refinance a federal student loan, you lose access to all these long forgiveness programs.
Deferment and Forbearance
Federal student loans include deferment and forbearance which allow you to postpone your loan payments if you suffer severe financial hardship. But if you refinance, you’ll likely lose these protections.
Am I Eligible to Refinance My Student Loan?
While everyone’s situation is different, here are some of the qualities that will make you well-positioned to refinance your student loans.
You’ve graduated or are no longer in school.
You have a high-interest private or federal student loan
You earn a steady flow of income
You’ve kept up with your loan payments and have a credit score in the mid/high 600s or above.
You do not work for the government, and you do not foresee the need for an income-driven payment plan.
If this describes you, then you are in good shape to refinance your student loans, and will likely save a substantial amount by doing so. If you answered yes to some of these and not others, you should consider refinancing only your private student loans.
Situations Where it Makes Sense to Refinance
Here are some situations where it would make sense:
You have a private student loan with a high interest rate
If you’ve got a private student loan with a high interest rate, you should try refinancing as soon as possible. That will maximize your potential savings.
If you can lower your interest rate (even by just a half of a percentage point), it could save you thousands of dollars throughout the lifetime of the loan. If you previously refinanced your loans, you can refinance again to lock down an even lower rate. Since refinancing is free, you are almost guaranteed to save money.
Want to compare all your student loan refinancing options? Complete the free Sparrow application to compare personalized rates from over 15 premier lenders.
Your finances improve
Credit score and income are the two main factors that determine the interest rate on your private student loans. If your credit score increases or you get a pay raise, it could be a great time to shoot your shot at refinancing your student loans. Refinancing to a shorter repayment plan at a lower interest rate will allow you to pay off your loans faster and save money in the long term.
In order to refinance, you generally need a credit score at least in the high 600s and enough income to consistently pay your debts and other expenses. If you don’t meet those criteria, you could refinance with a cosigner who does.
You have a federal student loan but don’t plan on using of the federal protections
If you don’t plan on taking advantage of federal loan benefits, such as income-driven repayment and Public Service Loan Forgiveness, refinancing might be a good option for you. Only refinance your federal student loans if you know you can get a lower rate. There is no reason to refinance your loans unless you end up paying less in interest.
You have a creditworthy cosigner
A cosigner is a person – such as a parent, close family member or friend – who pledges to pay back the loan if you do not. If you can find a cosigner with strong credit and high income, you’ll have a better chance of qualifying for a low interest rate. This could end up saving you thousands of dollars of interest expense over the lifetime of your loan.
How to Prepare For Refinancing
1.Explore all private loan options.
Determine if the private loan being considered will have a fixed or variable interest rate. A fixed interest rate remains the same throughout the lifetime of the loan, while variable rates will likely fluctuate throughout the lifetime of the loan depending on interest rates set by the banks.
Although a variable rate may be lower at certain points throughout the loan, they are largely unpredictable. On the other hand, fixed-rate offers more stability since you’ll know exactly how much you owe each month. Both can be good options depending on your circumstance and the movement of variable rates.
2. Know where you stand.
A strong credit score will almost certainly be required. While most lenders want to see scores in the mid-to-high 600s, aiming for 700 or higher will help with both the approval process and the rate you will qualify for. This means you will need to know where they stand before starting the process.
3. Carefully examine your credit report and score.
There are a number of sites that allow you to check your credit report for free. If there are mistakes, you will need to take the time to correct them before you start the process of applying for refinancing. If your score is not where it needs to be, you will need to take steps to improve your score before starting on the path to refinancing.
4.Shop around for the best rates.
Some borrowers may be concerned about damaging their credit score by having too many hard inquiries over a short period of time. Luckily, we’ve built a free tool that allows you to see what rates you’ll qualify for without impacting your credit score.
At the end of 2020, the United States reached a new high of $1.7 trillion in student debt. It’s hard to conceptualize just how much $1.7 trillion is, but what we do know is that it’s really, really, really big.
How Many People are Impacted by Student Debt?
The $1.7 trillion in student debt is held by around 44.7 million Americans. This might seem like a lot, but it isn’t incredibly surprising when we consider the fact that in recent years, around 69% of college students took out student loans and graduated with an average of $29,900 in student debt, including federal and private debt.
How does this $1.7 trillion break down? Let’s see.
Federal vs. Private Student Loan Debt
Student loans are typically one of two types: federal or private. Federal loans are dealt by the government, and private student loans come from private lenders such as financial institutions and banks.
Federal student debt makes up about $1.57 trillion of the total student loan debt. This amount is spread across 42.9 million borrowers and various loan types.
Private student loans make up around $132 billion of the grand total.2 While this number is only a fraction of the federal loan debt, it’s important to remember that private interest rates tend to be much higher. Thus, this loan debt has just as much, if not more, of an impact.
Student Loan Debt By Degree Type
As of 2019, college graduates obtaining a master’s degree held the most debt. The following details the breakdown of which degrees held what percentage of the overall student loan debt.3
Associate’s Degree: 7%
Bachelor’s Degree: 29%
Master’s Degree: 36%
Professional/Doctoral Degree: 20%
Demographic Breakdown of Student Loan Debt
By Age
Believe it or not, the 25-34 years-old age group holds the most student loan debt. Here’s the breakdown:4
When we break it down by race, we can begin to see some startling disparities.
Black and African American college graduates owe an average of $25,000 more in student loan debt than White college graduates. That said, 54% of all student loan debt is held by White/Caucasian student borrowers. This means that even while holding less of the overall student loan debt, Black and African American college graduates still carry more in student loan debt.
Federal student loans have more repayment options than private student loans, allowing us to see just how much of this debt is in repayment versus forbearance and so on.
As of January 2021, federal student loan debt was broken down the following way:5
$14.7 billion in repayment, across 0.4 million borrowers
$114.4 billion in deferment, across 3.2 million borrowers
$887.4 billion in forbearance, across 22.2 million borrowers
$43.7 billion in a grace period, across 1.7 million borrowers
Student Debt for the Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness program (PSLF) grants eligible federal loan borrowers forgiveness on a portion of their loans after making 120 qualifying payments and working for a qualified employer. Borrowers in this program typically won’t throw lump sum payments at their debt as they know it will eventually be forgiven after making minimum payments.
This means that the debt levels for people in this program can look a bit different.
In total, there are around 1,378,000 borrowers in the PSLF program. The average balance forgiven is $76,906.6
One common trend amongst all of these categories is the fact that student loan debt is rising, and it’s rising steadily. Over the past few years, student loan debt has continued to jump by billions each year. Regardless of degree, program, age, or year, student loan debt is on the rise for us all.
This might sound scary, but we want you to know that if you’re reading this, you’re already ahead of the game. Being informed on what student debt looks like is a great place to start. Now, it’s all about making smart financial decisions when it comes to your loans. (fun fact: we’ve got you covered on that)
A 2019 study showed that most Americans live with some financial regret. One of the highest-ranked regrets was related to choices surrounding student loans.
Trying to figure out the difference between student loan options will leave you with gray hair by age 25. The truth is, there are tons of different options available, and it’s incredibly important to understand the differences to make the best decision for your education. The best place to start is understanding the differences between federal and private student loans.
So take a deep breath, and don’t worry. No gray hairs here. We’ll give you everything you need to know.
Who Issues the Loan?
Federal
The federal government issues these loans. Federal tax dollars paid by US citizens each year fund federal student aid programs
Private
Banks and other financial institutions issue private student loans.
Who is Eligible for the Loans?
Federal
In order to become eligible for federal student loans, you must meet the following requirements:
Demonstrate financial need: Financial need is calculated by taking the difference between the cost of attendance (COA) at a school and your Expected Family Contribution (EFC). While COA varies from school to school, your EFC does not change based on the school you attend.
Be a U.S. citizen or eligible noncitizen: some legal U.S. residents without citizenship may qualify.
Have a valid Social Security number: with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau.
Be registered with Selective Services: if you’re a male (you must register between the ages of 18 and 25).
Be enrolled or accepted for enrollment in an eligible degree or certificate program: You are not eligible to borrow federal loans unless you attend an eligible program.
Be enrolled at least half-time to be eligible for Direct Loan Program funds: most programs require you to be enrolled at least half-time.
Maintain satisfactory academic progress in college or career school: You must meet the standards for satisfactory academic progress toward a degree or certificate offered by your institution. Check with your school to find out its standards.
Complete and sign the Free Application for Federal Student Aid (FAFSA) form: FAFSA is used to determine your financial need.
Show you’re qualified to obtain a college or career school education: You must have a high-school diploma or a recognized equivalent such as a General Educational Development (GED) certificate.
Private
Not everyone will qualify for private student loans. Private lenders evaluate applicants based on a variety of factors, typically including the financial history and credit history of the applicant and/or the cosigner (if applicable). If the private lender deems you to be too risky of a borrower, they may not issue you a loan.
Applying with a cosigner who has a strong credit score could improve your chances of qualifying and allow you to access lower interest rates.
How Much Can You Borrow?
Federal
The amount you can borrow in federal loans depends on your student status.
A parent can also borrow a maximum of $20,500 in Direct Unsubsidized Loans per academic year via a Direct PLUS Loan.
Graduate/professional students can also borrow a Direct PLUS Loan, however, the amount varies from person to person depending on the cost of attendance at their respective institution and the financial aid they received.
To see how much money you can receive in federal loans, you will need to fill out the Free Application for Federal Student Aid (FAFSA). This is essentially an application that gives the federal government an idea of your expected financial need.
Private
The amount one can borrow in private student loans varies by lender. Typically, borrowers are able to fill the remaining balance they owe after accepting scholarships and/or federal loans with private student loans. Regardless, the amount you borrow from any private lender cannot exceed the total cost of attendance at your institution.
What are the Interest Rates?
Federal
Congress sets the interest rates on federal student loans. The rates vary based on the loan type and the disbursement date of the loan (the date the funds are paid to the student or school directly).
The table below provides interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2021, and before July 1, 2022.
Loan Type
Borrower Type
Fixed Interest Rate
Direct Subsidized Loans & Direct Unsubsidized Loans
Undergraduate
5.50%
Direct Unsubsidized Loans
Graduate or Professional
7.05%
Direct PLUS Loans
Parents & Graduate or Professional Students
8.05%
Interest Rates for Direct Loans First Disbursed on or After July 1, 2023, and Before July 1, 2024
All federal student loans have fixed interest, meaning that the rate will not fluctuate for the life of the loan. Perkins Loans (regardless of the first disbursement date) have a fixed interest rate of 5%.
The interest rate on private student loans is based on a variety of factors. Most private lenders look at your financial history and credit score to assess the risk you pose as a borrower, which is reflected by the interest rate they offer you.
The lower your credit score, the more risk you present as a borrower — this means a higher interest rate. Similarly, the higher your credit score, the less risk you present as a borrower — this leads to a lower interest rate.
Unlike federal student loans, private student loan interest rates can be fixed or variable. You can use Sparrow to compare real interest rates from more than 15+ different lenders to ensure you’re getting the best rate possible.
When Do I Have to Start Paying the Loan?
Federal
Federal loans will go into repayment if you graduate, go below part-time student status, or leave school entirely. If you have a Direct Subsidized, Direct Unsubsidized, or Family Educational Loan, you will have a 6-month grace period before you are required to make consistent payments.3
It is important to note that Direct Unsubsidized loans and PLUS loans will accrue interest while you are in school. Direct Subsidized loans will not accrue interest while you are in school. So, while payments won’t be required until after the grace period, interest may be accruing depending on the loan type.
Private
Private loans typically don’t require consistent payments until after you leave school. Most lenders will implement a similar grace period to federal student loans, usually around 6 months after graduation. However, private student loans will accrue interest while in school, starting immediately after disbursement.
Is There an Advantage of One Over the Other?
Federal Loans
Private Student Loans
Pros
1. Typically don’t require good credit or a cosigner. 2. Come with additional benefits such as loan forgiveness programs and income-driven repayment options. 3. Interest rates tend to be lower than private loans.
1. Higher borrowing limit, up to 100% of the cost of attendance 3. You can apply online in a couple of minutes 2. Lowest interest rates on the market, if you have excellent credit.
Cons
1. There is a cap to how much you can borrow in federal student loans. 2. Not all students will qualify for subsidized student loans.
1. You may need a cosigner to qualify for a private student loan. 2. Not accessible to borrowers who lack a strong credit score or creditworthy cosigner
Final Thoughts
There’s a lot to understand about federal and private student loans, but the good news is that if you’ve made it to this point in the article (shoutout to you!) you’re already one step closer to making an educated decision when it comes to your loans.
During his 2020 presidential campaign, President Joe Biden emphasized time and time again his plan to cancel student debt. This has sparked a conversation about what this really means and whether or not we should actually do it.
If you happen to be one of the 43 million Americans whose student debt is part of the national total of $1.7 trillion, this may sound like music to your ears. However, there are pros and cons to canceling student debt that are important to consider.
*Article as of December 2022. For updated information on President Biden’s student debt cancelation actions, please visit the rest of our blog.
What Does Student Debt Cancellation Really Mean?
Canceling federal student loan debt would relieve borrowers of the obligation to pay back federal student loans.
Biden’s Proposed Plan
Biden’s presidential campaign focused largely on changes in higher education and student debt.
Biden has supported the immediate cancellation of $10,000 of federal student loan debt per person as part of COVID-19 relief.
Democrats and progressives alike have been advocating for student borrowers and asked Biden to cancel $50,000 of federal student debt per borrower instead of his planned $10,000. While ambitious, politicians such as Senator Chuck Schumer and Senator Elizabeth Warren believe it is possible and warranted.
However, Biden previously stated that he doesn’t believe he has the authority to cancel such large sums of student loan debt. In some interviews, Biden even suggested that he disagrees with canceling such large amounts.
However, in August 2022, Biden announced a plan to cancel up to $20,000 in student loan debt per borrower. Due to litigation surrounding the action however, it is currently on hold.
Specific Areas of Forgiveness
In Biden’s federal student debt plan, he proposed forgiveness in the following ways:
For those who earn less than $125,000/year.
For undergraduate student loans. Graduate students’ debt would not be canceled under Biden’s proposed plan.
For those at public colleges and universities, as well as private HBCUs and minority-serving institutions.
People with private student loans would not be impacted or relieved of their debt under this plan.
Free Tuition
In Biden’s American Families Plan, he proposed making college tuition-free for some schools such as:
Community colleges
Minority-serving institutions such as HBCUs
It’s important to note that this plan covers tuition and tuition only, meaning you would still have to pay the additional costs like room and board, meal plan, and fees.
Increased Support for Public Servants
Biden plans to provide more student debt support to people pursuing public service by:
Forgiving up to $50,000 and immediately canceling $10,000 for each year someone completes an eligible form of public service. People in this category would be eligible for 5 years of this loan forgiveness.
Making changes to the current Public Service Loan Forgiveness Program (PSLF). His changes would allow more loans to qualify for forgiveness and for specific amounts of forgiveness after 5 years of public service. Biden’s additions would not replace the current PSLF program.
Larger Pell Grants
The Pell Grant is a form of need-based federal financial aid that typically does not have to be repaid. It is meant to help eligible low-income students pay for college costs, including tuition, fees, room and board, and other educational expenses. As of 2021, the maximum Pell Grant is $6,495 and the minimum is $650.
In Biden’s 2022 budget, he requested to increase the maximum amount for Pell Grants by $400.
Income-Driven Repayment
In his campaign, Biden proposed a new income-driven repayment plan for federal student loans. It includes:
Undergraduate loans only. Graduate student loans would not qualify for this repayment option.
Automatic enrollment. Everyone would be automatically enrolled in this plan and would need to opt-out on their own if they didn’t want to participate.
Untaxed forgiveness. Current loan forgiveness programs typically tax the amount you are forgiven. Under Biden’s plan, the amount owed in student loan debt would be forgiven tax-free after 20 years.
$0 monthly payments. If you make less than $25,000 per year, your monthly payments would be $0 under Biden’s proposed plan.
What Does This Mean for People with Private Student Loans?
Biden does not have the authority to cancel private loans. His plans focus on federal student loans, as they are owned by the government.
Private lenders provide money to borrowers on their own terms separate from the government. If you have private loans and student debt forgiveness does happen, your private student loans will remain as is.
The Pros and the Cons
In no way is this an exhaustive list of the pros and cons of canceling student debt, but these are the main arguments for and against it:
The Pros
Any amount of student loan forgiveness would benefit those in debt.
It could stimulate the overall economy. If borrowers were able to divert some of their money from making student loan payments to things like buying a house, it could lead to overall economic growth.
It could help alleviate some of the disparities caused by student loan debt. There are racial and ethnic disparities within the student debt crisis, and canceling even some student loan debt could help even the playing field.
The Cons
Student debt cancellation does nothing to address the root of the problem: the high cost of a college education in today’s world.
Some say it could lead to an incredibly privileged class of recent college graduates.
Final Thoughts
The answer to whether or not we should cancel student debt really comes down to how you personally weigh the pros and cons in your mind. What we do know is that there has been a lot of talk surrounding the topic and many politicians and companies are stepping forward in support of student debt cancellation.
Let us all take a moment of silence to thank our student loans for getting us through college. How could we ever repay them?
Jokes on us, we have to repay them.
In all seriousness, understanding your student loan repayment plan options is incredibly important, especially with private student loans. When you take out a private loan, interest starts to accrue as soon as the amount is disbursed. So, if you’re using a private loan to pay for your education, it will accrue interest the entire time you’re in school.
While every private lender has its set of repayment plans, there are four main repayment plans that have become quite common across the industry.
Immediate Repayment
Interest-Only Repayment
Partial Repayment
Deferred Repayment
In this article, we’ll break down the four main repayment plans for private student loans, and provide some suggestions that could save you money in the long run by minimizing the interest that accrues.
Immediate Repayment
Opting for immediate repayment means you would make full payments as soon as the loan is disbursed, including while you’re still in school.
Benefits of Immediate Repayment
By making full payments right away, you will be able to minimize the interest you pay, resulting in the greatest savings.
You will be able to get a good head start on repaying your loan by the time you graduate as you would’ve already paid a decent chunk in both interest and principal.
Downside of Immediate Repayment
For a majority of students, it just isn’t realistic to make full payments while still enrolled in college.
Interest-Only Repayment
Similar to immediate repayment, interest-only repayment requires you to make some payments while still in school. The difference is that you’re only paying interest rather than the full payment.
Benefits of Interest-Only Repayment
The monthly payments may be more manageable as they’d be only for the interest.
Your loan balance won’t grow while you’re still in school.
Downside of Interest-Only Repayment
You won’t actually be paying down your loan. Because the interest compounds, your payments would prevent you from owing more than you borrowed when it’s time to make full payments, but you won’t actually be paying off any of the initial loan amount.
Partial Repayment
Partial repayment is similar to immediate and interest-only repayment in that you make payments while in school, however, partial repayment may be more manageable depending on your overall loan amount.
Partial repayment requires you to pay a set amount, typically around $25, per month while still in school to reduce the accrued interest. (This could get confusing to differentiate partial repayment from interest-only repayments. Interest-only repayments would cover the entire monthly interest, as where partial repayment would only cover part of the monthly interest.)
Benefits of Partial Repayment
You can keep your loan balance in check and reduce the total amount repaid.
Your loan balance won’t grow as quickly in comparison to not making any monthly payments while still in school.
Downside of Partial Repayment
You would still owe more than you borrowed by the time you graduate.
Deferred Repayment
Deferred repayment is the only repayment plan that doesn’t require you to make payments while still in school. With this plan, payments would likely start after the grace period ends, typically 6 months after graduation.
Benefits of Deferred Repayment
You won’t have to make any payments while you’re still in school.
Downside of Deferred Repayment
You will likely pay the highest overall cost. Unpaid interest will compound and add to your principal amount at the end of your grace period.
So What Should I Do?
Making full or partial loan payments while in school could save you thousands of dollars over time and is certainly recommended. But at the end of the day, the best private loan repayment plan is the one that works within your budget.
Check out the table below for a quick breakdown of the four main repayment plans offered by private student lenders.
Private Student Loan Repayment Plans
Repayment Plan
Terms
Pros
Cons
Immediate Repayment
Make full payments as soon as the loan is disbursed, while you’re still in school.
You will minimize the interest you pay, resulting in the greatest savings. Because you’re paying down both interest and principal while you’re still in school, you’ll already have made a good start on repaying your loan by the time you graduate.
For many students, it’s not realistic to make full monthly payments while still enrolled in college.
Interest-Only Repayment
Pay only interest while you’re in school.
Your monthly payments will be more manageable, and your loan balance won’t grow while you’re in school.
You won’t make any progress paying down your loan balance while you’re a student. But at least you won’t owe more than you borrowed when it’s time to start making full payments.
Partial Repayment
Pay $25 per month while you’re in school to reduce accrued interest.
You can keep your loan balance in check, and reduce the total amount repaid.
You’ll still owe more than you borrowed when you graduate, but your loan balance won’t grow as quickly.
Deferred Repayment
Don’t make any payments while you’re in school. Begin repayment after graduation or 6 months after graduation.
You won’t have to make payments while you’re in school.
You will likely pay the highest overall cost since unpaid interest will be added to your principal amount at the end of your grace period.
Final Thoughts
Understanding the different repayment plans for private student loans is crucial in making informed decisions about how to manage your debt. While there are pros and cons to each plan, making full or partial payments while in school can help minimize the overall cost of your loan. Ultimately, the best repayment plan is the one that fits your budget and financial goals. By taking the time to research and compare your options, you can make a plan that works for you and help set yourself up for a financially stable future.
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What Does Student Debt Cancellation Really Mean?