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Financial Aid Help for College and Loan Refinancing

financial aid help for college and loan refinancing

BillCutterz knows how scary getting ready for college is, especially when funds are low. We’re here for whoever needs financial aid help. Here’s a guide on everything to do with FAFSA, student loans, and refinancing.

There are many different forms of aid, one of which is student loans. Student loans are highly disliked by many and are seen as the worst thing a student can do to pay for school. In reality, they are one of the best financial tools a responsible student can use to achieve a college degree. Especially with help from companies like Sofi, who can help you spend less on a loan after it’s taken out. In this guide, I will go over many questions including:

• What is FAFSA?
• What Types of Financial Aid are There?
• How Do Federal and Private Loans Work
• What Happens When You Graduate with Loans?
• How to Apply for a Loan
• What is Refinancing vs. Consolidation
• Why Consolidation is Usually the Best Choice for New Graduates
• How to Consolidate and What is Sofi?

Financial Aid Help:

What is FAFSA and Financial Aid?

FAFSA, or the Free Application for Federal Student Aid [1], is an application that students who want to go to college must fill out to receive Financial Aid. Financial aid is money that’s given to students, by the government, to help pay for college. Depending on the college, financial aid can pay tuition in full with money left over for books and supplies. With more costly schools, like a university, it may only pay for a fraction of the costs.

Who can get Financial Aid?

Anyone can apply for financial aid, but not everyone will receive it. Income (and parent’s income if under the age of 24 with no special circumstances [2]) will affect how much a student receives, but isn’t the only factor. Here’s an infographic provided by StudentAid that goes over who is eligible [3] for financial aid. It’s highly recommended for everyone to apply, even if you think you may not be awarded.

For more in-depth and up-to-date information, see this Ultimate FAFSA Guide updated for 2018.

What Types of Financial Aid Are There?

Federal Aid:

Grants – Aid that’s given out for free. Does not have to be paid back (unless you drop out of school.)
Loans – Money that a student borrows and is meant to be paid back (with interest).
Work Study – A grant given that enables the school or outside employer to fund a job for a student. The student then works to receive money for school.

School Aid:

Scholarships – The only free aid given by schools is scholarships. They are essentially private grants where you don’t have to pay back the money.

Non-Profit/ Private Aid:

Scholarships – Same as the school scholarships, just given by private organizations that like to give back to the community; free money, but usually has some requirements (Essays, achievement based, etc.)
Loans – Like federal aid, these must be paid back with interest. Many times the interest will be even higher than that of a federal loan.


How Do Federal and Private Loans Work?

A loan is money that has to be paid back eventually, with a little more on top due to interest.

Over the past 20 years, loans have been given a bad rap and for a good reason. In the late 1990’s loan rates were more than two times what they are today. Rates would accrue so much interest that the students who did have loans were overwhelmed and not expecting to pay so much back. Since then, interest rates are down to 3.76% which means you pay much less interest on a loan than your parents did with many more options to pay them off.

Federal Government Loan

Direct Standard Loan – This loan is provided to those who show financial need, but don’t feel the grants and scholarships will be enough. Usually, this is the safest and best loan to get. You don’t build interest on this loan until six months AFTER you have graduated. As of right now (July 2016) the interest rate for this loan stands at 3.76%. 3.76% interest is great for any loan.

Direct Unsubsidized Loan – An unsubsidized loan is much different than its subsidized counterpart. Anyone can get this loan without a financial need, but it doesn’t come without strings attached. This loan’s interest immediately starts accumulating, as soon as it’s taken out. It has an interest rate of 3.76% (as of July 2016)

Direct PLUS loans – These loans are usually granted to students whose parents take on the burden of credit (only the parent can take this loan out), as it will go under their name in case the Direct loans are not enough. It can also be available to graduate students if they need it without having to put the burden of payback on the parents. The interest rate is almost double that of the Direct loans at 6.31%

Perkins Loans – This loan is given out by the school that the student is attending. Specifically for students with high financial need. Not all schools participate in the Federal Perkins loan, so check with the financial aid department to verify. Payments for the loan will be made out to the school with the interest rate being 5%.

Private Loans

For private loans there aren’t different types, there’s only different rates, fees, and terms. Private loans are given out by “for-profit” companies and entities, not by the government. Because of this, private loans tend to have higher interest rates than federal loans (which means you pay more unless you can refinance with Sofi who tends to have lower rates). The biggest downside to these types of loans are that most of the time they can’t be forebear (temporarily postponed payments), deferred (not having to make payments on a loan for a set amount of time or accrue interest), and in a lot of cases, can’t be consolidated either (which helps a lot after school when interest can start building up).


I should also mention student loans are a type of debt that isn’t affected by bankruptcy (even if you go bankrupt you still have to pay it back) and must either be FORGIVEN or paid back.

Interest Rates

Interest rates are set so when you take out a loan, not only do you have to pay the principal back, but also pay a little bit extra at a set percentage rate each month.

Fixed Rates vs. Variable Rates

Fixed and variable rates usually don’t apply to most student loans unless they’re being consolidated, but I will go over it just in case you take a private loan that asks which one you would like.


For a fixed rate loan, the rate will stay the same and won’t change (if started at 5%, it will end at 5% every year), but can sometimes be more expensive if done in the short term because they’re often higher than variable rates. So the recommended time for a fixed rate loan is usually four years and longer.


A variable rate is a rate of interest that can change depending on the market. Typically they’re cheaper but can change a lot over time. In the long run, a variable rate can be more expensive (one year it might be 3%, but the next it could be 9%, making it a higher interest rate average at 6%, a bit more than a fixed 5% loan). These loans are usually recommended in the 0 – 2-year range.

How to Apply for a Loan

Applying for a loan changes depending on what kind of loan you’re getting and where you’re getting it from. For a federal or school loan it is usually done through financial aid from your school, so you should call and ask about details from your college. For a private loan you may have to use a little Google-fu and search around for a company, then apply online.

What Happens When You Graduate with Loans?

Depending on the loan, you may have different grace periods after graduating where you don’t pay any interest and don’t have to start paying until after that grace period ends. Some loans may have already been accruing interest and now require to start making payments on them. Speak with your loan officer to find out where you stand.

What are Refinancing and Consolidation?


When you refinance a student loan what you’re doing is trying to get a lower rate/ lower payment on a loan or a better rate with a higher payment to pay it off faster. While you may get a lower rate it usually comes with a few costs like lowering your credit score or getting rid of your student loan tax deductions because it’s essentially like getting a new loan to replace the old one. Along with these costs, you’ll also lose the benefits of loan forgiveness, forbearance, and deferment.


When consolidating, a company (like Sofi) combines loans that you already have outstanding into just one loan. When you consolidate, you only have one bill with one company instead of multiple companies at different balances and different rates. This option is beneficial for people that have high monthly payments, high-interest rates, multiple loans, or parents/family co-signed for a loan. Consolidating can lower your monthly payments, interest rates, take co-signers off of a loan, and all while giving you a one single and lower monthly payment. The only downside is it may take longer to pay off the total debt, you may lose some lender benefits (like loan forgiveness, deferment, or forbearance) and in some cases, you may end up paying more in the long run. 

Why Consolidation and Refinancing is Usually the Best Choice for New Graduates

Consolidation is usually recommended to new graduates because they tend to have multiple loans. Many people can be absent-minded and forget to make a payment on ALL of their loans, and it helps by putting them all together into one. Consolidating also lowers the interest rate and payments to be made on the loans. Consolidating can even help your credit score if you make all your payments on time.

How to Consolidate

To consolidate and refinance your loans you have to use a creditor to come up with a new loan to find the best rate, payment plan, and time frame for you. We recommend using someone like Sofi because they have excellent deals with:

•Rates as low as 3.5% fixed and 2.14% variable

•Loan terms of 5, 7, 10, 15, and 20 years

•Ability to consolidate both federal and private loans

•No application fees or prepayment penalties

•Unemployment protection if you lose your job

•$5,000 minimum to refinance with no maximum amount

Sofi will also work with those that don’t get approved right away. There’s no minimum credit score or income, and you don’t have to have any credit history.


Don’t be scared to take out loans, but remember to be wary of them and be responsible by paying them back on time. Don’t take out more loans than you can afford; $20,000 in student loans is a lot easier to maintain and pay off than $100,000! When you graduate, remember to talk with your loan officer and assess where you are (financially and loan-wise.) Find out what will be best for you, refinancing with a company like Sofi or trying to maintain the loans yourself.

We enjoy saving money here at BillCutterz, so if you have any other ideas or questions feel free to share in the comments below. Don’t forget to visit our other blogs for upcoming holidays and tips on how to save money!

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