How do annuities work?

A mother and her daughter play together.

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

Many people know about 401(k)s and IRAs, but there are many other options for retirement planning and wealth-building. Find out more about annuities and whether this option might be right for you.

What is an annuity?

Annuities are a type of insurance product, but instead of insuring yourself or your property against potential future losses, annuities let you insure income. Specifically, they help ensure that you will receive an agreed-upon amount of money periodically at some point in the future, which makes them a popular vehicle for retirement planning.

Annuities are a type of income insurance product that helps ensure that you will receive an agreed-upon amount of money periodically in the future, which makes them a popular vehicle for retirement planning.

How annuities work

The basic concept behind annuities is that you purchase a product now. You pay for it either in a lump sum or via agreed-upon payments—sometimes in the form of insurance premiums over a period of years.

In exchange, at some point in the future, you begin to receive payments on your annuity. Those payments typically come periodically, such as monthly, quarterly or annually. Depending on the annuity product you purchase, you can receive those payments for a certain period of time or for the rest of your life once the annuity payout begins.

You can generally expect to get back more in annuity payments than you pay into the product. That’s why they’re considered an investment. The reason for this is that your annuity purchase price or premium payments are put into a pot with all the other payments being made by annuity customers for that product or provider. Those funds are invested, and the earnings over time result in a profit for you and the insurance provider.

The main types of annuities

How much you can earn, when and how it pays out and the risk associated with your investment all depend on what type of annuity you buy. The types of annuities are summarized below to help you determine if any might be a good choice for you.

Deferred annuities versus immediate annuities

The first major decision to make when purchasing an annuity is whether you want a deferred or immediate annuity. Deferred annuities begin paying out at some agreed-upon point in the future, making them potential vehicles for retirement planning. Immediate annuities start paying out immediately, which might make them a better option if you’re close to retirement or want to ensure a certain level of income in the near future.

Three categories of annuities

Once you decide when you want your payouts to begin, you’ll need to pick a more specific type of annuity to invest in. Both immediate and deferred annuities have three major categories which are outlined below.

3 types of annuities

1. Fixed annuities

Fixed annuities are those that pay out an agreed-upon, guaranteed amount each time you receive income. This can be a good option if you want a stable income you can count on. The downside of fixed annuities is that the lower risk comes with lower potential reward from a returns perspective.

2. Fixed indexed annuities

Fixed indexed annuities guarantee at least a minimum amount paid out, so they can help provide stability for your budget. But part of your returns is tied to the performance of a market index. Market indexes include options such as the Dow Jones or S&P 500. If you have a fixed indexed annuity, then you might earn more payout than the minimum if the market performs well in a given period.

3. Variable annuities

Variable annuities are tied to a group of mutual funds. The amount of your annuity payouts depends on the performance of those funds. That can mean greater long-term reward, but it also comes with more risk than either of the other two categories of annuities.

Can you withdraw your money early?

You may be able to withdraw money from an annuity early if you find that you need your investment back or can’t wait until payouts are scheduled to begin. But this can be a costly move.

First, if you take money out of a retirement account, including some annuities, before reaching retirement age, the IRS may levy a 10% penalty. You’ll also have to pay any applicable taxes on the income.

For the purposes of annuities, penalties and taxes are only paid on the amount you earned on the investment. You’re not taxed on the amount you paid into the annuity because you were already taxed on that amount when you earned it the first time.

In some cases, the IRS waives the 10% penalty. Such cases include the total disability of the annuity owner or the annuity owner taking early withdrawals to pay for qualified education expenses.

How are annuities taxed?

Taxes on annuities can be complex, so it’s important to consult a tax professional to understand what your tax burden might be. Typically, payments you make toward an annuity are not made with pre-tax dollars. That means the money you pay into an annuity is already taxed, and you won’t pay income tax on it again in the future.

But you might owe taxes on any earnings you make from the investment. That means when you begin to receive payouts, you will have to report the income and calculate how much of it is taxable.

Is an annuity right for you?

Deciding whether any investment is right for you is an individual matter. You must look at your current financial state, your goals for the future and the level of risk you’re comfortable with. Since annuities are based on contracts, they’re typically considered less risky than stock market investments, but no investment is 100% guaranteed. Consider talking to a financial adviser to understand what investment and retirement planning options might be right for you.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

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

Source: lexingtonlaw.com

12 Cheapest Small Towns in America

Small-town living has plenty of perks: light traffic, a strong sense of community and a slower pace of life. Perhaps best of all, there’s the cost of living, which typically is cheaper in small towns than in expensive big cities.

To get a better sense of what inexpensive small-town living really has to offer, we compiled a list of the 12 cheapest small towns in America, with small towns defined as places with populations of 10,000 to 50,000 people. We based our rankings on the Council for Community and Economic Research’s (C2ER) calculations of living expenses in 269 urban areas. C2ER’s expansive study tracks prices for housing, utilities, healthcare, groceries, transportation and miscellaneous goods and services (such as going to a movie theater or hair salon).

It goes without saying that you should weigh the pros and cons before you pack up and relocate to one of the 12 cheapest small towns in America. While a low cost of living is attractive, it can be offset by issues such as scarce jobs, small paychecks or a lack of things to do in the area. Plan an extended visit to ensure the small town fits your lifestyle.

The most recent Council for Community and Economic Research’s (C2ER) Cost of Living Index, published February 2021, is based on price data collected during the first three quarters of 2020. City-level data on city populations, household incomes and home values come from the U.S. Census Bureau. Unemployment rates come from the U.S. Bureau of Labor Statistics, as of April 7 for the period ended February 2021.

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Benton Harbor, Mich.

photo of lighthouse and pierphoto of lighthouse and pier
  • Cost of living: 12.6% below U.S. average
  • City population: 9,843
  • Median household income: $21,916 (U.S.: $65,712)
  • Median home value: $63,300 (U.S.: $240,500)
  • Unemployment rate: 6.0% (U.S.: 6.0%)

Benton Harbor sits by the shores of Lake Michigan about 50 miles west of Kalamazoo, which is one of the cheapest larger cities in the U.S. The small town’s biggest claim to fame is that it’s home to Whirlpool (WHR), the global manufacturer of washers, dryers, refrigerators and a range of other home appliances.

But despite being host to a Fortune 500 company, Benton Harbor is among America’s cheapest small towns, boasting a cost of living that’s more than 12% below the national average.

True, median income is roughly a third of the national level, but the unemployment rate is in line with the country as a whole. Poverty and crime are also high in Benton Harbor – factors that contribute to a median home value that’s an eye-popping 74% lower than the national median. Indeed, housing-related costs, including rents and mortgages, are 32% cheaper in Benton Harbor, according to C2ER’s Cost of Living Index.

Neighboring St. Joseph, about the same size as Benton Harbor, is a popular beach resort town with significantly higher household incomes and home values.

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Hutchinson, Kan.

Strataca salt mine Strataca salt mine
  • Cost of living: 13.4% below U.S. average
  • City population: 40,914
  • Median household income: $46,927
  • Median home value: $96,300 
  • Unemployment rate: 4.8%

Hutchinson, known as “Hutch” by the locals, is about an hour’s drive northwest from Wichita. Founded in the early 1870s as a railroad town, Hutch soon became known for its salt deposits, which were first discovered in 1887.

Today, Hutch is synonymous with the Kansas State Fair, which it hosts annually. The town is also home to the National Junior College Athletic Association (NJCAA) Basketball Tournament. Local cultural attractions include the Fox Theatre, which opened in 1931. The grand movie palace is considered to be among the finest examples of theater art deco architecture in the Midwest.

Where Hutch stands out among America’s cheapest small towns is that it boasts the lowest housing costs on this list. Indeed, they run 41.3% below the national average. Apartment rents are 43% lower than national average, while home prices come in at a 40% discount.

However, other major costs of living aren’t too far off from what the average American pays. Although prices for groceries are almost 7% lower than the national average, healthcare and miscellaneous goods & services are essentially the same as the U.S. average.

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Meridian, Miss.

photo of a courthousephoto of a courthouse
  • Cost of living: 14.1% below U.S. average
  • City population: 37,848
  • Median household income: $32,422
  • Median home value: $83,300 
  • Unemployment rate: 6.7%

Meridian was rebuilt from 1890 to 1930 after being almost totally destroyed in the Civil War. As a result, it has not one but nine registered historic districts. The Highland Park Dentzel Carousel, dating back to 1909, is one of the more whimsical ones.

Meridian’s other claim to fame is as the birthplace of Jimmie Rodgers, known as the “Father of Country Music.” Music remains a centerpiece of Meridian’s cultural scene to this day.

Today, the federal government plays an important role in its economic life, as Naval Air Station Meridian and Key Field are two of the largest employers.

Happily, the men and women in uniform, and Meridian’s civilian citizens, catch a break on expenses. The cost of living stands 14.1% below the U.S. average; what really pushes Meridian into America’s absolute cheapest small towns are its comparatively modest housing costs. Indeed, housing expenses are a third lower than what the average American pays.

4 of 12

Burlington, Iowa

photo of a bridge in Iowaphoto of a bridge in Iowa
  • Cost of living: 14.3% below U.S. average
  • City population: 24,974
  • Median household income: $47,540
  • Median home value: $93,200 
  • Unemployment rate: 6.9%

Burlington sits on the Mississippi River, about 165 miles east of Des Moines. Manufacturing has long been a staple of the area economy, but a number of major employers have left over the years. Today, top employers include Great River Health System and American Ordnance, which makes ammunition for the U.S. military.

Utilities in Burlington are close to 12% more expensive than the national average and healthcare costs are essentially the same. Inexpensive housing is what makes Burlington a truly affordable small town. Housing-related costs are 35% cheaper compared to what the average American pays. Rents, on average, are almost 40% lower than the national average.

True, median incomes are 28% lower than the national figure, but then, median home values are cheaper by more than 60%.

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Ponca City, Okla.

photo of a courthouse in Ponca City, OKphoto of a courthouse in Ponca City, OK
  • Cost of living: 14.5% below U.S. average
  • City population: 24,134
  • Median household income: $44,043
  • Median home value: $96,600 
  • Unemployment rate: 5.8%

Ponca City traces its lineage back to the days of the Land Run of 1893, when pioneers decided to build a town in north-central Oklahoma near the Arkansas River and a freshwater spring. Not long after its founding, enterprising oil men successfully drilled wells in the area, and Ponca City remains an oil town to this day. The area’s largest employers include energy companies such as Schlumberger (SLB), ConocoPhillips (COP) and Phillips 66 (PSX).

Household incomes are well below the national median, but housing is a heck of a deal. The median value of a Ponca City home is just $96,600. Nationally, it’s $240,500. Indeed, total housing costs are just two-thirds of what the average American pays, according to C2ER’s Cost of Living Index. Residents also catch a break on healthcare, which is 12.4% less expensive.

Although it’s among the cheapest small towns in America, Ponca City’s low costs of living do come at a cost of their own: The town sits pretty much in the middle of Tornado Alley.

6 of 12

Martinsville, Va.

photo of Martinsville Speedwayphoto of Martinsville Speedway
  • Cost of living: 15.2% below U.S. average
  • City population: 12,852
  • Median household income: $34,371
  • Median home value: $87,700 
  • Unemployment rate: 9.8%

Martinsville needs no introduction to race fans. The tiny Virginia town, an hour’s drive south of Roanoke, lays claim to the Martinsville Speedway of NASCAR fame. Racing enthusiasts laud the short track for its tight turns and intimate seating.

Beyond the track, manufacturing has always been central to the area’s economy, and although a number of firms have moved on over the past decades, factory work remains important. Major employers include Eastman Chemical (EMN), a manufacturer of plastics, and Monogram Foods.

Martinsville has a rich history dating back to colonial times, and the town boasts multiple historic districts and historic sites including the John Waddey Carter House and the Dry Bridge School.

But Martinsville also is notable as one of America’s cheapest small towns. Housing expenses are 32% below the national average. Fittingly for a racing town, gasoline is about 6% cheaper per gallon.

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Salina, Kan.

photo of downtown Salina, KSphoto of downtown Salina, KS
  • Cost of living: 16.4% below U.S. average
  • City population: 46,998
  • Median household income: $50,490
  • Median home value: $129,300 
  • Unemployment rate: 4.3%

The small town of Salina sits at the intersection of Interstates 70 and 135, about 90 miles north of Wichita and 180 miles west of Kansas City.

Manufacturing and healthcare are among the town’s most important industries. Major employers include Schwan’s Company, the maker of Tony’s frozen pizza; Great Plains Manufacturing, which serves the agricultural industry; and the Salina Regional Health Center. Salina is also home to several institutions of higher education, including the University of Kansas School of Medicine Salina Campus and Kansas State University Polytechnic Campus.

This economic mix is producing both low unemployment and low living costs. Housing expenses run two-thirds of the national average, according to C2ER. Groceries are cheaper too, running about 8% lower than the national average.

Utility bills, however, take a bit of a bite. In Salina, they’re almost 2% higher than the U.S. average.

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Statesboro, Ga.

courthouse Statesboro, GAcourthouse Statesboro, GA
  • Cost of living: 16.8% below U.S. average
  • City population: 31,495
  • Median household income: $29,203
  • Median home value: $113,600 
  • Unemployment rate: 5.8%

As home to the flagship campus of Georgia Southern University, Statesboro offers many of the benefits of college-town living but at exceedingly affordable prices. Thanks to its status as an academic hub, cultural attractions tied to the local university include a performing arts center, symphony, museum, planetarium and botanic gardens.

Another perk? The charming city of Savannah is just an hour’s drive to the southeast.

Although the university is the area’s largest employer, manufacturing jobs also play an important part in the local economy. At the same time, it should be noted that Statesboro has a high poverty rate, or 41.8% vs. 13.3% for the state of Georgia as a whole.

Statesboro’s place among America’s cheapest small towns is largely due to housing costs, which are about 32% lower compared with the national average, while healthcare runs roughly 14% below average. For example, a visit to a doctor costs about 24% less in Statesboro. Dental care is about a fifth less expensive, according to the C2ER’s Cost of Living Index.

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Tupelo, Miss.

photo of house where Elvis Presley was bornphoto of house where Elvis Presley was born
  • Cost of living: 19% below U.S. average
  • City population: 38,271
  • Median household income: $50,694
  • Median home value: $145,400 
  • Unemployment rate: 5.6%

Tupelo’s biggest claim to fame is being the birthplace of Elvis Presley. Indeed, the town, 100 miles southeast of Memphis’s Graceland, is looking forward to hosting its 23rd annual Elvis Festival in June. (Last year’s gathering was a virtual-only affair.)

Not a fan of The King? The cultural scene also includes the North Mississippi Symphony Orchestra and the Tupelo Automobile Museum. But Tupelo’s second-biggest claim to fame is arguably its super-low living costs. Electric and gas bills are about 12% lower than the national average, according to the Cost of Living Index. Housing is 34% cheaper and groceries go for 16% less.

For residents not making a living as Elvis impersonators, major employers include North Mississippi Health Services, Cooper Tire & Rubber (CTB) and BancorpSouth (BXS), which is headquartered in Tupelo.

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Richmond, Ind.

Amish man in horse and buggyAmish man in horse and buggy
  • Cost of living: 19.1% below U.S. average
  • City population: 35,539
  • Median household income: $39,724
  • Median home value: $88,400 
  • Unemployment rate: 5.1%

Few cities of any size can claim Richmond’s place in the early history of recorded jazz. Some of the first jazz records were made in this small town, featuring greats such as Hoagy Carmichael, Duke Ellington and Louis Armstrong. There’s a Walk of Fame celebrating jazz and other artists who recorded with Richmond’s Gennett Records.

While jazz will always be part of its history, today’s Richmond, which is an hour’s drive west from Dayton, Ohio, is known more for its colleges and seminaries. They include Indiana University East, the Earlham School of Religion (part of Quaker-influenced Earlham College) and the Bethany Theological Seminary.

Inexpensive housing is a key to Richmond’s place among our nation’s cheapest small towns. Residents spend 34% less on housing than the average American does. Apartment rents are about half the national average. Average home prices are 26% less. Healthcare is also a bargain. For example, a visit to the eye doctor costs about 50% less than the national average. An appointment with a physician is cheaper by a third.

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Muskogee, Okla.

museum in Muskogee, OKmuseum in Muskogee, OK
  • Cost of living: 19.2% below U.S. average
  • City population: 37,624
  • Median household income: $38,194
  • Median home value: $92,300 
  • Unemployment rate: 6.3%

Muskogee packs a lot of history, culture and colleges into a small package.

Located about 50 miles south of Tulsa, the town traces its roots back to 1817. It’s home to four institutions of higher learning, as well as the Oklahoma School for the Blind. Jim Thorpe – All-American, the 1951 film starring Burt Lancaster, was shot on the campus of what was then known as the Bacone Indian University in Muskogee. The town also boasts six museums and the Oklahoma Music Hall of Fame.

And let’s not forget what is arguably the town’s most famous appearance in popular culture – Merle Haggard’s hit song “Okie from Muskogee,” which became an emblem of Vietnam-era America. 

Today, the area’s employers include the U.S. Department of Veterans Affairs, a VA medical center and paper company Georgia-Pacific.

But what really puts Muskogee on the map is its ultra-low cost of living. The biggest break comes from housing-related expenses, which are more than 35% lower than the national average, according to C2ER’s Cost of Living Index. Transportation, groceries and healthcare are notably cheaper, too.

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Pittsburg, Kan.

Russ Hall at Pittsburg State UniversityRuss Hall at Pittsburg State University
  • Cost of living: 19.4% below U.S. average
  • City population: 20,171
  • Median household income: $34,956
  • Median home value: $88,500 
  • Unemployment rate: 4.4%

The cheapest small town in America is Pittsburg, Kan., based on the 269 urban areas analyzed by C2ER’s Cost of Living Index.

Pittsburg is about a two-hour drive due south from Kansas City on Route 69. When you get there, you’ll find a small town with a cost of living more than 19% below the national average.

Once upon a time, the town was known for its abundance of coal and the Southern and Eastern European immigrants who worked the mines. Today, the area relies more heavily on higher education, thanks to the presence of Pittsburg State University. Famous alumni of Pittsburg’s local university include actor Gary Busey and Brian Moorman, retired two-time Pro Bowl punter for the NFL’s Buffalo Bills.

Although median incomes are almost $31,000 below the national average, median home prices are a whopping $152,000 cheaper. That helps make housing costs 37.2% less expensive than what the average American pays. A myriad of other items are cheap, as well. For example, a haircut will set you back an average of $14.82 vs. $18.88 nationally. Shampoo costs 89 cents, whereas the average American pays $1.05.

Source: kiplinger.com

Gift Aid vs Self Help Aid For College

College tuition can be costly whether you are seeking an undergraduate and graduate degree, attending an out-of-state public university, or taking classes at a private university.

If you do not have adequate savings to pay for classes, room and board, food, travel and other necessities, then you may be considering how to pay for college.

The costs of attending college continue to rise each year for both public and private colleges and universities. The average tuition and fees at a public in-state college was $9,687 and at or private schools it $35,087 for the 2020-21 school year. Obtaining financial aid is one way students can afford to attend college.

One common type of financial aid is called gift aid and typically comes in the form of federal and state grants and a wide range of scholarships that are given by private donors, foundations, non-profit organizations and even the universities themselves.

These grants and scholarships do not have to be paid back, which is helpful for students who are on a tight budget or are considering obtaining a graduate degree.

Another type of aid is called self help aid and usually comes in a form of work study programs and student loans. Some work study programs are sponsored by the federal government and they provide part-time jobs for students who need help paying their tuition. These jobs can be either on the campus of the college or university or off campus nearby.

Self help aid also includes federal student loans which have to be paid back after a student graduates.

There are advantages and disadvantages of both gift aid and self help aid. Undergraduate and graduate students may only qualify for one type of aid, depending on their financial circumstances, where they are obtaining their college degree or other factors.

What Are The Pros and Cons of Gift Aid?

Grants and scholarships are considered gift aid. One common form of grants are called Pell grants. These are grants provided by the federal government and Pell grants are given to undergraduate students who have demonstrated financial need.

The maximum federal Pell grant award is $6,345 for the 2020–21 award year (July 1, 2020, to June 30, 2021), but amounts can change annually.

The main drawback of gift aid is that you may not know what amount you will receive and you may need to supplement paying for college by seeking more scholarships and grants or getting a part-time job.

Federal work study programs are available for both undergraduate and graduate students to help them pay for tuition and other educational costs. The program’s jobs are related to the student’s course of study and also include community service work.

Both full-time or part-time students may qualify for part-time employment while they are enrolled at their university or college and it is available to undergraduate and graduate and professional students who demonstrate financial aid.

The work study programs are operated by a college and university financial aid office and you will receive at least the federal minimum wage. These jobs are available both on-campus and off-campus which can be beneficial for students who do not have other means of transportation.

Students who work off campus typically work for a nonprofit organization or a public agency and the goal of the job is geared to be in the public interest. The number of jobs is limited, so students should apply early to ensure that they have a position for the following academic year.

Federal and Private Student Loans

Another type of self-help aid are federal and private student loans. Federal student loans are based upon the financial need of a student and their family. They are either subsidized or unsubsidized direct loans and may offer lower interest rates than private loans. One drawback is that the federal government will limit how much money you can borrow.

Undergraduate students may qualify for subsidized loans that are given based on their financial need. One benefit is that the federal government will pay the interest on these loans while you are attending school or at least taking classes half-time, during your grace period or when you have deferred the loan.

Both undergraduate and graduate students may qualify for unsubsidized loans and they are not based on financial need. These loans accrue interest while students are taking classes, during the loan’s grace period, or when you have deferred the loan.

Private student loans can be used to help make up the gap in what is needed to pay the remainder of tuition or living expenses. While both federal and private student loans may help students pay for their tuition; they must be repaid once a student graduates.

If you do not complete your course study and do not receive a degree, the student loans still have to be repaid.

Federal student loans have protections that private student loans do not offer. Students who have received federal student loans can seek several options after graduation to repay their loans including income-driven repayment programs.

Federal student loans also offer borrowers’ the ability to put loans in forbearance or deferment, allowing them to temporarily pause payments in certain situations.

Some borrowers will choose to refinance their federal student loans into new private student loans. But this option means that you lose the protection of the federal repayment plans. Private student loans have both fixed and variable interest rates.

Fixed interest rates are beneficial for people who want to know the exact amount of their loans each month helping them to budget more easily. The interest rate on variable student loans are sometimes lower than fixed rates but that means your payment amounts can fluctuate from month to month.

Shopping around can help you find the best private student loan that fits your financial needs and the amount that you can repay each month.

Qualifying For Gift Aid or Self Help Aid?

Qualifying for either gift aid or self help aid might depend on your financial circumstances. Students may want to apply early for grants, scholarships, work-study programs and student loans.

completing a FAFSA®, or Free Application for Federal Student Aid. This application must be completed every year.

Some states and colleges may have their own FAFSA deadlines , so double check to avoid missing any. Missing a deadline can mean forgoing some financial aid.

While some gift aid such as scholarships are given to students based on merit, grades or other accomplishments, grants, work study programs and student loans are typically based on your financial needs and the cost of tuition at your university.

Some universities use data from the FAFSA to determine gift aid like scholarships too. Students can also apply for scholarships and grants that aren’t associated with the FAFSA®.

Private Student Loans with SoFi

In some cases gift aid and federal aid aren’t enough to help students pay for their tuition. In that case, some students may consider private student loans.

SoFi offers private student loans with no late fees or origination fees with flexible repayment options. There are also interest rate discounts for eligible SoFi members.

Interested applicants can find out what rate and terms they could pre-qualify for in just a few minutes. Learn more.



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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

Dealing with medical debt

A father holding his son on his shoulders.

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

According to a 2018 Consumer Reports survey, almost 30% of insured Americans had medical debt sent to collections in a two-year time span. That number might sound high, but there are many reasons why medical bills go unpaid long enough to end up in collections.

For one thing, healthcare expenses are often costly and unplanned, leaving people struggling to pay their bills in a timely manner. And close to a quarter of people surveyed told Consumer Reports they didn’t realize there was even an amount due to be paid.

If you are dealing with medical bills in collections or
are worried about a medical bill making it to collections, find out more below.

According to a 2018 report, almost 30% of insured Americans had medical debt sent to collections in a two-year time span.

When Does Medical Debt Go to Collections?

First-party medical creditors—this is the organization that provided the healthcare service or the agency contracted to handle billing on its behalf—can typically send you to collections at any time. The key is that they must follow their own policies consistently.

In most cases, first-party medical creditors will send you
at least one bill. Some may send multiple bills over the course of several
months. At some point, if you don’t pay those bills, the account will go to
collections. When that happens, it can be reported to the credit bureaus as a
medical account in collections.

How Do Medical Bills in Collections Affect Your Credit?

There’s some good news: the 2017 changes to the credit reporting rules offer some provisions to help protect your credit from unplanned medical bills. Specifically, there’s a waiting period before medical debt can show up on your credit report and reporting on medical debt is removed from your credit report if it has been paid or is being paid by insurance.

The credit bureaus must wait at least 180 days after a medical debt is reported to them before they add it to your report. That provides up to 6 months for you to dispute medical bills, work with insurance companies or settle the debt with the creditor, if you choose, before it impacts your credit score.

In addition, if a medical debt does appear on your reports
after the 180-day period but has been or is being paid by insurance, then it
must be removed from the reports.

If medical bill collections do end up on your credit
report and they are not paid by insurance, they may remain for up to seven years—even
if they’re paid. However, they may not impact your score as much as other types
of collections. Both the FICO Score 9 model and VantageScore 4.0 weigh medical
debt less heavily than some other kinds of debt.

What Can You Do About Medical Debt in Collections?

Just because medical bills don’t necessarily have the impact on your credit score that other debts do, it doesn’t mean there’s no impact at all. Consumer Reports notes that almost one-fifth of Americans say their credit has been negatively impacted by medical bills in collections. Try some of the steps below to help resolve the matter and positively impact your credit history for the future.

Almost one-fifth of Americans say their credit has been negatively impacted by medical bills in collections.

Know What Your Insurance Covers

Start by ensuring that you really do owe this money.
Review the explanation of benefits, also called an EOB, provided by your
insurance company. You should receive an EOB statement from your insurance
company anytime a provider bills medical expenses to your insurance. (Keep in
mind that an EOB is not a bill.)

In most cases, insurance companies don’t allow the full
amount a provider bills it for. Your EOB will show:

  • How much
    of the bill was allowed and how much was disallowed.
    Your provider must
    write off disallowed amounts and typically can’t bill them to you if they
    agreed to accept insurance payments.
  • How much
    of the bill was paid by the insurance company.
    This is the amount you do
    not owe and do not need to worry about.
  • How much
    of the bill is the patient’s responsibility.
    This is the amount you do owe,
    according to your insurance. If you’re being billed by the medical creditor for
    more than this, it could be a mistake.

If you don’t think you owe the amount being sought, you may choose to dispute it. Ask for documentation proving that you owe the amount. If the account is being reported on your credit report, consider sending a dispute letter to the credit bureau in question if you believe there is an error in the reporting.

Negotiate with the Service Provider

Once you understand how much you owe, you may choose to
reach out to the provider to negotiate. You may be able to get a discount,
particularly if you didn’t use insurance and you can pay a large sum toward the
amount billed.

Negotiation with providers may work better earlier in the game, so it may be helpful to not put off this step. Make sure you know what you might owe and how you can pay it even before services are rendered, if possible.

Suggest a Suitable Payment Plan

If you receive a medical bill and you can’t pay it all
at once, you may ask for a payment plan or suggest an arrangement. If you can
pay the bill off in a short period of time, such as a few months, many medical
providers will not send you to collections.

Use a Credit Card Only If You Must

Paying for medical debt with a credit card converts a bill with little to no interest to one that might come with a large amount of interest. Only use a credit card to pay medical bills if you have no other options.

Consider Seeking Debt Settlement

If the account has already gone to collections, you may
try negotiating a settlement. In some cases, the older a debt is, the less
likely the organization is to collect it. This could make it more likely to
accept a smaller amount to consider the account paid in full.

Make sure you have the ability to make an immediate payment if you do negotiate a settlement. You may ask for the collections account to be deleted from your credit report in return for making the settlement payment, but not all collection agencies can or will do this. However, they do have to mark the account as paid, which looks better on your credit history than an unpaid account.

Whatever you do when settling a debt, get it in writing. You might need to demonstrate there was an
agreement later.

Work with a Medical Billing Advocate

If you’re feeling overwhelmed by medical bills and all
the information that comes with them, you might consider working with a medical
billing advocate. These individuals help you understand your bills, appeal
costs to hospitals and ensure your insurance company covers everything it
should. That can help reduce the total cost of your medical expenses.

Regularly Check Your Credit Report

Staying on top of your credit report by checking it
regularly is important, especially because you might never see a notice in the
mail about your debt going to medical collections. When you review your credit
regularly, you can respond to and handle negative items quickly and
proactively, giving you a better chance at protecting or positively impacting
your credit in the future.

Reach out to the credit consultants at Lexington Law if you want to learn more about your credit report and how you can work to improve your credit.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

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

Source: lexingtonlaw.com

Will you get a second stimulus check?

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

By mid-May 2020, the IRS had issued more than $218 billion in stimulus checks related to the CARES Act, and it was still working to ensure all eligible Americans received theirs. But in early August, 2020, almost five months after the CARES Act was passed, many people were wondering if they would receive a second stimulus check. Find out what’s known about stimulus checks and future financial assistance from the federal government in the article below.

Will There Be a Second Stimulus Check?

Judging on the number of bills being passed around Congress, there’s a possibility another stimulus act is coming, and it may come with a second round of stimulus checks. But the details—including how much the check will be worth and who will be eligible—depend on which of the acts ends up making it through.

Bills currently being discussed include:

By mid-May 2020, the IRS had issued more than $218 billion in stimulus checks related to the CARES Act.

The HEALS Act

The HEALS Act comes from the Republicans and is a stimulus package similar to the CARES Act. If this act passes in its current form it will include many of the details described below.

How Much Money Will People Get?

Yes, this act does include stimulus payments to many Americans. The details of how much and who might get what amount are included below.

  • Individuals making less than $75,000 per year will get $1,200.
  • Couples filing jointly and making less than $125,000 per year will get $2,400.
  • People making above those amounts may still get a check. The stimulus is reduced $5 for every $100 of income above those limits until it tapers off completely. So, someone making $80,000 per year would get $950, for example.
  • An additional $500 is also included for every dependent claimed on the person or couple’s tax return, which is different from the CARES Act, which excluded dependents over the age of 16.

Who Would Qualify?

The income and dependent restrictions explained above will determine who would qualify for the stimulus. Qualification would likely be based on tax returns or Social Security benefit statements as was the case with the CARES Act.

What Other Benefits Are Included?

The HEALS Act contains a number of other benefits and stimulus efforts for businesses, schools and workers. Some of the main provisions are highlighted below, but this is not a comprehensive list.

  • Additional unemployment benefits would be provided, but it would be less per week than under the CARES Act.
  • The act would expand the Paycheck Protection Program by another $190 billion and make it easier for businesses to comply with the payroll requirement.
  • A return-to-work bonus may be offered to unemployed workers who find new jobs.
  • Funds to schools to help support reopening efforts would be included.
  • Some protection against lawsuits related to COVID-19 would be provided for businesses.
  • The act also includes $16 billion in coronavirus testing support.

The HEROES Act

This is the stimulus act being proposed by the Democrats. It also includes stimulus payments and other benefits for individuals and businesses.

How Much Money Will People Get?

As with the other bills, the HEROES Act includes a round of stimulus payments for qualifying Americans. The details of the payment amounts being proposed are summarized below.

  • Individuals making less than $75,000 get a $1,200 check under this act.
  • Married people filing jointly making less than $125,000 total annually get a $2,400 check under this act.
  • The stimulus is reduced $5 for every $100 of income above those limits until it tapers off completely.
  • The HEROES Act provides $1,200 per dependent for the first three dependents for an individual or married couple with no age restrictions. So if you claim three children, you would get an additional $3,600 in stimulus funds.

Who Would Qualify?

The qualifications for stimulus checks would be similar to those under the HEALS and CARES Acts as represented above.

What Other Benefits Are Included?

Here are some of the other benefits included in the HEROES Act:

  • This act includes the same enhanced unemployment benefits available under CARES, just extended for a longer period of time.
  • The HEROES Act also includes expanded eligibility for the Paycheck Protection Program and a reduction in the payroll requirement.
  • An expansion and extension of the eviction moratorium and protections for renters is included in the HEROES Act but not the HEALS Act.
  • Funds to support school reopenings are also included in this act.

When Could a Second Stimulus Check Come?

When a second stimulus check might arrive depends heavily on when a bill is passed. Both the House and the Senate must pass the bill, and then it has to be signed by the president. But the hope is that it won’t take as long for the IRS to turn around payments as it did in March and April. Ideally it won’t—the IRS has now done this once already and has probably learned lessons and put a system in place that speeds up the second round.

In fact, Steven Mnuchin, the US Treasury Secretary, said that the IRS could start sending payments within a week of an act being passed. So, if the act is passed anytime in mid-September, for example, the checks could start rolling out before the calendar moved into October.

The Stimulus check process in 4 steps

Will This Be the Last Stimulus Check?

It’s pure speculation at this point to discuss a second, or even third or fourth stimulus check. But it’s not impossible. It likely depends on the state of the economy and job market as the COVID-19 pandemic continues. If future stimulus checks do come, though, they may become increasingly more targeted as time passes. For example, it’s possible stimulus funds might start to go to people who can demonstrate a need.

However, until this second act is passed and lawmakers move on to considering future bills, there’s simply no way to know.

Protecting Your Financial Status During COVID-19 and After

Whether you’re waiting for and relying on a second stimulus check or you’re beginning to see a light at the end of your own personal COVID-19 financial tunnel, it’s definitely important to keep an eye on your personal finances during these trying times. That can include checking your credit report to ensure all the information is accurate and disputing inaccurate items so they don’t drag down your score in the future. It can also include managing your debt, income and investments in the most responsible way. During COVID-19 and beyond, Lexington Law offers information that can help you navigate finances and plan for the future. Check out articles that range from student loans to mortgages, and consider our credit repair services if you need help getting your credit report back to rights.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

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

Source: lexingtonlaw.com

Mint Success: Transitioning from College Kid to Young Professional

Photo Credit: Lawrence Peart

“Mint is so crucial to my personal finance I honestly have no idea where I would be without it.” That’s what Austin, TX photography consultant Lawrence Peart says when reflecting about his transition from college student to young pro, financially speaking. His experience so far shows that it is possible to graduate from college without debt, and to adjust to the higher cost of living as a young professional, while also saving money for your future.

But Peart stands out from the crowd. We looked at Minters’ numbers to see how college students and recent graduates use their money or handle debt, and found that there’s a big shift in many categories from ages 18 to 25 – incomes increase, spending categories fluctuate, and debt repayment – well, you know how that goes. Student loan payback time for many!

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College Grads Make More Money…

Depending on the field that graduates enter, incomes can be across the board, but a majority of our Mint users in that age range earn between $25K and $50K annually.

Student ChartGraduate Chart

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…and Spend More Money!

The newfound earnings may seem like a lot of money to a recent grad but, when faced with the sticker shock of life outside school, the typical Mint user experiences an accompanying increase in spending on rent, entertainment, and education related expenses – mostly student loan repayment. That bill averages about $300 per month.

Most grads continue to use credit cards after graduation. In fact, their card charges increase from $1,200 to $1,900 on average. But most of them don’t pay finance charges, which means these savvy Mint users are the ones who pay their balances by the end of the month. This explains why Mint’s young users have an average credit score of 690, considerably higher than the national average of 630 for the same age group*.

Good work, Minters! But while you’re paying off your college debt and adjusting to life on the outside, don’t forget to save for your future. Only 2% of college students have significant long-term savings, and that number only goes up to 7% among college graduates 25 and under. It might seem daunting to set aside those crucial dollars, but that money will grow over time and make your older self thank your younger self.

Moving Forward

Peart is in that 7% – he follows the mantra “Save, invest early and often, reap the benefits later.” With a goal to live debt-free and retire in his 20’s (he just turned 26), Lawrence uses Mint to budget and find extra money to sock away for the future. While his income falls in the same range as the majority of recently graduated Mint users, his experience both during school and in the few years since graduation defies many of the statistics, so naturally we asked him all about it.

What kind of shift in spending did you experience between college and post-college life?

I think it might surprise most people to hear that I spend far less money now than I did in college. Once you start earning an actual income and developing a clearer sense of your relationship to money it becomes much easier to save, and feels more rewarding to do so. While in school I never had much cash, so in a way it had less value and I spent it more freely. You expect to be broke in college, which becomes a self-fulfilling prophecy, and unless you’re careful that can then extend past your college years into your working life. I even had a little saying for it: the closer I am to zero, the less I have to lose.

The average college graduate spends about $300 per month on student loan repayment. What’s your bill?

$0. My experience paying for college was a mixture of some good fortune, a little bit of privilege, and tons of hard work. I chose a public school in a reasonably cheap city, I received decent grants, I applied for every scholarship available to me every semester (and made sure I had the grades to qualify) and for all but my sophomore year I worked at least part-time to have a source of income. I graduated broke, sure, and maybe missed out on some fun things here and there, but at least I didn’t owe anything.

 Invest Young

What was the most shocking financial realization you experienced once you left college?

That you can save quite a bit of money not doing the stuff everyone seems to think you have to be doing. If you don’t buy fancy clothes, go out for drinks every day, feel the need to keep up with the newest phone every 6 months etc., all of that extra cash starts to add up.

What are your thoughts about retirement savings, and what do you practice?

I half-seriously tell myself that I want to retire in my 20’s. I don’t mean “retire” in the way most people would think of retirement, I always want to be creating and applying myself to something, but I’d like to have the ability to not work for long periods of time. To be able to wake up one day in the near future and say “I am comfortable not working the rest of the month, time do something creative” and not feel guilty about it. That’s the goal.

I set up a Roth IRA almost immediately upon getting sustained income and contribute the full amount each year into basic low-cost index funds. I admire my parents in a lot of ways and don’t question their decisions and what life events influenced them, but while they are both doing fine in retirement age they are doing so without any long-term retirement account holdings. It might be hard to imagine 40 years down the line, but the math regarding investing when you’re young is compelling.

How does Mint help you stay on track?

I worked for about nine months before I came across Mint, and even though I thought I was being good with my money, you truly have no idea until you see it categorized and laid out in front of you. Those little purchases each day, the subscriptions, the monthly payments, it all adds up fast. You might think you’re saving money, but you’re not. It really does take hard work. Mint makes it easy, and I’ll tell everyone who listens: it’s even made paying bills fun. The first week of each new month is like Christmas. I get paid, I pay off my recurring expenses and then allocate how much I want to save that month before organizing more flexible costs like groceries, entertainment, etc. I follow one maxim above all else: you don’t save what is left after spending, you spend what is left after saving.

You can be like Lawrence

Does the idea of watching the savings pile up get you excited? Try setting up a goal with your Mint account and making that progress bar move!Don't save what you don't spend - spend what you don't save
We would like to hear your story! Contact us at Editor_Mint@intuit.com with “Mint User Story” in the subject.

Kim Tracy Prince is a Los Angeles-based writer who is pretty jealous of Lawrence’s early progress. It took her many years to pay off her student loans. She celebrated by finally framing her diploma.

*Source: https://www.creditkarma.com/trends/age
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Source: mint.intuit.com