What Is a Federal Perkins Loan?

Perkins Loans were designed for undergraduate and graduate students who demonstrated exceptional financial need. Although the program has ended, 1.6 million borrowers still owe $4.7 billion in Perkins Loans as of mid-2021.

The loans were meant to make going to school and repaying student loans easier for students whose financial situation may have prevented them from going to school at all.

The program expired on Sept. 30, 2017. If you were awarded a Perkins Loan before then, you still have to pay your loan back, in almost all cases.

Benefits of Federal Perkins Loans

Perkins Loans Are Subsidized Loans

With federal subsidized student loans like Perkins Loans, the government pays the interest on the loan while you’re in school, during your grace period, and if you need to defer your loan payments for an eligible reason.

That creates significant savings compared with federal unsubsidized student loans, when interest may continue to grow even if you are not currently required to make payments on the loan.

The benefit still exists for students who took out Perkins Loans.

Additionally, Federal Perkins Loans had no origination fee. In contrast, Direct Loans currently have an origination fee of 1.057%, and Direct PLUS Loans for parents and grad students have a fee of 4.228% until Oct. 1, 2021. (The percentages change on Oct. 1 every year.)

Perkins Loan Interest Rate

While other federal student loan rates are tied to the 10-year Treasury note, the Perkins Loan rate was fixed at 5%—which used to be lower than some other loan types.

For the 2022-2023 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 4.99%, the rate on Direct Unsubsidized loans for graduate and professional students is 6.54%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 7.54%. The interest rates on federal student loans are fixed and are set annually by Congress.

Extended Grace Period

Another benefit of Perkins student loans is their extended grace period.

Most federal student loans have a grace period of six months after graduation to begin payments. Perkins Loans give an extra three months, so borrowers don’t have to start repaying a Perkins Loan for nine months after they graduate, leave school, or drop below half-time enrollment.

That said, any borrower who is eager to start repaying student loans doesn’t have to wait until a grace period is over to begin.

Perkins Loan Forgiveness Programs

If you have Perkins Loans, you may also qualify for certain forgiveness programs, depending on your employment or volunteer status.

If you work as a Peace Corps volunteer, firefighter, law enforcement officer, nurse, librarian with a master’s degree at a Title I school, public defender, teacher who meets specific criteria, among several other jobs, you could be eligible to have all or part of your Perkins Loan forgiven.

How Much Could You Borrow?

If you were eligible for a Perkins Loan, you most likely were only able to take a portion of your federal loans out as Perkins Loans. The amount you were able to borrow in Perkins Loans was determined by your personal financial situation.

For dependent undergraduate students whose parents are eligible for Direct PLUS Loans, the aggregate federal student loan limit is $31,000, with no more than $23,000 of that for subsidized loans. Undergrads deemed independent can have an aggregate of $57,500 in federal student loans, with no more than $23,000 in subsidized loans.

The aggregate federal loan limit for graduate or professional students is $138,500, which includes federal loans received for undergraduate studies.

Refinancing Your Student Loans

You may now be seeking a lower interest rate for your outstanding student loan balance.

Since graduating from college and getting a job, you may be making significantly more money and have established good credit. If that’s the case, refinancing your federal and/or private loans may be a good choice.

Even though Perkins Loans have good repayment options and a steady, reasonably low-interest rate, not all student loans enjoy the same perks.

Before you refinance, which means paying off any or all current loans with a new, private loan, preferably with a lower interest rate, it is important to review the benefits of your current loans. Refinancing would eliminate federal benefits like deferment and income-driven repayment plans.

Depending on your credit history and earning potential, you may be able to qualify for lower monthly payments or a lower interest rate, which could potentially reduce the amount of money you pay in interest over the life of the loan.

The Takeaway

Federal Perkins Loans, for students of exceptional need, came with benefits and a fixed interest rate that was relatively low at the time. Billions are still owed on Perkins Loans, and a borrower may want to weigh the merits of seeking a lower rate.

SoFi is a leader in the student loan space, offering refinancing of both federal and private student loans with a fixed or variable rate and no application or origination fees.

See your student loan refinancing interest rate in just a few minutes. No strings attached.


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 SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

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.
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.
SLR18190

Source: sofi.com

How to Get a Free Credit Score Report

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A credit report is a detailed overview of your credit history, including your payment history, lines of credit, and how consistent you’ve been with paying off your credit balances. Three national credit bureaus issue credit reports: Equifax, Experian, and TransUnion. While your credit report doesn’t contain your credit score, they help lenders understand your risk tolerance and eligibility for things like loans, insurance policies, jobs, and credit cards.

Your credit score, on the other hand, is a three-digit number that shows lenders how risky a borrower you are and is a crucial component of your financial health. Your credit score plays a key role in determining what loans you qualify for and the interest rate you will pay on all types of things, from mortgages to renter’s insurance to car loans. Your credit score comes from the information contained in your credit report, such as your payment history, credit utilization ratio, and age of credit, and is calculated using an algorithm. As critical as this little number is, many Americans are in the dark when it comes to their credit scores.

Fortunately, federal law entitles citizens to get a free credit report every year from the three major credit bureaus. Below, we’ll cover how to get a credit report, so you can understand where your financial health lies. Read end-to-end to learn how to get a free credit report and FICO score, or use the provided links to jump to a section of your choosing.

The Importance of Your Credit Report

Your credit report houses all sorts of pertinent information about your financial background, including your credit payment history, credit utilization ratio, and age of credit. Credit scores have become such a huge influence in the lives of consumers that millions are greatly disadvantaged by their lack of knowledge about their scores. In fact, roughly 26 million Americans are “credit invisible,” meaning they don’t have a credit report with one of the three national credit bureaus. On top of that, an additional 19 million Americans have credit scores that are unscorable by a credit-scoring model. Not having a credit score can make it difficult to get approved for a loan for a mortgage, car, or home improvement project because lenders will have no way to assess your risk level as a borrower. 

Knowing how to get a credit report can help you gain a better understanding of your financial health. As important as the information on your credit report is, you need to make it a priority to get your hands on it to help you not only find out what your current score actually is, but what is affecting it, and if there are any errors on it that are unfairly dropping your score.

Why is Your Credit Score Report So Helpful?

Considering the importance of credit scores on your financial portfolio, it makes sense to have a clear understanding of your credit’s health, which can only be identified on your credit score report. The information in your credit report is used to generate your credit score, which is what your potential lenders will see before they decide to approve you for a loan.

Your credit report includes important financial information, such as:

  • The types of credit that you use
  • How long your accounts have been open
  • How much money you owed
  • Whether you’ve paid your bills in full and on time
  • How efficiently you paid your bills
  • Late payments

It gives lenders information about how much credit you have used, and if you are looking for new sources of credit. There are a variety of lenders you might come across that look at your credit report to conduct business, such as:

  • Banks and financial institutions
  • Landlords
  • Car dealers
  • Credit card companies
  • Insurance companies
  • Department stores
  • Cell phone and cable providers
  • Utility providers
  • Employers

Your credit score has a huge influence on lenders’ decisions to approve or deny your loan applications. Many facets of your borrowing habits will be outlined on your credit report. Lenders use the information on your credit report to gauge their credit decisions on their applicants and customers from credit reporting agencies, including Equifax, TransUnion, and Experian. Lenders and other companies use the information in your credit score report to assess your applications for credit, loans, insurance, and even renting a residence.

How to Get a Free Credit Report

Many consumers wonder how to get a free credit score report. According to FTC.gov, the Fair Credit Reporting Act requires the three national credit bureaus—Experian, Equifax, and TransUnion—to provide free copies of credit reports once every 12 months to consumers who request one. They must also set reasonable prices for scores for consumers who need to retrieve their credit report more than once per year.  Here are some guidelines on how to get a credit report:

  • One way to access your credit report for free is by visiting the official government website AnnualCreditReport.com or by calling their toll-free number at 1.877.322.8228. Through this website, you can request your free credit report from one of the three bureaus, or have one of each credit report sent at the same time, depending on your intended use. For example, if you want to verify that all of your information, such as name, address, credit accounts, and amount owed, is accurate, you might want to request all three at once to compare. Or, you can spread out each credit report by requesting one every four months, for example.
  • Aside from obtaining a free credit score from one of the three national credit bureaus, you can also gain access to your credit report for free through other means, such as through Mint. At Mint, we team up with TransUnion to provide free credit scores. Mint’s free credit report and score simply requires you to verify your identity and once verified, you’ll have your free credit report summary within minutes. Through Mint, you can also enjoy credit monitoring, which provides credit alerts whenever TransUnion receives new credit information from any of your creditors.

For those wondering how to get a free credit score report, you can use the government’s free website AnnualCreditReport.com, or get your free credit report from websites like Mint.

taking out a home mortgage, you might want to view your credit report right away. There are three ways you can request a credit report: online, through the phone, and by mail. Here’s how long each method takes:

  • Requesting a free credit report online: When you request a free credit report online, such as through AnnualCreditReport.com or through Mint, you can get your credit report immediately. 
  • Requesting a free credit report through phone: If you order your free credit report by calling 1.877.322.8228, your credit report will be processed and mailed to your address within 15 days.
  • Requesting a free credit report through mail: You can write a letter requesting your annual credit report or fill out and mail the Annual Credit Report Request Form to the following address:

Annual Credit Report Request Service

P.O. Box 105218

Atlanta, GA 30348-5281

Requesting a free credit report through mail will be processed and mailed to your address within 15 days of receipt, which can bring your total wait time up to two to three weeks for delivery.

What to Do While You’re Waiting for Your Credit Report

Whether you called to request a free credit report or mailed in an annual credit report request form, you can take a few actions to pass the time.

Check your credit score

Checking your credit score is important for a variety of reasons. It gives you an overview of your financial health, can help you spot any errors, and can show you areas of improvement. As you review your credit score, you may come across two different types: FICO and Vantage.

  • FICO Credit Score: Fair Isaac Corporation created the FICO scoring model to provide an industry-standard for determining credit-worthiness that was fair for both consumers and lenders. FICO is the most widely used credit score and uses credit scoring models that are bureau specific, meaning there is a separate scoring model for Experian, Equifax, and TransUnion. Because each credit bureau has different information on file, your credit score might not be the same. However, in most cases, your score only differs by a few points—anything more might be due to a mistake. 

Most FICO scores range between 300-850— the higher the score, the less risky you may seem to lenders. A “good” credit score, according to FICO, is anywhere between 670-739. In order to get a FICO credit score, you need to have at least one account open for at least six months or longer, along with at least one account that has been reported to a credit bureau within the last six months.

  • Vantage Credit Score: The VantageScore Model was created by the three credit reporting companies— Experian, Equifax, and TransUnion. Together, industry-leading experts created a credit scoring model using credit report information from each credit bureau. Earlier versions of the VantageScore have a credit range between 501 and 990. The new VantageScore 3.0 uses the same credit score range as the FICO credit score, which is 300-850. Similar to the FICO credit score, a “good” credit score is anywhere between 670-739.

Unlike the FICO credit score, Vantage’s credit score accepts consumers who are new to the credit market, who would otherwise be invisible to lenders. Because lenders from all three credit bureaus can use the VantageScore, credit scores should remain fairly consistent. The only time a change would occur is if a lender provides a new piece of data to a credit bureau.

With Mint, you can check your credit score for free as many times as you’d like without hurting your credit score. Mint works by using the VantageScore model, which is determined by six different factors: age and types of credit, credit utilization, payment history, total balances and debt, recent credit inquiries, and available credit. Check your free credit score with Mint today to see where your credit score stands.

Understand your credit score

Before you work on increasing your credit score, it’s important to know what your credit score looks at. There are a variety of credit score myths out there that you might believe, which is why understanding what can impact your credit score can help you make thoughtful actions to improve your score.

Here’s a list of what most credit scores measure:

  • Payment history: Your payment history is just one piece of your credit history. Your payment history looks at your past credit payments and whether they’ve been paid on time. Missed or late payments can tell lenders that it might be risky to lend to you because you may miss a future payment. Paying off your credit balance on time in full, every time can help keep your credit score in check.
  • Age of credit: The longer the credit history, the higher your credit score might be. This is because the age of your oldest account provides more data and shows lenders you have more experience managing credit. 
  • Types of credit: Your credit mix, such as credit cards, loans, mortgages, and retail accounts, can show lenders you have experience managing and paying off multiple types of credit.
  • Credit utilization: Credit utilization is the amount of money you owe compared to your available line of credit. Often expressed as a ratio, high credit utilization may make lenders view you as risky because you’re borrowing close to your limit. For example, if your credit line is $10,000, and you bought a used car for $7,000 with a credit card, your credit utilization ratio will be 70%. Experts believe you should have a credit utilization ratio of no more than 30 percent of your credit limit.
  • New credit accounts: Opening a new credit account can result in a hard inquiry, which can hurt your credit score because it shows that a lender is looking at your credit report.

Understanding what credit scores measure can help you make smart financial decisions, such as making credit card payments on time, maintaining a low credit utilization ratio, and effectively managing different types of credit.

What to Do If There’s an Error on Your Credit Report

An error on your credit report can deal a significant blow on your credit score and report. An error on your credit report can happen for a variety of reasons, such as a careless mistake, inputting wrong information, or even identity theft. Regularly checking your credit score can help you look for any discrepancies that can damage your credit score. Thanks to the Fair Credit Reporting Act, you can issue a credit dispute for any information you think is incorrect without negatively impacting your score. If you notice an error on your credit report, follow these steps:

  • Step 1: Submit a letter in writing or online to the credit reporting company that details the information you think is inaccurate. With your letter, provide any copies (not original files) that support your claim, and information such as your name, address, and the information you want to be removed or corrected on your credit report.
  • Step 2: Wait for the credit reporting company to respond. A response typically takes around 30 days from the day they receive your letter. During this time, they will investigate your claim and send the information you sent to the lenders that provided the information. If the lender finds there was a mistake, they must inform all three credit bureaus.
  • Step 3: Write a letter to the lender or information provider that may have made a mistake detailing the item you think is wrong in your credit report. Provide any copies of important information that supports your dispute and have them review your claim.
  • Step 4: Review your results. Each credit reporting company is required to provide you with the results of your investigation. If the dispute wasn’t resolved, you can have the credit bureau make a note on your future credit reports that there was a dispute.

As stated, disputing a credit report doesn’t hurt your credit score. If you believe there is an error on your credit report, take the time to resolve the error. Not doing so can lower your credit score, which can make it challenging to get approved for a loan or urge lenders to tack on higher interest rates for loans.

Mint.com is the Best Place to Go for Your Credit Score Report

Credit scores are an essential component of your financial portfolio. Now Mint offers a new feature that allows you to access your free credit report summary to help you understand what is influencing your credit score so you can learn how to improve it. You’ll be able to find out your credit score for free without ever having to use a credit card.

This new feature is just an extension of Mint’s commitment to giving consumers like you access to critical information that influences your financial health. All you have to do to get your free credit score from Mint is log into your Mint account and get started. With Mint, you can also work toward improving your credit and financing standing overall, create a budget, and stay on top of bills. If you’re not yet a member of Mint, learn more at Mint.com about becoming a member to gain access to all their helpful financial tools today!

Save more, spend smarter, and make your money go further

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Mint is passionate about helping you to achieve financial goals through education and with powerful tools, personalized insights, and much more. More from Mint

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Examining the Different Types of Student Loans

With the average annual cost of college for the 2021-2022 school year $10,740 for public four-year in-state and $38,070 for private non-profit four-year schools, it’s not uncommon for students to use loans to help pay for their education.

The two major umbrellas to consider are federal student loans and private student loans. Federal student loans are those backed by the U.S. Department of Education, while private student loans are offered through financial institutions such as banks, online lenders, and credit unions.

Knowing what types of student loans are available to you and understanding your student loan statement can help you figure out the best way to save money in the long run.

What Are The Different Types of Student Loans?

One of the first things to understand is the difference between federal and private student loans.

Federal student loans are loans offered by the government, at a fixed interest rate and with certain restrictions. Depending on borrower needs, students could qualify for either subsidized or unsubsidized federal loans (more on those, later). Federal student loans come with protections for borrowers’ loans like income-driven repayment options, deferment, forbearance, and access to the Public Service Loan Forgiveness (PSLF) program. Most federal student loans also have annual lending limits .

For some students, federal student loans aren’t enough to cover the cost of a college education. Some turn to scholarships, grants, or a part-time job to fill in the gaps. Other students rely on private student loans, offered by lenders and financial institutions, to cover the cost of college.

Applying for Federal Student Loans

The first step in the federal student loan process is to fill out the Free Application for Federal Student Aid (FAFSA®). That will involve compiling some family financial history. Even students who don’t think they’ll qualify for financial aid will likely still want to fill out a FAFSA. All federal student loans require a FAFSA first. And some schools use information from the FAFSA to determine eligibility for other types of aid like scholarships or grants.

All federal student loans require a FAFSA first.

After filling out the FAFSA, students will receive a financial aid package which includes any federal aid awarded to the student including grants, work study, and loans. Depending on financial circumstances, the loans will either be subsidized or unsubsidized.

The Different Types of Federal Student Loans

Think of federal student loans as an overarching category. There are different types of federal student loans, each of which have different eligibility requirements, borrower maximums (or not), and interest rates. Understanding all your options means you’ll be better prepared to determine the best way to finance your education.

Recommended: Private Student Loans vs. Federal Student Loans

For the 2022-2023 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 4.99%, the rate on Direct Unsubsidized loans for graduate and professional students is 6.54%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 7.54%. The interest rates on federal student loans are fixed and are set annually by Congress.

Direct Subsidized vs. Unsubsidized Loans

Federal Direct loans, also known as Stafford Loans, can be either subsidized or unsubsidized. With a subsidized student loan, the government will cover the accrued interest while the borrower is enrolled in school, during the grace period, and during any periods of deferment. Not having to pay interest on your loans during school can really help—especially since interest accrues and capitalizes, or gets added to the principal loan amount, and then accrues more interest. There are no subsidized federal loans for graduate students—only for undergrads.

The government does not pay the interest on unsubsidized Direct loans. That means, even while you’re in school, the loans are accruing interest. You don’t have to make payments on the loans while you’re a full-time student, but interest is building up. As the interest accrues, it is added to the loan’s principal.

Recommended: Student Loan Grace Periods: What You Need to Know

That’s why it’s possible to have a higher remaining loan balance than the initial loan amount after graduation. Individuals with an unsubsidized student loan do have the option to make interest-only payments on the loan during periods of deferment, including while they’re in school, but are not required to do so.

Federal loans have fixed interest rates (that are set annually), meaning they don’t change over the life of the loan.

Federal student loan borrowing limits vary depending on factors like your year in school and whether or not you are a dependent student. For example, first-year undergrads who are considered independent or whose parents are not able to take out parent loans have a maximum borrowing amount of $9,500 (of which only $3,500 can be subsidized) annually. The maximum for dependent students is $5,500 in their first year, with the same $3,500 cap on subsidized loans.

PLUS Loans

Direct PLUS loans can be borrowed directly by a graduate student, or Parent PLUS loans can be taken out by an undergrad’s parents. PLUS loans, in both forms, have the same benefits as other federal loans in that the interest rate is fixed and there are flexible repayment options.

Unlike other federal loans, PLUS loans require a credit check. They’re designed for graduate and professional students, who have had more time to build up a credit score. The maximum PLUS loan amount you can borrow is the full cost of tuition less any other financial assistance.

When taking out student loans for college, a lot of the options depend on your FAFSA and what’s determined to be your family’s financial need or ability to pay. If you’re a dependent student , then there will likely be some expectation of parental contribution and your parents may be offered the option of taking out Parent PLUS loans.

Parent PLUS loans are similar to Direct PLUS loans, except parents are expected to begin repaying the loan while the student is still in school—though they can request a deferment until graduation.

Direct Consolidation Loans

After graduation, students might have a number of different federal student loans. That can obviously be confusing. If you want to consolidate all federal loans into one place, then you may be able to pool them into a Direct Consolidation Loan. This allows you to only make one monthly payment towards all your federal student loans.

A Direct Consolidation loan will not lower your overall interest rate.

A Direct Consolidation loan will not lower your overall interest rate. The interest rate on your new Direct Consolidation Loan is simply a weighted average of the interest rates, rounded up to the nearest eighth of a percent, of your existing federal loans. Consolidation could also wipe out any history of payments you were making toward PSLF. Only federal loans can be consolidated with a Direct Consolidation Loan.

Related: A Look Into the Public Service Loan Forgiveness Program

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

Private Student Loans

Students who don’t receive enough funding from the federal government, may look to private student loans as an option to finance their education. Private loans are offered by lenders such as banks, online lenders, and credit unions.

Applying for Private Student Loans

Private lenders do not use the FAFSA to determine a potential borrower’s creditworthiness. Instead, students interested in borrowing private loans will fill out a loan application directly with a lender. Before applying, lenders will generally allow people to get a quote to see if they pre-qualify and at what rates. This can be helpful when evaluating different lenders.

The terms, interest rates, and borrowing limits on private loans may vary by lender. Lenders will use factors like the borrower’s credit score to determine the interest rate they qualify for. When borrowing a private student loan you’ll generally have the option to choose between a fixed or variable interest rate.

Student loan repayment options will be determined by your lender. Some offer deferment plans while the borrower is enrolled in school and others require payments to start as soon as the loan is disbursed.

Another private student loan option is to consolidate or refinance your existing student loans after graduation. This might be beneficial if it lowers your interest rate and saves you money over the life of your loan. Federal student loans offer unique borrower benefits and protections like income-driven repayment plans. Refinancing federal loans eliminates them from these benefits.

Understanding the Student Loan Statement

When you take out a loan, you sign a promissory note, which outlines the interest rate, loan amount, and repayment terms. If you hold federal student loans, when you graduate you select a repayment plan. If you don’t do anything, you’ll automatically be put on the Standard Repayment plan.

For most federal loans, the Standard Repayment plan is a set monthly payment for up to 10 years. There are a few other repayment plans to choose from, including four income-driven repayment plans. The different plans allow you to pay back your loan over different time periods. The longer the repayment term, the more you’ll pay in interest over the life of the loan.

When you look at your student loan statement, you’ll see each loan listed as the total loan amount, how much principal remains, how much interest has accrued since your last payment, your current interest rate, and how much your current monthly payment is—in addition to any fees, such as late fees, you might owe.

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The Benefits of Refinancing Student Loans

It’s possible to consolidate both federal and private student loans into one new loan when you refinance your student loans with a private lender. If an applicant qualifies for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan.

Make sure to weigh the benefits that come with your federal loans against the value of refinancing. When you refinance federal loans they will no longer be eligible for federal borrower protections.

Some private lenders offer similar borrower protections. For example, borrowers who refinance with SoFi may qualify for Unemployment Protection. This can help eligible borrowers pause their loan payments if they unexpectedly lose their job through no fault of their own. To see what refinancing could mean for you, take a look at SoFi’s student loan refinancing calculator.

The Takeaway

The two main categories of student loans are private and federal. Federal loans are awarded to students based on information they provide in their FAFSA annually. Federal loans have a fixed interest rate and are eligible for a variety of repayment plans, as determined by the U.S. Department of Education.

Undergrads may qualify for unsubsidized or subsidized federal loans, depending on their financial need. Graduate students may qualify for unsubsidized loans or PLUS loans. Parents of undergraduates may also borrow Parent PLUS loans.

Private student loans are offered by private financial institutions. In order to borrow a private student loan, individuals will generally need to file an application with a lender. The lender will review factors like the applicant’s credit history, among others, in order to determine the terms they qualify for.

Check out what kind of rates and terms you can get in just a few minutes.


We’ve Got You Covered


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 SEPTEMBER 1, 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.


SOSL18182

Source: sofi.com

How to Get the Most Out of Your Airline Miles and Points

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Additional Resources

Lots of people like to travel to new places and try new things. The problem is that travel can be expensive.

I’ve personally managed to take nearly all of my vacations for free thanks to rewards credit cards. All in all, I’ve earned more than 1 million miles and points to fund my trips over the past five years. I’ve used these points to visit U.S. and international destinations I would never have seen otherwise, enriching my life in ways I couldn’t have imagined. 

If you know what you’re doing, you can — like me — save a lot of money by using airline miles and points. If you really take the time to optimize your travel rewards, you can find yourself on a luxury vacation for economy prices.


How to Get the Most of Your Airline Miles and Points

Most airlines and hotels operate loyalty programs that award you with miles and points when you fly or stay with them. 


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These points help you save money and earn upgrades when you redeem them for travel. And there’s lots you can do to earn more rewards even before you travel — giving you some much needed budgetary breathing room. 

Earning Miles & Points

If you’re looking to go on an exciting vacation on the cheap, you’ll want to earn as many miles and points as possible before you set sail. Use these strategies to boost your earning rate.

Sign Up for Airline & Hotel Loyalty Programs

Even if you haven’t flown with an airline or stayed at a hotel, you should be able to sign up for that company’s loyalty program. This ensures you’ll earn points next time you fly or stay with that company. 

It also ensures you’ll receive promotional offers. 

Though potentially annoying if you’re not actively planning to travel in the near future, these offers often promise big discounts or exciting opportunities to earn rewards points or miles. For example, members of American Airlines AAdvantage program often receive mailers to sign up for a branded credit card and get a great sign-up bonus.

Choose the Right Credit Card

One of the best ways to earn more airline miles and hotel points is to regularly use a travel credit card. 

Most major airlines and hotel chains have a credit card partner and offer one or more branded credit cards. Each time you use their card, you’ll earn points or miles that you can redeem toward future travel.

When evaluating potential travel credit cards, consider the following:

  • Whether You’ll Actually Use Your Points. If you won’t use the points or miles a card offers, it’s not worth getting.
  • How Much You’ll Earn. Look for cards that have the highest earning rates in the categories you know you’ll spend in.
  • Status and Perks. If you’re loyal to a specific airline or hotel, see if there are premium cards that come with status or perks with that chain. For example, certain Hilton credit cards confer automatic status that comes with you automatic room upgrades, a daily food and beverage credit, a free night on longer trips, and more.
  • Generic Cards. If you aren’t loyal to a specific brand, choose one that offers generic rewards like the Chase Sapphire Preferred Card or the American Express Gold Card. Instead of being tied to a single airline, you can use Chase Ultimate Rewards or American Express Membership Rewards points toward travel on a number of the card issuers’ partner airlines.

Take Advantage of Welcome Bonuses

One of the best opportunities to rack up points or miles is through welcome bonuses and other credit card offers.

Credit card issuers want you to sign up for their card, so they’ll try to incentivize people to sign up through these offers. Usually, they require you to spend a certain amount of money within a certain time period, often three or four months.

For example, you might see a deal to earn 40,000 miles when you spend $3,000 in your first three months with a new credit card.

These bonuses are often large enough to get you a free round-trip flight or hotel stay right away. If you’re in the market for a travel credit card, pay attention to each contender’s welcome bonus offer — it could well be the card’s defining feature.

However, be careful and make sure that you can meet the spending requirement of any card you sign up for without overspending. If you overspend and carry a balance, the interest you pay will more than offset the value of the rewards you earn.

Take Advantage of Bonus Spending Categories

Some credit cards have flat-rate rewards programs. You earn rewards at the same rate regardless of where you spend your money.

Other rewards programs have bonus categories. For example, a credit card might give you 1 mile per dollar spent on most purchases but offer 2 bonus miles for each dollar you spend at restaurants.

For example, the Chase Sapphire Preferred Card offers:

  • 5x points on travel through Chase
  • 3x points on dining and delivery
  • 3x points on groceries
  • 3x points on select streaming services
  • 2x points on other travel purchases
  • 1x points on everything else

Some cards also offer limited-time deals where you can get even higher earning rates at certain merchants, such as 10x points per dollar spent with a particular merchant.

If you have multiple rewards credit cards, try to optimize your spending to take advantage of bonus spending categories and earn more miles or points.

Refer a Friend

Many credit card issuers offer refer-a-friend bonuses to cardholders who get someone else to sign up for a travel card. Often, these programs are win-win situations: You get a bonus for making a successful referral and the referred person gets a lucrative sign-up bonus.

If you know someone who wants a travel credit card, refer them to your favorite card. You could both end up closer to a free flight or hotel stay.


Pay for Group Travel

If your friends aren’t up for signing up for new cards but still want to travel with you, you can accelerate your earnings by offering to book everyone’s flights and hotels. Put the cost of the trip on your card and have everyone else pay you back.

As long as they do pay you back, you earn miles or points on the entire trip value while still only paying your portion of the costs.

This can be especially lucrative if your credit card offers bonus points for spending on flights or hotels. You could find yourself racking up tens of thousands of points if you put all of the flights or hotel rooms on your card. It’s also a good way to hit spending requirements for welcome bonuses.

Just make sure you get paid back after you book the trip.

Use Shopping Portals

Many credit card issuers, airlines, and hotel chains offer shopping portals that sell merchandise and travel. If you shop through these portals, you could earn additional frequent flyer miles or rewards points, often at better rates than those offered by the card’s regular rewards program.

Depending on the portal, you might even earn points when you shop with a debit card. That’s great news if your credit score isn’t where you’d like it to be and you’re having trouble qualifying for a travel credit card as a result.

Earn Elite Status

Many airlines’ and hotels’ loyalty programs offer elite status if you earn enough miles or points or spend enough money on their branded credit cards. If you travel a lot, elite status is well worth the effort to achieve, as it promises perks like room or fare upgrades, food credits, bonus point earnings, free nights, and more.

For example, if you earn at least 125,000 Rapid Rewards points with Southwest Airlines, you qualify for a companion pass. That gives one companion of your choice a free ticket on any flight you take, less taxes and fees. The pass lasts through the end of the following year, giving you more than 12 months to enjoy this benefit. 


Redeeming Miles & Points

Earning your miles and points is just one piece of the puzzle. You’ll want to use points in the most efficient way possible to make sure you get the best value.

Be Flexible About Travel Dates

Whether you’re paying for your airline ticket with cash or miles, being flexible about your travel dates is one of the best ways to save money while traveling. 

Certain times of the year, like Thanksgiving weekend and the period between Christmas and New Year’s Day, have huge demand for travel. Other times, not so much.

For example, a recent round-trip flight between Boston and Orlando cost me about $220 in early June. Not bad. During Thanksgiving week the same year, the same route cost more than double that. Ouch.

Certain days of the week are busier and therefore more expensive too. Expect to pay more to fly on Thursdays, Fridays, and Sundays. 

Bottom line: If you can be flexible and travel during less busy times, you can redeem your points for award flights at a much cheaper rate.

Treat Yourself to Upgrades

If you’re looking for a luxury vacation, fare class or room upgrades offer fantastic value for your points. You can often upgrade to a first-class or business class seat for a relatively low number of miles compared to the difference in the two fares’ cash prices.

Hotels are similar. More luxurious rooms often cost fewer points than you’d expect based on the cash price.

If your goal is to travel as much as possible, don’t waste your points on upgrades. But if you’re craving a once-in-a-while splurge, this is a cost-effective strategy. 

Think Beyond Airfare and Hotels

Airfare and lodging are big travel expenses, but they’re not the only ones you’ll encounter on your journey. Once you get where you’re going, you have to think about what you’re going to do and how you’ll get around.

Some hotels and airlines have partnerships with rental car companies or vacation companies that offer activities or excursions. You might be able to redeem your rewards for exciting activities or a free rental car so you can drive around your destination.

Travel cards with generic rewards are often the best way to get these redemptions. For example, Chase’s Sapphire line of cards let you redeem your points not only for flights and hotels but also for cruises, rental cars, and sightseeing tours.

Consider the Point Transfer Ratio

Many airlines and hotels have partner companies and let their customers transfer points or miles to their partners. This has two clear benefits.

First, it gives you more options. For example, the OneWorld Alliance is a group of airlines that includes American Airlines, British Airways, Japan Airlines, and Qantas, among others.

If you have American Airlines AAdvantage miles, you can often use them to book flights with another member of the OneWorld Alliance.

Second, if you’re willing to put in some work, you can sometimes get even more value for your points by transferring them. Favorable transfer ratios often boost your points’ value — sometimes by an order of magnitude — after you’ve moved them to another airline.

Find the Award Chart Sweet Spots

Some hotels and airlines have standardized redemption options, letting you turn a set number of miles into a specific flight or hotel stay.

For example, JetBlue offers one-way flights to and from Hawaii and any U.S. East Coast location for 30,000 miles, making a round-trip vacation 60,000 miles. 

Depending on where you live on the East Coast, that deal could be a great value over redeeming points for other flights. For example, despite the much shorter distance and (usually) lower dollar cost, a flight between Boston and Los Angeles can cost as much as 33,000 points.

Be on the lookout for sweet spots where you can get a far greater value for your points or miles than other redemptions.

Redeem Via the Rewards Portal

If you’re using a travel credit card with generic rewards instead of a branded airline card, you can often get better value for your points by using the card issuer’s rewards portal.

For example, the Chase Sapphire Reserve Card boosts your points’ value by 50% when you use them to book travel through Chase’s travel portal. If you book your tickets outside the portal, you lose that value.

Pool Points With Friends & Family

If you’re going on a family vacation with members of the same airline or hotel loyalty program, look into pooling your points as a group. Many airlines and hotels allow this at no cost. 

If you each have just a few thousand points, you may not be able to get any useful redemptions on your own. But together, you might be able to get a free ticket or room and split the savings between everyone.

Watch for Limited-Time Deals

Some airlines or hotels will run deals where you can redeem your points for great deals. If you’re paying attention, you might see a chance to get a flight or hotel stay for half the normal price.

These deals can also come on the earning side, such as a higher earning rate on the purchase of a flight or hotel stay. This can accelerate your progress toward a free flight or stay.

Don’t Forget Partner Awards

Just like the various travel alliances often let you transfer points between airlines or hotels, you can often redeem your miles directly for flights on other airlines without having to transfer them first.

Partner bookings can be a bit complicated when it comes to finding the best value for your miles. But if you’re lucky, you can get a great redemption for very cheap.

Familiarize yourself with the different airline alliances to see which airlines are partners to see if you can find good opportunities. If you have a specific trip in mind, you can do some research online — using resources like travel subreddits — to see if other travelers have found exciting deals.

Keep an Eye on Expiration Dates

Some loyalty programs make their miles or points expire after a period of time. For example, American Airlines miles expire after two years of no activity. 

Fortunately, if you earn a single mile during any two-year period, you reset the timer for your entire balance. Time your purchases accordingly.

Cash Out Miles You Won’t Use

Between sign up bonuses, referring friends, and not having time to travel much, you might find yourself with way more miles and points than you can imagine yourself using.

If you find yourself with miles that are about to expire or that you won’t otherwise use, try to redeem them for something so that you don’t completely miss out on the value. 

You can do this even if you don’t plan to travel in the near future. Many airlines let you cash out your miles for non-travel rewards, such as gift cards or merchandise. While these redemptions are generally a worse value than redeeming miles for an award ticket they’re better than letting your miles languish and never get used.


Final Word

If you like to travel, airline and hotel rewards programs are a great way to save money on trips or to take a luxury vacation. 

Signing up for the right credit card, finding opportunities to maximize mile and point earnings, looking for lesser-known ways to boost points’ redemption value — these strategies and more have significantly reduced my travel costs over the years. They can do the same for you.

But maximizing travel rewards is just one way to save money on the road. Even as you work to make the most of your points, look for other opportunities to take exciting trips on the cheap too.

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TJ is a Boston-based writer who focuses on credit cards, credit, and bank accounts. When he’s not writing about all things personal finance, he enjoys cooking, esports, soccer, hockey, and games of the video and board varieties.

Source: moneycrashers.com

What Is the Principal Amount of a Loan?

A personal loan can be a helpful financial tool when someone needs to borrow money to pay for things like home repairs, a wedding, or medical expenses, for example. The principal amount of a loan refers to how much money is borrowed and has to be paid back, aside from interest.

Keep reading for more insight into what the principal of a loan is and how it affects repayment.

Loan Principal Meaning

What is the principal of a loan? When someone takes out a loan, they are borrowing an amount of money, which is called “principal.” The principal on a loan represents the amount of money they borrowed and agreed to pay back. The interest on the loan is what they’ll pay in exchange for borrowing that money.

Does a Personal Loan Have a Principal Amount?

Yes, personal loans do come with a principal amount. Whenever a borrower makes a personal loan payment, the loan’s principal decreases incrementally until it is fully paid off.

Recommended: What Is a Personal Loan?

Loan Principal vs Loan Interest

The loan principal is different from interest. The principal represents the amount of money that was borrowed and must be paid back. The lender will charge interest in exchange for lending the borrower money. Payments made by the borrower are applied to both the principal and interest.

Along with the interest rate, a lender may also disclose the annual percentage rate (APR) charged on the loan, which includes any fees the lender might charge, such as an origination fee, and the interest. As the borrower makes more payments and makes progress paying off their loan principal amount, less of their payments will go towards interest and more will apply to the principal balance. This principal is referred to as amortization.

Recommended: What Is the Average Interest Rate on a Personal Loan?

Loan Principal and Taxes

Personal loans aren’t considered to be a form of income so the amount borrowed is not subject to taxes like investment earnings or wages are. The borrower won’t be required to report a personal loan on their income tax return, no matter who lent the money to them (bank, credit card, peer-to-peer lender, etc.).

Recommended: What Are the Common Uses for Personal Loans?

Loan Principal Repayment Penalties

As tempting as it can be to pay off a loan as quickly as possible to save money on interest payments, some lenders charge borrowers a prepayment penalty if they pay their personal loan off early. Not all charge a prepayment penalty. When shopping for a personal loan, it’s important to inquire about extra fees like this to have a true idea of what borrowing that money may cost.

The borrower’s personal loan agreement will state if they will need to pay a prepayment penalty for paying off their loan early. If a borrower finds that they are subject to a prepayment penalty, it can help to calculate if paying that fee would cost less than continuing to pay interest for the personal loan’s originally planned term.

How Can You Pay Down the Loan Principal Faster?

It’s understandable why some borrowers may want to pay down their loan principal faster than originally planned as it can save the borrower money on interest and lighten their monthly budget. Here are a few ways borrowers can pay down their loan principal faster.

Interest Payments

When a borrower pays down the principal on a loan, they reduce how much interest they need to pay. That means that each month as they make a new payment they reduce their principal and the interest they’ll owe in the future. As previously noted, paying down the principal faster can help the borrower pay less interest. Personal loan lenders allow borrowers to make extra payments or to make a larger monthly payment than planned. When doing this, it’s important that borrowers confirm that their extra payments are going towards the principal balance and not the interest. That way, their extra payments work towards paying down the principal and lowering the amount of interest they owe.

Shorten Loan Term

Refinancing a loan and choosing a shorter loan time can also make it easier to pay down a personal loan faster. Not to mention, if the borrower has a better credit score than when they applied for the original personal loan, they may be able to qualify for a lower interest rate which can make it easier to pay down their debt faster. Having a shorter loan term typically increases the monthly payment amount but can result in paying less interest over the life of the loan and paying off the debt faster.

Cheaper Payments

Refinancing to a new loan with a lower interest rate may reduce monthly loan payments, depending on the term of the new loan. With lower monthly scheduled payments, they may opt to pay extra toward the principal and possibly pay the loan in full before the end of the term.

Other Important Information on the Personal Loan Agreement

A personal loan agreement includes a lot of helpful information about the loan, such as the principal amount and how long the borrower has to pay their debt. The more information the borrower has about the loan, the more strategically they can plan to pay it off. Here’s a closer look at the information typically included in a personal loan agreement.

Loan Amount

An important thing to note on a personal loan agreement is the total amount the borrower is responsible for repaying.

Loan Maturity Date

A personal loan’s maturity date is the day the final loan payment is due.

Loan Interest Rates

The loan’s interest rate and APR should be listed on the personal loan agreement.

Monthly Loan Payments

The monthly loan payment amount will be listed on the personal loan agreement. Knowing how much they need to pay each month can make it easier for the borrower to budget accordingly.

The Takeaway

Understanding how a personal loan works can make it easier to pay one-off. To recap — What is the principal amount of a loan? The principal on a loan is the amount the consumer borrowed and needs to pay back.

Consumers looking for a personal loan may want to consider a SoFi Personal Loan. With competitive interest rates and a wide range of loan amounts available to qualified borrowers, there may be a personal loan option that works for your financial needs.

Learn more about SoFi Personal Loans today

FAQ

What is the principal balance of a loan?

The principal balance of a loan is the amount originally borrowed that the borrower agrees to pay back.

Does the principal of the loan change?

The original loan principal does not change. The principal amount included in each monthly payment will change as the amortization period progresses. On an amortized loan, less principal than interest is paid in each monthly payment at the beginning of the loan and incrementally increases over the life of the loan.

How does loan principal work?

The loan principal represents the amount borrowed. Usually, this is done in monthly payments until the loan principal is fully repaid.


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Source: sofi.com