How Do I Get the Best Interest Rate on a Loan?

Whether trying to consolidate debt with a personal loan or thinking about a loan to pay for a major life event, taking on debt is a financial move that warrants some consideration. It’s important to understand the financial commitment that taking on a personal loan — or any other debt — entails. This includes understanding interest rates you might qualify for, how a loan term affects the total interest charged, fees that might be charged by different lenders, and, finally, comparing offers you might receive.

Shopping around and comparing loans can increase your confidence that you’re getting the best interest rate on a loan.

What’s a Good Interest Rate on a Loan?

You may see advertisements for loan interest rates, but when you get around to checking your personal loan interest rate, what you’re offered may be different than rates you’ve seen. Why is that? A loan company may have interest rate ranges, but the lowest, most competitive rates may only be available to people who have excellent credit, as well as other factors.

When shopping around for a loan, it’s typical that when checking your rate, even with online personal loan companies, you can check your rate without affecting your credit score. This pre-qualification rate is just an estimate of the interest rate you would likely be offered if you were to apply for a loan, but it can give you a good estimate of what sort of rate you might be offered. You can compare rates to begin to filter potential companies to use to apply for a loan.

Recommended: Personal Loan Calculator

Getting a Favorable Interest Rate on a Loan

The potential interest rate on a loan depends on a few factors. These may include:

•   The amount of money borrowed.

•   The length of the loan.

•   The type of interest on your loan. Some loans may have variable interest (interest rates can fluctuate throughout the life of the loan) or a fixed interest rate. Typically, starting interest rates may be lower on a variable-rate loan.

•   Your credit score, which consists of several components.

•   Being a current customer of the company.

For example, your credit history, reflected in your credit score, can give a lender an idea of how much a risk you may be. Late payments, a high balance, or recently opened lines of credit or existing loans may make it seem like you could be a risky potential borrower.

If your credit score is not where you’d like it to be, it may make sense to take some time to focus on increasing your credit score. Some ways to do this are:

•   Analyzing your credit report and correcting any errors. If you haven’t checked your credit report, doing so before you apply for a loan is a good first step to making sure your credit information is correct. Then you’ll have a chance to correct any errors that may be bringing down your credit score.

•   Work on improving your credit score, if necessary. Making sure you pay bills on time and keeping your credit utilization ratio at a healthy level can help improve your credit score.

•   Minimize opening new accounts. Opening new accounts may temporarily decrease your credit score. If you’re planning to apply for a loan, it may be good to hold off on opening any new accounts for a few months leading up to your application.

•   Consider a cosigner or co-applicant for a loan. If you have someone close to you — a parent or a partner — with excellent credit, having a cosigner may make a loan application stronger. Keep in mind, though, that a cosigner will be responsible for the loan if the main borrower does not make payments.

Recommended: What is a Good APR?

Comparing Interest Rates on Personal Loans

When you compare loan options, it can be easy to focus exclusively on interest rates, choosing the company that may potentially offer you the lowest rate. But it can also be important to look at some other factors, including:

•   What are the fees? Some companies may charge fees such as origination fees or prepayment penalties. Before you commit to a loan, know what fees may be applicable so you won’t be surprised.

•   What sort of hardship terms do they have? Life happens, and it’s helpful to know if there are any alternative payment options if you were not able to make a payment during a month. It can be helpful to know in advance the steps one would take if they were experiencing financial hardship.

•   What is customer service like? If you have questions, how do you access the company?

•   Does your current bank offer “bundled” options? Current customers with active accounts may be offered lower personal loan interest rates than brand-new customers.

Recommended: Avoiding Loan Origination Fees

Choosing a Personal Loan For Your Financial Situation

Interest rates and terms aside, before you apply for a loan, it’s a good idea to understand how the loan will fit into your life and how you’ll budget for loan payments in the future. The best personal loan is one that feels like it can comfortably fit in your budget.

But it also may be a good idea to assess whether you need a personal loan, or whether there may be another financial option that fits your goals. For example:

•   Using a buy now, pay later service to cover the cost of a purchase. These services may offer 0% interest for a set amount of time.

•   Transferring high-interest credit card debt to a 0% or low-interest credit card, and making a plan to pay the balance before the end of the promotional rate.

•   Taking on a side hustle or decreasing monthly expenses to be able to cover the cost of a major purchase or renovation.

•   Researching other loan options, such as a home equity loan, depending on your needs.

Recommended: 39 Ways to Earn Passive Income Streams

The Takeaway

A loan is likely to play a big part in your financial life for months or years, so it’s important to take your time figuring out which loan option is right for you. And it’s also important to remember that interest rate is just one aspect of the loan. Paying attention to details like potential fees, hardship clauses, and other factors you may find in the small print may save you money and stress over time.

SoFi offers competitive unsecured personal loan options with fixed rates and no fees. Completing an easy online application will show what rate you qualify for — no commitment required and it won’t affect your credit score*.

Check your rate in just one minute.

Photo credit: iStock/Prostock-Studio


*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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.
SOPL0821025

Source: sofi.com

12 Steps to Filling out the FAFSA Form 2021-2022

For many people, one of the first steps to applying for college is filling out the Free Application for Federal Student Aid, or FAFSA®. This form helps the government determine your eligibility for federal student aid, including subsidized and unsubsidized student loans, as well as grants and work-study opportunities.

Completing The 2021-2022 FAFSA Application

The FAFSA form 2021 may look a bit different if you’ve filled out the form in the past. That’s because of the FAFSA® Simplification Act, which was passed in December 2020 and designed to make the FAFSA more accessible for lower-income students and families. While most of these changes won’t go into effect for the upcoming FAFSA cycle, we’ll point in this article a few changes to FAFSA you will see this year.

Recommended: FAFSA 101: How to Complete the FAFSA

12 Steps to Fill Out the FAFSA

FAFSA opens Oct. 1, 2020, and closes June 30, 2022 for the 2021/2022 academic year. However, FAFSA deadlines may vary depending on the states and schools you’re applying to, so you may want to check with each school to confirm their FAFSA deadline. If you’re ready to fill out FAFSA, we’ve outlined steps required in the process.

Not ready to fill out the FAFSA? You can fill out an abridged Federal Student Aid Estimator to give you an idea of what filling out the actual FAFSA will be like and to estimate your expected student aid package.

1. Required Documents Ready

Before even loading the online FAFSA form, it may be useful to have all your required documents in order to make the application process even easier. The things you’ll need may include:

•   Social security or alien registration ID

•   Drivers license or state ID

•   Federal income tax returns, W-2s and other financial documents for both yourself and your parent(s) if you’re a dependent (more on that later)

•   Bank statements

•   Untaxed income

•   Title IV Institution Codes for schools you’re applying to (again, more on that later)

•   Download app, if you plan on applying on mobile (you can also apply on desktop)

Dependent students will also need to provide similar information for their parents.

2. FSA IDs

There’s one more thing you’ll need in order to apply for FAFSA, and that’s a federal student aid ID, or FSA ID . This is simply the username or password you’ll use to log into FAFSA. Note that if you need to enter parental financial information, whoever is providing that financial information will also need to create an FSA ID .

3. Basic Information

Now that you have a FSA ID, you’re ready to log in and get started. The first few steps of FAFSA will be filling out basic information. The site or app will first ask you if you are a student, parent, or preparer helping a student fill out the FAFSA. Select which one applies to you. You should then be prompted to provide the following:

•   Your full name

•   Date of birth

•   Social security number

4. Starting the Application

Once you fill in this information, you will be asked to accept or decline the disclaimer, which details how the site will use and monitor your data. You should then be prompted to either start a FAFSA for 2021-2022 or 2020-2021. If you’re filing FAFSA for the upcoming year and are not currently enrolled in college, you should choose “Start 2021-2022 FAFSA.”

You’ll also be asked to create a save key, which is simply a four-digit code you’ll use to save your application. If you don’t finish FAFSA in one sitting, then you’ll be asked to enter your save key to continue filling it out at a later date.

5. Section 1: Student Information

Next, you’ll need to enter some information about yourself, including (but not limited to):

•   Social security number

•   Full name

•   Date of birth

•   Email address

•   Phone number

•   Home address

•   State of residence

•   Citizenship status

•   High school completion status

•   College degree level

•   If you’d like to be considered for work-study

6. Section 2: College Search Section

To send your FAFSA information to schools you’re applying to, you’ll need to find the federal school code for each school you want your information sent to. Doing so allows colleges to receive your FAFSA information and use it to provide you a financial aid package. You can find this code either on the school’s website or by searching for it on the FAFSA form itself.

7. Section 3: Dependency Status

You can either apply to FAFSA as a dependent of your parents or as an independent. If you’re a first-time college student and will graduate from high school in 2022 and/or are under 24 years old, you’ll most likely need to file as a dependent, meaning you’ll need your parents’ financial information to apply.

Section 3 of the FAFSA will help you determine if you’re an independent or dependent student. You’ll need to provide some more information about yourself, such as your marital status, if you have children or other dependents, and if you’re at risk or are currently experiencing homelessness.

Once you’ve filled out this information, FAFSA should display a message that determines whether or not you’re considered a dependent and therefore need parental financial information to determine expected family contribution (which will soon be replaced with the student aid index).

(Note that the rest of these steps assume you’re filing as a dependent. While the process of filing as an independent will be similar, you won’t be asked to provide information about your parents.)

8. Section 4: Parental Information

If you need parental information for FAFSA, you’ll include that in this section. Information you’ll need includes (but is not limited to):

•   Parental marital status

•   Date of parent’s marriage

•   Parent social security number

•   Parent name

•   Parent date of birth

•   Parent email address

•   Parent’s spousal information for all of the above

•   Household size

9. Section 5: Parent Financials

Next, you’ll need to provide some financial information about your parents. You’ll be asked for information such as (but not limited to):

•   Last year taxes were filed

•   Tax return type

•   Filing status

•   IRS Data Retrieval Tool (otherwise, need to fill in tax information manually)

•   Combat pay

•   Grant and scholarship aid

•   Education credits

•   Untaxed IRA distributions

•   IRA deductions and payments

•   Tax exempt interest income

•   Child support payments

•   Need-based employment programs

•   Net worth

10. Section 6: Student financials

Now it’s time to provide some financial information about yourself. You’ll be asked for information such as (but not limited to):

•   Last year taxes were filed

•   Tax return type

•   Filing status

•   IRS Data Retrieval Tool (otherwise, need to fill in tax information manually)

•   Combat pay

•   Grant and scholarship aid

•   Education credits

•   Untaxed IRA distributions

•   IRA deductions and payments

•   Tax exempt interest income

•   Child support payments

•   Need-based employment programs

•   Net worth

11. Check for errors

Once you’ve reached the end of the application, you should receive a FAFSA summary. Before hitting submit, you may want to ensure that all the information you included is accurate. Reviewing this information closely may help avoid filing a FAFSA correction later.

12. Agreement of Terms

The FAFSA requires you to accept or reject its agreement of terms. If your parent(s) also provided information because you filed as a dependent, they will also need to accept these terms in order for you to submit the application. Both you and your parent(s) will e-sign using your FSA ID. Once you’ve accepted the terms, your FAFSA will be complete.

Sample FAFSA Form for 2021/2022

Do you need some extra help? FAFSA’s Financial Aid Tool Kit is rich with resources and information. Some documents include step-by-step instructions on how to complete the FAFSA on the website and mobile app, lists of tips for filling out the FAFSA, question-and-answer documents, and more. You can also view a sample FAFSA form or a presentation on how to fill out FAFSA using the mobile app.

This student aid report may also be useful if you need to see another FAFSA sample form.

Recommended: How much FAFSA Money Can I Expect?

What’s Different About the 2021/2022 FAFSA

As previously discussed, the FAFSA Simplification Act passed last December resulted in a few changes to FAFSA. However, most of these changes won’t go into effect for the 2021-2022 school year. For FAFSA 2021-2022, major changes include the following:

•   Automatic-Zero EFC: FAFSA will give all applicants with an income of $27,000 or less an EFC of zero, meaning FAFSA does not expect families to help pay for the applicant’s college. This amount increased $1,000 from last year, which set the cut-off at $26,000, so more students should be able to receive a EFC of zero.

•   Schedule 1 Questions: When populating tax information from the IRS Data Retrieval Tool, the tool will automatically answer whether or not the applicant filed for a Schedule 1.

Additional changes are already scheduled for the 2022/2023 FAFSA form, such as drug convictions no longer negatively affecting one’s ability to get financial aid. Additionally, registration status for Selective Service for eligible males will also no longer be considered for financial aid. You can review the latest changes to the FAFSA on the official FAFSA website.

A Few Extra Tips

Completing the FAFSA can be an overwhelming process. For those filing for the first time, you may want to check out this 2021-2022 FAFSA guide and some FAFSA tips to make the process even easier. If you need some more help on how to fill out FAFSA 2021/2022, some tips from StudentAid.Gov include:

1.    Completing the form: It can be tempting to skip the FAFSA altogether, especially if you’re from a middle- or upper-class family and you believe you won’t be eligible for aid. However, falling for this assumption could mean leaving aid on the table.

2.    Paying attention to deadlines: As stated earlier, FAFSA 2021/2022 opens Oct. 1 and closes June 30, 2022. However, the schools you’re applying to may require you to fill out the FAFSA before June 30, so it’s best to ask each school’s financial aid office about what their FAFSA deadlines are to avoid losing out on aid.

3.    Using the IRS Data Retrieval Tool: This tool auto-fills your latest tax information from the IRS database. When you fill out FAFSA, you’ll have the option to either fill out your tax data manually or use the tool. Using the tool could help you avoid making costly mistakes while also saving you time.

4.    Filling out every section: Not sure how to fill out a section? FAFSA offers helpful tips throughout each section of the FAFSA form to make filling out the FAFSA easier. Additionally, not filling out a section of FAFSA could result in your form not being submitted or you receiving less financial aid.

5.    Double-checking the form: Before you submit, you may want to go back and double-check your answers to make sure everything is filled out and is accurate.

Recommended: Navigating Your Financial Aid Package

The Takeaway

Filling out the FAFSA is a great first step to pay for your dream school. This is one of the best ways of getting scholarships and grants you won’t have to pay back or government-backed loans to help you pay for college-related costs. By learning how to properly fill out the FAFSA (and then actually doing so!), you can increase your odds of getting a bigger financial aid package.

However, if your financial aid package doesn’t cover all your college expenses, you may want to consider private student loans. It’s important to note that private student loans don’t offer the same protections as federal student loans, like income-driven repayment plans or deferment options. For this reason, private student loans are generally considered only after other sources of funding have been considered.

SoFi’s Private Student Loans are available for undergraduate and graduate students, as well as parents. In just a few minutes, you can apply online for student loans and be well on your way to financing your education.

Find out more about SoFi’s Private Student Loan options.

Header photo credit: iStock/Vladimir Sukhachev

FAFSA photos credit: FAFSA’s Financial Aid Tool Kit


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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.
SOPS0921032

Source: sofi.com

Average Student Loan Debt by State in 2021

Student loan debt nationwide increased by 8.28% in 2020, the largest increase since 2013, according to the latest report from EducationData.org. That spike was most likely fueled by rising unemployment and 3.2 million new federal student loan borrowers.

Student loan debt is now the second highest consumer debt category in the country behind only housing debt . Nationwide, nearly 40% of college attendees report some type of educational debt, and 65% graduate with student debt, the report showed.

A recent report from EducationData.org details the average student loan debt per borrower (based on all student loan debt, not just that owed by undergraduate borrowers) in each state. Overall, residents of Washington, D.C., have the nation’s highest federal student loan debt at more than $55,000 per borrower when looking at the total student loan debt owed by individuals in the state. Of every state, North Dakota has the lowest average federal student loan debt, with residents there owing an average of just $29,446.

Student Loan Debt in Each State

Read on for an overview of what student loan debt looks like across the country according to EducationData.org . This data is reflective of all borrowers, not just undergraduate students.

Alabama

Average borrower debt: $37,348
Total student loan debt: $23.1 Billion
Everything you need to know about student loans & scholarships in Alabama

Alaska

Average borrower debt: $34,431
Total student loan debt: $2.3 Billion
Everything you need to know about student loans & scholarships in Alaska

Arizona

Average borrower debt: $35,454
Total student loan debt: $30.7 Billion
Everything you need to know about student loans & scholarships in Arizona

Arkansas

Average borrower debt: $33,525
Total student loan debt: $12.8 Billion
Everything you need to know about student loans & scholarships in Arkansas

California

Average borrower debt: $36,937
Total student loan debt: $142.7 Billion
Everything you need to know about student loans & scholarships in California

Colorado

Average borrower debt: $37,120
Total student loan debt: $28.2 Billion
Everything you need to know about student loans & scholarships in Colorado

Connecticut

Average borrower debt: $35,448
Total student loan debt: $17.1 Billion
Everything you need to know about student loans & scholarships in Connecticut

Delaware

Average borrower debt: $37,338
Total student loan debt: $4.6 Billion
Everything you need to know about student loans & scholarships in Delaware

District of Columbia

Average borrower debt: $55,077
Total student loan debt: $6.4 Billion

Florida

Average borrower debt: $38,481
Total student loan debt: $98.2 Billion
Everything you need to know about student loans & scholarships in Florida

Georgia

Average borrower debt: $41,843
Total student loan debt: $67.2 Billion
Everything you need to know about student loans & scholarships in Georgia

Hawaii

Average borrower debt: $36,575
Total student loan debt: $4.4 Billion
Everything you need to know about student loans & scholarships in Hawaii

Idaho

Average borrower debt: $33,100
Total student loan debt: $7.1 Billion
Everything you need to know about student loans & scholarships in Idaho

Illinois

Average borrower debt: $38,071
Total student loan debt: $61.1 Billion
Everything you need to know about student loans & scholarships in Illinois

Indiana

Average borrower debt: $33,106
Total student loan debt: $29.6 Billion
Everything you need to know about student loans & scholarships in Indiana

Iowa

Average borrower debt: $30,848
Total student loan debt: $13.2 Billion
Everything you need to know about student loans & scholarships in Iowa

Kansas

Average borrower debt: $33,130
Total student loan debt: $12.5 Billion
Everything you need to know about student loans & scholarships in Kansas

Kentucky

Average borrower debt: $33,023
Total student loan debt: $19.5 Billion
Everything you need to know about student loans & scholarships in Kentucky

Louisiana

Average borrower debt: $34,683
Total student loan debt: $22.1 Billion
Everything you need to know about student loans & scholarships in Louisiana

Maine

Average borrower debt: $33,352
Total student loan debt: $6.1 Billion
Everything you need to know about student loans & scholarships in Maine

Maryland

Average borrower debt: $43,219
Total student loan debt: $35.5 Billion
Everything you need to know about student loans & scholarships in Maryland

Massachusetts

Average borrower debt: $34,549
Total student loan debt: $30.4 Billion
Everything you need to know about student loans & scholarships in Massachusetts

Michigan

Average borrower debt: $36,295
Total student loan debt: $50.7 Billion
Everything you need to know about student loans & scholarships in Michigan

Minnesota

Average borrower debt: $33,822
Total student loan debt: $26.3 Billion
Everything you need to know about student loans & scholarships in Minnesota

Mississippi

Average borrower debt: $37,080
Total student loan debt: $16.0 Billion
Everything you need to know about student loans & scholarships in Mississippi

Missouri

Average borrower debt: $35,706
Total student loan debt: $29.3 Billion
Everything you need to know about student loans & scholarships in Missouri

Montana

Average borrower debt: $33,953
Total student loan debt: $4.2 Billion
Everything you need to know about student loans & scholarships in Montana

Nebraska

Average borrower debt: $32,138
Total student loan debt: $7.8 Billion
Everything you need to know about student loans & scholarships in Nebraska

Nevada

Average borrower debt: $33,863
Total student loan debt: $26.3 Billion
Everything you need to know about student loans & scholarships in Nevada

New Hampshire

Average borrower debt: $34,353
Total student loan debt: $6.4 Billion
Everything you need to know about student loans & scholarships in New Hampshire

New Jersey

Average borrower debt: $35,730
Total student loan debt: $41.7 Billion
Everything you need to know about student loans & scholarships in New Jersey

New Mexico

Average borrower debt: $34,237
Total student loan debt: $7.7 Billion
Everything you need to know about student loans & scholarships in New Mexico

New York

Average borrower debt: $38,107
Total student loan debt: $91.9 Billion
Everything you need to know about student loans & scholarships in New York

North Carolina

Average borrower debt: $37,861
Total student loan debt: $48.0 Billion
Everything you need to know about student loans & scholarships in North Carolina

North Dakota

Average borrower debt: $29,446
Total student loan debt: $2.5 Billion
Everything you need to know about student loans & scholarships in North Dakota

Ohio

Average borrower debt: $34,923
Total student loan debt: $61.8 Billion
Everything you need to know about student loans & scholarships in Ohio

Oklahoma

Average borrower debt: $31,832
Total student loan debt: $15.2 Billion
Everything you need to know about student loans & scholarships in Oklahoma

Oregon

Average borrower debt: $37,251
Total student loan debt: $20.0 Billion
Everything you need to know about student loans & scholarships in Oregon

Pennsylvania

Average borrower debt: $35,804
Total student loan debt: $63.9 Billion
Everything you need to know about student loans & scholarships in Pennsylvania

Rhode Island

Average borrower debt: $32,212
Total student loan debt: $4.5 Billion
Everything you need to know about student loans & scholarships in Rhode Island

South Carolina

Average borrower debt: $38,662
Total student loan debt: $27.5 Billion
Everything you need to know about student loans & scholarships in South Carolina

South Dakota

Average borrower debt: $31,858
Total student loan debt: $3.6 Billion
Everything you need to know about student loans & scholarships in South Dakota

Tennessee

Average borrower debt: $36,549
Total student loan debt: $30.8 Billion
Everything you need to know about student loans & scholarships in Tennessee

Texas

Average borrower debt: $33,123
Total student loan debt: $116.8 Billion
Everything you need to know about student loans & scholarships in Texas

Utah

Average borrower debt: $32,781
Total student loan debt: $9.9 Billion
Everything you need to know about student loans & scholarships in Utah

Vermont

Average borrower debt: $38,411
Total student loan debt: $2.9 Billion
Everything you need to know about student loans & scholarships in Vermont

Virginia

Average borrower debt: $39,472
Total student loan debt: $41.9 Billion
Everything you need to know about student loans & scholarships in Virginia

Washington

Average borrower debt: $35,521
Total student loan debt: $27.6 Billion
Everything you need to know about student loans & scholarships in Washington

West Virginia

Average borrower debt: $32,258
Total student loan debt: $7.2 Billion
Everything you need to know about student loans & scholarships in West Virginia

Wisconsin

Average borrower debt: $32,272
Total student loan debt: $23.1 Billion
Everything you need to know about student loans & scholarships in Wisconsin

Wyoming

Average borrower debt: $30,246
Total student loan debt: $1.6 Billion
Everything you need to know about student loans & scholarships in Wyoming

The Takeaway

The average amount of debt held by borrowers varies from state to state. The five states with the highest average amount of student loan debt per borrower are; Washington D.C., Maryland, Georgia, Virginia, and South Carolina. The five states with the lowest average of student loans per borrower are; South Dakota, Oklahoma, Iowa, Wyoming, and North Dakota. North Dakota is the only state where the average borrower owes less than $30,000.

For millions, student loans are a necessary part of paying for college. When federal aid and savings aren’t enough to pay for school, some borrowers turn to private student loans. While private lenders are not required to offer the same benefits or protections as federal student loans, they can be helpful for borrowers who have exhausted all other options and are looking to fill in gaps in funding. Student loans with SoFi have no hidden fees and borrowers are able to choose from four repayment plans.

Find out more about private student loans available from SoFi.

Photo credit: iStock/FangXiaNuo


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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.
SOPS0921034

Source: sofi.com

What Can You Use Student Loans For?

To attend college these days, many students take out student loans. Otherwise, they wouldn’t be able to afford the hefty price tag of tuition and other expenses.

According to U.S. News & World Report, among the college graduates from the class of 2020 who took out student loans, the average amount borrowed was $29,927. In 2010, that number was $24,937 — a difference of about $5,000.

Student loans are meant to be used to pay for your education and related expenses so that you can earn a college degree. Even if you have access to student loan money, it doesn’t mean you should use it on general living expenses. By learning the answer to, “What can you use a student loan for?” you will make better use of your money and ensure you’re in a more stable financial situation post-graduation.

Recommended: I Didn’t Get Enough Financial Aid: Now What?

5 Things You Can Use Your Student Loans to Pay For

Here are five things you can spend your student loan funds on.

1. Your Tuition and Fees

Of course, the first thing your student loans are intended to cover is your college tuition and fees. The average college tuition and fees for a private institution in 2021-2022 is $38,185, while the average for a public, out-of-state school is $22,698 and $10,338 for a public, in-state institution.

2. Books and Supplies

Beyond tuition and fees, student loans can be used to purchase your textbooks and supplies, such as a laptop, notebooks and pens, and a backpack. Keep in mind that you may be able to save money by purchasing used textbooks online or at your campus bookstore. Hard copy textbooks cost, on average, between $80 and $150; you may be able to find used ones for a fraction of the price. Some students may find that renting textbooks may also be a cost-saving option.

Recommended: How to Pay for College Textbooks

3. Housing Costs

Your student loans can be used to pay for your housing costs, whether you live in a dormitory or off-campus. If you do live off-campus, you can also put your loans towards paying for related expenses like your utilities bill. Compare the costs of on-campus vs. off-campus housing, and consider getting a roommate to help you cover the costs of living off-campus.

4. Transportation

If you have a car on campus or you need to take public transportation to get to school, work, or your internships, then you can use your student loans to pay for those costs. Even if you have a car, you may want to consider leaving it at home when you go away to school, because gas, maintenance, and a parking pass could end up costing much more than using public transportation and your school’s shuttle, which should be free.

5. Food

What else can you use student loans for? Food would qualify as a valid expense, whether you’re cooking meals at home or you’ve signed up for a meal plan. This doesn’t mean you should eat out at fancy restaurants all the time just because the money is there. Instead, you could save by cooking at home, splitting food costs with a roommate, and asking if local establishments have discounts for college students.

Recommended: How to Get Out of Student Loan Debt: 6 Options

5 Things Your Student Loans Should Not Cover

Now that you know what student loans can be used for, you’re likely wondering what they should not be used for as well. Here are five expenses that cannot be covered with funds from your student loans.

1. Entertainment

While you love to do things like go to the movies and concerts and bowling, you should not use your student loans to pay for your entertainment. Your campus likely offers plenty of free and low-cost entertainment like sports games and movie nights, so pursue those opportunities instead.

2. A Vacation

College is draining, and you deserve a vacation from the stress every once in a while. However, if you can’t afford to go on spring break or another type of trip, then you should put it off at this time. It’s never a good idea to use your student loans to cover these expenses.

3. Gym Membership

You may have belonged to a gym at home before you went to college, and you still want to keep up your membership there. You can, as long as you don’t use your student loans to cover it. Many colleges and universities have a gym or fitness center on campus that is available to students and included in the cost of tuition.

4. A New Car

Even if you need a new car, student loans cannot be used to buy a new set of wheels. Consider taking public transportation instead of buying a modest used car when you save up enough money.

5. Extra Food Costs

While you and your roommates may love pizza, it’s not a good idea to use your student loan money to cover that cost. You also shouldn’t take your family out to eat or dine out too much with that borrowed money. Stick to eating at home or in the dining hall, and only going out to eat every once in a while with your own money.

Student Loan Spending Rules

The federal code that applies to the misuse of student loan money is clear. Any person who “knowingly and willfully” misapplied funds could face a fine or imprisonment.

Your student loan refund — what’s left after your scholarships, grants, and loans are applied toward tuition, campus housing, fees, and other direct charges — isn’t money that’s meant to be spent willy-nilly. It’s meant for education-related expenses.

The amount of financial aid a student receives is based largely on each academic institution’s calculated “cost of attendance,” which may include factors like your financial need and your Expected Family Contribution (EFC). Your cost of attendance minus your EFC generally helps determine how much need-based aid you’re eligible for. Eligibility for non-need-based financial aid is determined by subtracting all of the aid you’ve already received from your cost of attendance.

Starting for the 2024-2025 school year, the EFC will be replaced with the Student Aid Index (SAI). The SAI will work similarly to the EFC though there will be some important changes such as adjustments in Pell Grant eligibility.

Additionally, when you took out a student loan, you probably signed a promissory note that outlined what you’re supposed to be spending your loan money on. Those restrictions may vary depending on what kind of loan you received — federal or private, subsidized or unsubsidized. If the restrictions weren’t clear, it’s not a bad idea to ask your lender, “What can I use my student loan for?”

If you’re interested in adjusting loan terms or securing a new interest rate, you could consider refinancing your student loans with SoFi. Refinancing can allow qualifying borrowers to secure a lower interest rate or preferable terms, which could potentially save them money over the long run. Refinancing federal loans eliminates them from all federal borrower benefits and protections, inducing deferment options and the ability to pursue public service loan forgiveness, so it’s not the right choice for all borrowers.

The Takeaway

Student loans can be used to pay for qualifying educational expenses like tuition and fees, room and board, and supplies like books, pens, a laptop, and a backpack. Expenses like entertainment, vacations, cars, and fancy dinners cannot generally be paid for using student loans.

If you have student loans and are interested in securing a new — potentially lower — interest rate, consider refinancing.

There are no fees to refinance a student loan with SoFi and potential borrowers can find out if they pre-qualify, and at what rates, in just a few minutes.

Learn more about student loan refinancing with SoFi.


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 JANUARY 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.

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Source: sofi.com

Using Income Share Agreements to Pay for School

Many students end up taking out loans to finance the cost of college. As of the first quarter of 2021, Americans collectively held $1.57 trillion in student debt, up $29 billion from the previous quarter. And a significant share of borrowers were struggling with their debt burdens: Just under 6% of total student debt was 90 days or more past due or in default.

Students looking for alternatives to student loans can apply for grants and scholarships, take on work-study jobs or other part-time work, or find ways to save on expenses.

Recently, another alternative has appeared on the table for students at certain institutions: income share agreements. An income share agreement is a type of college financing in which repayment is a fixed percentage of the borrower’s future income over a specified period of time.

As this financing option grows in popularity, here are some key things to know about how these agreements operate and to help you decide whether they’re the right choice for you.

How Income Share Agreements Work

Unlike student loans, an income share agreement, also known as an income sharing agreement or ISA, doesn’t involve a contract with the government or a private lender. Rather, it’s a contract between the student and their college or university.

In exchange for receiving educational funds from the school, the student promises to pay a share of his or her future earnings to the institution for a fixed amount of time after graduation.

ISAs don’t typically charge interest, and the amount students pay usually fluctuates according to their income. Students don’t necessarily have to pay back the entire amount they borrow, as long as they make the agreed-upon payments over a set period. Though, they also may end up paying more than the amount they received.

Income share agreements only appeared on the scene in the last few years, but they are quickly expanding. Since 2016, ISA programs have launched at places like Purdue University in Indiana, Clarkson University in New York, and Lackawanna College in Pennsylvania. Each school decides on its own terms and eligibility guidelines for the programs. The school itself or outside investors may provide funds for ISAs.

Purdue University was one of the first schools to create a modern ISA program. Sophomores, juniors, and seniors who meet certain criteria, including full-time enrollment and satisfactory academic progress, are eligible to apply.

Students may have a six-month grace period after graduation to start making payments, similar to the six-month grace period for student loans, and the repayment term at Purdue is typically 10 years. For some schools, however, the repayment term ranges from two to 10 years.

The exact amount students can expect to pay depends on the amount they took out and their income. The university estimates that a junior who graduates in 2023 with a marketing major will have a starting salary of $51,000 and will see their income grow an average of 4.7% a year.

If that student borrowed $10,000 in ISA funds, he or she would be required to pay 3.39% of his or her income for a little over eight years. The total amount that student would pay back is $17,971. The repayment cap for the 2021-2022 school year is $23,100.

Again, every ISA is different and may have different requirements, so be sure to check with your college or university for all the details.

The Advantages of Income Share Agreements

ISAs aren’t for everyone, but they can be beneficial for some students. For example, students who don’t qualify for other forms of financial aid, such as undocumented immigrants, may have few other options for funding school.

For students who have already maxed out their federal loans, ISAs can be a more affordable option than Parent PLUS loans or private student loans, both of which sometimes come with relatively high interest rates and fees.

Compared to student loans, many ISAs also protect students by preventing monthly payments from becoming unaffordable. Since the amount paid is always tied to income, students should never end up owing more than a set percentage for a fixed period of time. However, a student’s field of study may impact this. Students who are high earners after college may end up paying more to repay an ISA than they would have under other financing options.

If a student has trouble finding a well-paying job, or finding one at all, payments typically shrink accordingly. For example, Purdue sets a minimum income amount below which students don’t pay anything.

In Purdue’s case, the student won’t owe anything else once the repayment period is over, compared to student loans that can multiply exponentially over time due to accrued interest.

Purdue and several other universities also set the amount and length of repayment based on a student’s major, meaning monthly payments can be more tailored to graduates’ fields and salaries than student loans are. For fortunate students who see their income rise beyond expectations, many schools ensure the student won’t pay beyond a certain cap.

Potential Pitfalls of Income Share Agreements

ISAs come with some risks and drawbacks, as well. Firstly, since the repayment amount is based on income, a student who earns a lot after graduation might end up paying more than they would have with some student loans. This is because if a student earns a high income after graduating, they’d pay more to the fund. Second, the terms of repayment can vary widely, and some programs require graduates to give up a huge chunk of their paychecks.

For example, Lambda School , an online program that trains students to be software engineers, requires alums who earn at least $50,000 to pay 17% of their income for two years (up to $30,000). This can be a burden for recent graduates, especially compared to other options like income-driven repayment, which determines the percentage of income going towards student loans based on discretionary income.

Currently, there is very little regulation of ISAs, so students should read ISA terms carefully to understand what they’re signing up for.

No matter what, income share agreements are still funding that needs to be repaid, often at a higher amount than the principal.

So you’re still paying more overall for your education compared to finding sources of income like scholarships, a part-time job, gifts from family, or reducing expenses through lifestyle changes or going to a less expensive school.

How Do Income Share Agreements Impact You?

Many schools’ ISA programs are designed to fill in gaps in funding when students do not receive enough from other sources, such as financial aid, federal or private student loans, scholarships or savings. Thus, it’s important to understand how an ISA will impact both your long-term finances and other methods to pay for college.

ISAs do not impact need-based aid like grants or scholarships. Students with loans, however, could have a more complicated repayment plan with multiple payments due each month.

With ISAs, there is less clarity as to how much you’ll end up repaying from up to 10 years of income. As your income changes, your payment will remain the same percentage unless it falls below the minimum income threshold ($1,666.67 at Purdue) or reaches a repayment cap.

Whereas students may pay more than the loan principal to reduce interest, ISAs often require reaching a repayment cap of roughly double the borrowed amount to be paid off early.

Depending on your future income and career path, an ISA could cut into potential savings and investments or serve as a safety net for a less stable occupation.

Who Should Consider An ISA?

As previously mentioned, income share agreements are an option for students who have maxed out on federal loans and scholarships. There are other circumstances when an ISA may or may not be worth considering.

Colleges may require a minimum GPA to be eligible for an ISA. For instance, Robert Morris University requires incoming students to have a 3.0 high school GPA and maintain a 2.75 GPA during their studies for continued funding eligibility. Taking stock of how an ISA aligns with your academic performance before accepting funding could reduce stress later on.

Since ISA programs structure repayment as a percentage of income, graduates who secure high-paying jobs can end up paying a significant sum compared to the borrowed amount. An ISA term could be more favorable to students planning to enter sectors with more gradual salary growth, such as civil service.

Repayment plans at income sharing agreement colleges are not uniform. Students at schools with lower payment caps and early repayment options may find ISAs more advantageous.

Considering Private Loans

Students should generally exhaust all their federal options for grants and loans before considering other types of debt. But for some students looking to fill gaps in their educational funding, private student loans may make more sense for their needs than ISAs.

Recommended: Examining the Different Types of Student Loans

In particular, students who expect to have high salaries after graduation may end up paying less based on interest for a private student loan than they would for an ISA. Some private loans can also allow you to reduce what you owe overall by repaying your debt ahead of schedule.

SoFi doesn’t charge any fees, including origination fees or late fees. Nor are there prepayment penalties for paying off your loan early. You can also qualify for a 0.25% reduction on your interest rate when you sign up for automated payments.

The Takeaway

As mentioned, an income share agreement is an alternate financing option for college. An ISA is generally used to fill in gaps in college funding. Generally, it’s an agreement between the borrower and the school that states the borrower will repay the funds based on their future salary for a set amount of time.

One alternative to an ISA could be private student loans. Keep in mind that private loans are generally only considered as an option after all other sources of federal aid, including federal student loans, have been exhausted.

If you’ve exhausted your federal loan options and need help paying for school, consider a SoFi private student loan.


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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

12 Best Monthly Dividend Stocks and Funds to Buy for 2022

For all the changes we’ve experienced in recent years, some things remain regrettably the same. We all have bills to pay, and those bills generally come monthly. Whether it’s your mortgage, your car payment or even your regular phone and utility bills, you’re generally expected to pay every month.

While we’re in our working years, that’s not necessarily a problem, as paychecks generally come every two weeks. And even for those in retirement, Social Security and (if you’re lucky enough to have one) pension payments also come on a regular monthly schedule. But unfortunately, it doesn’t work that way in our investment portfolios. 

That’s where monthly dividend stocks come into play.

Dividend-paying stocks generally pay quarterly, and most bonds pay semiannually, or twice per year. This has a way of making portfolio income lumpy, as dividend and interest payments often come in clusters.

Well, monthly dividend stocks can help smooth out that income stream and better align your inflows with your outflows.

“We’d never recommend buying a stock purely because it has a monthly dividend,” says Rachel Klinger, president of McCann Wealth Strategies, an investment adviser based in State College, Pennsylvania. “But monthly dividend stocks can be a nice addition to a portfolio and can add a little regularity to an investor’s income stream.”

Today, we’re going to look at 12 of the best monthly dividend stocks and funds to buy as we get ready to start 2022. You’ll see some similarities across the selections as monthly dividend stocks tend to be concentrated in a small handful of sectors such as real estate investment trusts (REITs), closed-end funds (CEFs) and business development companies (BDCs). These sectors tend to be more income-focused than growth-focused and sport yields that are vastly higher than the market average.

But in a market where the yield on the S&P 500 is currently 1.25%, that’s certainly welcome. 

The list isn’t particularly diversified, so it doesn’t make a complete portfolio. In other words, you don’t want to overload your portfolio with monthly dividend stocks. But they do allow exposure to a handful of niche sectors that add some income stability, so take a look and see if any of these monthly payers align with your investment style.

Data is as of Nov. 21. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Fund discount/premium to NAV and expense ratio provided by CEF Connect.

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Realty Income

7-11 store7-11 store
  • Market value: $40.1 billion
  • Dividend yield: 4.2%

Perhaps no stock in history has been more associated with monthly dividends than conservative triple-net retail REIT Realty Income (O, $70.91). The company went so far as to trademark the “The Monthly Dividend Company” as its official nickname.

Realty Income is a stock, of course, and its share price can be just as volatile as any other stock. But it’s still as close to a bond as you’re going to get in the stock market. It has stable recurring rental cash flows from its empire of more than 7,000 properties spread across roughly 650 tenants.

Realty Income focuses on high-traffic retail properties that are generally recession-proof and, perhaps more importantly, “Amazon.com-proof.” Perhaps no business is completely free of risk of competition from Amazon.com (AMZN) and other e-commerce titans, but Realty Income comes close. 

Its largest tenants include 7-Eleven, Walgreens Boots Alliance (WBA), FedEx (FDX) and Home Depot (HD), among others. The portfolio had relatively high exposure to gyms and movie theaters, which made the pandemic painful. But as the world gets closer to normal with every passing day, Realty Income’s COVID-19 risk gets reduced that much more.

At current prices, Realty Income yields about 4.2%. While that’s not a monster yield, remember that the 10-year Treasury yields only 1.6%. 

It’s not the raw yield we’re looking for here, but rather income consistency and growth. As of this writing, Realty Income has made 616 consecutive monthly dividend payments and has raised its dividend for 96 consecutive quarters – making it a proud member of the S&P 500 Dividend Aristocrats. Since going public in 1994, Realty Income has grown its dividend at a compound annual growth rate of 4.5%, well ahead of inflation.

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Stag Industrial

warehousewarehouse
  • Market value: $7.6 billion
  • Dividend yield: 3.4%

Realty Income was pretty darn close to “Amazon.com-proof.” But fellow monthly payer STAG Industrial (STAG, $42.77) proactively benefits from the rise of internet commerce.

STAG invests in logistics and light industrial properties. You know those gritty warehouse properties you might see near the airport with 18-wheelers constantly coming and going? That’s exactly the kind of property that STAG buys and holds.

It’s a foregone conclusion that e-commerce is growing by leaps and bounds, and STAG is positioned to profit from it. Approximately 40% of STAG’s portfolio handles e-commerce fulfillment or other activity, and Amazon.com is its largest tenant.

E-commerce spiked during the pandemic for obvious reasons. As stores have reopened, the effects of that spike have dissipated somewhat, but the trend here is clear. We’re making a larger percentage of our purchases online.

Yet there’s still plenty of room for growth. As crazy as this might sound, only about 15% of retail sales are made online, according to Statista. Furthermore, the logistical space is highly fragmented, and Stag’s management estimates the value of their market to be around $1 trillion. In other words, it’s unlikely STAG will be running out of opportunities any time soon.

STAG isn’t sexy. But it’s one of the best monthly dividend stocks to buy in 2022, with a long road of growth in front of it. And its 3.4% yield is competitive in this market.

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Gladstone Commercial

industrial parkindustrial park
  • Market value: $838.2 million
  • Dividend yield: 6.7%

For another gritty industrial play, consider the shares of Gladstone Commercial (GOOD, $22.49). Gladstone Commercial, like STAG, has a large portfolio of logistical and light industrial properties. Approximately 48% of its rental revenues come from industrial properties with another 48% coming from office properties. The remaining 4% is split between retail properties, at 3%, and medical offices at 1%.

It’s a diversified portfolio that has had little difficulty navigating the crazy volatility of the past few years. As of Sept. 30, 2021, the REIT had a portfolio of 127 properties spread across 27 states and leased to 109 distinct tenants. In management’s own words, “We have grown our portfolio 18% per year in a consistent, disciplined manner since our IPO in 2003. Our occupancy stands at 97.7% and has never dipped below 95.0%.”

That’s not a bad run.

Gladstone Commercial has also been one of the most consistent monthly dividend stocks, paying one uninterrupted since January 2005. GOOD currently yields an attractive 6.7%.

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EPR Properties

movie theater and tub of popcornmovie theater and tub of popcorn
  • Market value: $3.7 billion
  • Dividend yield: 6.1%

The COVID-19 pandemic was rough on a lot of landlords. But few were as uniquely battered as EPR Properties (EPR, $49.21). EPR owns a diverse and eclectic portfolio of movie theaters, amusement parks, ski parks, “eat and play” properties like Topgolf, and a host of others.

EPR specializes in experiences over things … which is just about the worst way to be positioned at a time when social distancing was the norm. Essentially every property EPR owned was closed for at least a time, and crowds still haven’t returned to pre-COVID levels across much of the portfolio.

But the key here is that the worst is long behind EPR Properties, and the more normal life becomes, the better the outlook for EPR’s tenants.

EPR was a consistent dividend payer and raiser pre-pandemic. But with its tenants facing an existential crisis, the REIT cut its dividend in 2020. With business conditions massively improving in 2021, EPR reinstated its monthly dividend in July, and the shares now yield an attractive 6.1%. If you believe in life after COVID, EPR is one of the best monthly dividend stocks to play it.

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LTC Properties

senior living propertysenior living property
  • Market value: $1.3 billion
  • Dividend yield: 6.7%

For one final “traditional” REIT, consider the shares of LTC Properties (LTC, $34.24).

LTC faces some short-term headwinds due to the lingering effects of the pandemic, but its longer-term outlook is bright. LTC is a REIT with a portfolio roughly split equally between senior living properties and skilled nursing facilities.

Needless to say, COVID-19 was hard on this sector. Nursing homes were particularly susceptible to outbreaks, and nursing home residents were at particularly high risk given their age. 

Senior living properties are different in that the tenants are generally younger and live independently without medical care. But a lot of would-be tenants were reluctant to move out of their homes and into a more densely populated building during a raging pandemic. And many still are.

These lingering effects won’t disappear tomorrow. But ultimately, senior living facilities offer an attractive, active lifestyle for many seniors, and that hasn’t fundamentally changed. And home care might be a viable option for many seniors in need of skilled nursing. Ultimately there comes a point where there are few alternatives to the care of a nursing home.

Importantly, the longer-term demographic trends here are all but unstoppable. The peak of the Baby Boomer generation are in their early-to-mid-60s today, far too young to need long-term care. But over the course of the next two decades, demand will continue to build as more and more boomers age into the proper age bracket for these services.

At 6.7%, LTC is one of the higher-yielding monthly dividend stocks on this list.

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AGNC Investment

couple going over financials with mortgage brokercouple going over financials with mortgage broker
  • Market value: $8.4 billion
  • Dividend yield: 9.0%

AGNC Investment (AGNC, $15.98) is a REIT, strictly speaking, but it’s very different from the likes of Realty Income, STAG or any of the others covered on this list of monthly dividend stocks. Rather than own properties, AGNC owns a portfolio of mortgage securities. This gives it the same tax benefits of a REIT – no federal income taxes so long as the company distributes at least 90% of its net income as dividends – but a very different return profile.

Mortgage REITs (mREITs) are designed to be income vehicles with capital gains not really much of a priority. As such, they tend to be monster yielders. Case in point: AGNC yields 9%.

Say “AGNC” out loud. It sounds a lot like “agency,” right?

There’s a reason for that. AGNC invests exclusively in agency mortgage-backed securities, meaning bonds and other securities issued by Fannie Mae, Freddie Mac, Ginnie Mae or the Federal Home Loan Banks. This makes it one of the safest plays in this space.

And here’s a nice kicker: AGNC almost always trades at a premium to book value, which makes sense. You and I lack the capacity to replicate what AGNC does in house and lack access to financing on the same terms. Those benefits have value, which show up in a premium share price. Yet today, AGNC trades at a 9% discount to book value. That’s a fantastic price for the stock in this space.

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Dynex Capital

little house on chartlittle house on chart
  • Market value: $640.6 million
  • Dividend yield: 8.9%

Along the same lines, let’s take a look at Dynex Capital (DX, $17.47). Like AGNC, Dynex is a mortgage REIT, though its portfolio is a little more diverse. Approximately 85% of its portfolio is invested in agency residential mortgage-backed securities – bonds made out of the mortgages of ordinary Americans – but it also has exposure to commercial mortgage-backed securities and a small allocation to non-agency securities.

It’s important to remember that the mortgage REIT sector was eviscerated by the COVID-19 bear market. When the world first went under lockdown, it wasn’t immediately clear that millions of Americans would be able to continue paying their mortgages, which led investors to sell first and ask questions later. In the bloodbath that followed, many mortgage REITs took catastrophic losses and some failed altogether.

Dynex is one of the survivors. And frankly, any mortgage REIT that could survive the upheaval of 2020 is one that can likely survive the apocalypse. Your risk of ruin should be very modest here.

Dynex trades at a slight discount to book value and sports a juicy 8.9% yield. We could see some volatility in the space if the Fed ever gets around to raising rates, but for now this looks like one of the best monthly dividend stocks to buy if you’re looking to really pick up some yield.

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Broadmark Realty

real estate contract with keys and penreal estate contract with keys and pen
  • Market value: $1.3 billion
  • Dividend yield: 8.6%

Broadmark Realty (BRMK, $9.75) isn’t a “mortgage REIT,” per se, as it doesn’t own mortgages or mortgage-backed securities. But it does something awfully similar. Broadmark manages a portfolio of deed of trust loans for the purpose of funding development or investment in real estate.

This is a little different than AGNC or Dynex. These mortgage REITs primarily trade standardized mortgage-backed securities. Broadmark instead deals with the less-liquid world of construction loans.

Still, BRMK runs a conservative book. The weighted average loan-to-value of its portfolio is a very modest 60%. In other words, Broadmark would lend no more than $60,000 for a property valued at $100,000. This gives the company a wide margin of error in the event of a default by a borrower.

At current prices, Broadmark yields an attractive 8.6%. The company initiated its monthly dividend in late 2019 and sailed through the pandemic with no major issues.  

9 of 12

Main Street Capital

person doing business on computerperson doing business on computer
  • Market value: $3.2 billion
  • Dividend yield: 5.5%

We know that the pandemic hit Main Street a lot harder than Wall Street. It is what it is.

But what about business development companies. This is where the proverbial Main Street means the proverbial Wall Street. BDCs provide debt and equity capital mostly to middle-market companies. These are entities that have gotten a little big to get financing from bank loans and retained earnings but aren’t quite big enough yet to warrant a stock or bond IPO. BDCs exist to bridge that gap.

The appropriately named Main Street Capital (MAIN, $46.61) is a best-in-class BDC based in Houston, Texas. The last two years were not particularly easy for Main Street’s portfolio companies, as many smaller firms were less able to navigate the lockdowns. But the company persevered, and its share price recently climbed above its pre-pandemic highs.

Main Street has a conservative monthly dividend model in that it pays a relatively modest monthly dividend, but then uses any excess earnings to issue special dividends twice per year. This keeps Main Street out of trouble and prevents it from suffering the embarrassment of a dividend cut in years where earnings might be temporarily depressed.

As far as monthly dividend stocks go, Main Street’s regular payout works out to a respectable 5.6%, and this does not include the special dividends.

10 of 12

Prospect Capital

man signing contractman signing contract
  • Market value: $3.5 billion
  • Dividend yield: 8.0%

For another high-yielding, monthly-paying BDC, consider the shares of Prospect Capital (PSEC, $8.97).

Like most BDCs, Prospect Capital provides debt and equity financing to middle-market companies. The company has been publicly traded since 2004, so it’s proven to be a survivor in what has been a wildly volatile two decades.

Prospect Capital is objectively cheap, as it trades at just 89% of book value. Book value itself can be somewhat subjective, of course. But the 11% gives us a good degree of wiggle room. It’s safe to say the company, even under conservative assumptions, is selling for less than the value of its underlying portfolio. It also yields a very healthy 8.0%.

As a general rule, insider buying is a good sign. When the management team is using their own money to buy shares, that shows a commitment to the company and an alignment of interests. Well, over the course of the past two years, the management team bought more than 29 million PSEC shares combined. These weren’t stock options or executive stock grants. These are shares that the insiders bought themselves in their brokerage accounts.

That’s commitment.

11 of 12

Ecofin Sustainable and Social Impact Term Fund

Ecofin logoEcofin logo
  • Assets under management: $269.7 million
  • Distribution Rate: 6.0%*
  • Discount/premium to NAV: -14.3%
  • Expense ratio: 2.28%**

There’s something to be said for orphan stocks. There are certain stocks or funds that simply don’t have a “normal” go-to buying clientele.

As a case in point, consider the Ecofin Sustainable and Social Impact Term Fund (TEAF, $15.00). This is a fund that straddles the divide between traditional energy infrastructure like pipelines and green energy projects like solar panels. It also invests in “social impact” sectors like education and senior living. Approximately 68% of the portfolio is dedicated to sustainable infrastructure with energy infrastructure and social impact investments making up 13% and 19%, respectively.

But this isn’t the only way the fund is eclectic. It’s also a unique mixture of public and private investments. 52% is invested in publicly traded stocks with the remaining 48% invested in private, non-traded companies.

Is it any wonder that Wall Street has no idea what to do with this thing?

This lack of obvious buying clientele helps to explain why the fund trades at a large discount to net asset value of 15%.

That’s okay. We can buy this orphan stock, enjoy its 6% yield, and wait for that discount to NAV to close. And close it will. The fund is scheduled to liquidate in about 10 years, meaning the assets will be sold off and cash will be distributed to investors. Buying and holding this position at a deep discount would seem like a no-brainer of a strategy. 

Learn more about TEAF at the Ecofin provider site.

* Distribution rate is an annualized reflection of the most recent payout and is a standard measure for CEFs. Distributions can be a combination of dividends, interest income, realized capital gains and return of capital.

** Includes 1.50% in management fees, 0.28% in other expenses and 0.50% in interest expenses.

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BlackRock Municipal 2030 Target Term

BlackRock logoBlackRock logo
  • Assets under management: $1.9 billion 
  • Distribution rate: 2.9%
  • Discount/premium to NAV: -4.6%
  • Expense ratio: 1.01%**

We’ll wrap this up with another term fund, the BlackRock Municipal 2030 Target Term Fund (BTT, $25.49).

As its name suggests, the fund is designed to be liquidated in 2030, roughly eight years from now. A lot can happen in eight years, of course. But buying a portfolio of safe municipal bonds trading at a more than 4% discount to book value would seem like a smart move.

The biggest selling point of muni bonds is, of course, the tax-free income. The bond interest isn’t subject to federal income taxes. And while city, state and local bonds aren’t “risk free” – only the U.S. government can make that claim – defaults and financial distress in this space is rare. So, you’re getting a safe, tax-free payout. That’s not too shabby.

As of Oct. 29, 2021, BTT’s portfolio was spread across 633 holdings with its largest holding accounting for about 3.4%.

BTT sports a dividend yield of 2.9%. That’s not “high yield” by any stretch of the imagination. But remember, the payout is tax free, and if you’re in the 37% tax bracket, your tax-equivalent yield is a much more palatable 4.6%.

Learn more about BTT at the BlackRock provider site.

** Includes 0.40% in management fees, 0.61% in interest and other expenses

Source: kiplinger.com

Virtual Asset Service Providers (VASP): What Are They?

We live in a world of service providers: health service providers, cloud service providers, internet service providers — the list goes on. And when we’re talking about cryptocurrency, virtual asset service providers (VASP) are inevitably part of the conversation.

Just what exactly is a VASP? And why should you know about them if you’re interested in cryptocurrency? This article will cover everything you need to know.

What are Virtual Assets (VAs)?

Most, if not all, cryptocurrencies and digital tokens are virtual assets. As outlined by the Financial Action Task Force (FATF) , a virtual asset fits the following criteria:

•   It’s a digital store or representation of value.

•   It can be digitally traded or transacted, or used for payment or investment.

•   It doesn’t include a digital representation of fiat currency or securities.

Virtual assets that can be traded or exchanged require a medium upon which those trades can be executed. That’s where VASPs come into play.

What is a Virtual Asset Service Provider (VASP)?

A VASP is a platform used to buy, sell, exchange, or otherwise interact with the cryptocurrency market. In other words, VASPs are crypto exchanges — or, at least the framework and theory behind a digital currency exchange.

The acronym “VASP” was coined by the FATF, which is an intergovernmental, international body that shores up standards and regulations — or promotes the use of them — in an effort to curb money laundering and stop the financing of terrorism.

Given that different types of virtual currency can and may be used for illicit or illegal activities, the FATF is stepping in to create some rules and frameworks for entities in the crypto space to operate within. Just as many cryptocurrency platforms must abide by existing regulations and compliance protocols, they may also be subject to additional guidelines and scrutiny from the FATF.

What Makes VASPs Unique?

In order for an organization to be classified as a VASP, it must tick certain boxes. In guidance issued in June 2019, the FATF asserted that a VASP is a business that conducts at least one of the following activities:

•   Acts as an exchange for virtual assets or fiat currencies

•   Acts as an exchange between one or more types of virtual assets

•   Acts as a medium of transfer for virtual assets

•   Provides safekeeping or administration of instruments that allow entities to control virtual assets

•   Participates in or provides financial services related to an offer or sale of a virtual asset

What Are Some VASP Types?

The FATF guidelines clearly describe crypto exchanges, as well as other participants in the crypto markets, including:

•   Mining pools

•   Investment vehicles

•   Digital wallet providers

•   Companies offering escrow services (transferring digital assets between two parties, ensuring a transaction goes down smoothly). And yes, companies providing these services may be classified as VASPs, after the FATF expanded and clarified its definition of a VASP in.

In an early 2021 update , the FATF also stated that decentralized exchanges, decentralized platforms, and DApps may also be considered VASPs, as well as platforms that facilitate peer-to-peer crypto transactions.

Recommended: What is a dApp?

What Businesses are Not VASPs?

There are numerous types of crypto-related entities that are not VASPs, including but not limited to:

•   Individual crypto miners

•   Individuals participating in a Bitcoin mining pool

•   Individual traders

•   Central banks

In short, if you’re just a regular Joe who’s trading or otherwise participating in the crypto markets or validating a blockchain network, you’re not a VASP.

Other Key Terms to Know When Talking About VASPs

In order to get a full picture of VASPs, it’s important to understand a couple of other terms: Digital Asset Entity (DAE), and Digital Asset Customer (DAC).

The distinction between these specific types of entities — which may exist in more than one type of classification (an entity could be both a DAE and a VASP, for instance) — can have an impact on how the entity is regulated.

What is a Digital Asset Entity (DAE)?

A Digital Asset Entity refers to some of the various businesses and organizations in the digital transaction space. For example, a VASP is a DAE. But the DAE umbrella includes many other types of organizations, such as gambling platforms, that may not necessarily be labeled as traditional financial institutions.

What is a Digital Asset Customer (DAC)?

A Digital Asset Customer is an entity that makes use of the services of a DAE. You or anyone else can be a DAC, as you may utilize a financial institution’s services to engage with the cryptocurrency markets.

What Are Some Examples of VASPs?

There are several different types of businesses or platforms that can fit the description of a VASP, or that may take some role in the transaction process. Those can include centralized and decentralized exchanges, mining pools, investment vehicles, and more.

Here are some examples of companies or platforms that fit the description of a VASP:

•   Centralized exchange: These exchanges that act as a third party between crypto buyers and sellers. Examples include Coinbase and Kraken .

•   Decentralized exchange: These exchanges eliminate the need for a third-party middleman to execute trades or transactions. Examples include Uniswap and Venus .

•   Escrow service: There are also a lot of companies that provide escrow services (many exchanges offer the service, too) for digital asset transactions, such as Escaroo or Bitrated .

•   Investment vehicles: Crypto-tied investment vehicles, which may take the form of securities like crypto ETFs, are becoming more common and mainstream. One example: BITO , a Bitcoin-linked ETF that hit stock exchanges in October 2021.

The Takeaway

VASPs are businesses or companies that facilitate the exchange of virtual assets. Virtual assets can include things like cryptocurrency (Bitcoin, for example), non-fungible tokens (NFTs), or utility tokens (like Filecoin).

Had your fill of crypto-related acronyms? Ready to start investing in crypto? With SoFi Invest®, investors can trade more than two dozen cryptocurrencies, including Chainlink, Bitcoin, Ethereum, Dogecoin, Solana, Bitcoin, Litecoin, Cardano, and Enjin Coin.

Find out how to get started today.

Photo credit: iStock/Yuri_Arcurs


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