7 Things to Do After College Besides Work

Numerous college students have a trajectory in mind for navigating life after college. For some, getting a job is their top goal. But, are there other things to do after college besides work?

Beyond looking for a traditional entry-level job, there are alternative choices for new grads—including internships, volunteering, grad school, spending time abroad, or serving in Americorps.

Naturally, the options available will differ depending on each person’s situation, as not all alternatives to work come with a paycheck attached.

Here’s a look at these seven things to do after college besides work.

1. Pursuing Internships

One popular alternative to working right after college is finding an internship. Generally, internships are temporary work opportunities, which are sometimes, but not always, paid.

Internships may give recent grads a chance to build up hands-on experience in a field or industry they believe they’re interested in working in full time. For some people, it could help determine whether the reality of working in a given sector meets their expectations.

Whatever grads learn during an internship, having on-the-job experience (even for those who opt to pursue a different career path) could make a job seeker stand out afterwards. Internships can help beef up a resume, especially for recent grads who don’t have much formal job experience.

A potential perk of internships is the chance to further grow your professional network—building relationships with more experienced workers in a particular department or job. Some interns may even be able to turn their short-term internship roles into a full-time position at the same company.

Starting out in an internship can be a great way for graduates to enter the workforce, “road testing” a specific job role or company.

2. Serving with AmeriCorps

Some graduates want to spend their time after college contributing to the greater good of American society. One possible option here is the Americorps program—supported by the US Federal Government.

So, what exactly is Americorps? Americorps is a national service program dedicated to improving lives and fostering civic engagement. There are three main programs that graduates can join in AmeriCorps: AmeriCorps NCCC, AmeriCorps State and National, and AmeriCorps Vista.

There’s a wide variety of options in AmeriCorps, when it comes to how you can serve. Graduates can work in emergency management, help fight poverty, or work in a classroom.

However graduates decide to serve through AmeriCorps, it may provide them with a rewarding professional experience and insights into a potential career.

Practically, Americorps members may also qualify for benefits such as student loan deferment, a living allowance, education awards (upon finishing their service), and skills training.

It may sound a bit dramatic, but AmeriCorps’ slogan is “Be the greater good.” Giving back to society could be a powerful way to spend some time after graduating—supporting organizations in need, while also establishing new professional connections.

3. Attending Grad School

When entering the workforce, graduates may encounter job postings with detailed employment requirements.

Some jobs require just a Bachelor’s degree, while others require a Master’s–think, for instance, of being a lawyer or medical doctor. Depending on their field of study and career goals, some students may opt to go right to graduate school after receiving their undergraduate degrees.

The number of jobs that expect graduate degrees is increasing in the US. Graduates might want to research their desired career fields and see if it’s common for people in these roles to need a master’s or terminal degree.

Some students may wish to take a break in between undergrad and grad school, while others find it easier to go straight through. This choice will vary from student to student, depending on the energy they have to continue school as well as their financial ability to attend graduate school.

Graduate school will be a commitment of time, energy and money. So, it’s advisable that students feel confident that a graduate degree is necessary for the line of work they’d like to end up in before they apply or enroll.

4. Volunteering for a Cause

Volunteering could be a great way for graduates to gain some extra skills before applying for a full-time job. Doing volunteer work may help graduates polish some essential soft skills, like interpersonal communication, interacting with clients or service recipients, and time management.

Another potential benefit to volunteering is the ability to network and forge new connections outside of college. The people-to-people connections made while volunteering could lead to mentorship and job offers.

Volunteering is something graduates can do after college besides work, while still fleshing out their resume or skills.

New grads may want to volunteer at an institution or organization that syncs with their values or, perhaps, pursue opportunities in sectors of the economy where they’d like to work later on (i.e., at a hospital).

On top of all these potential plus sides, volunteering just feels good. It makes people feel happier. And, after all of the stress that accompanies finishing up college, volunteering afterward could be the perfect way to recharge.

5. Serving Abroad

Similar to the last option, volunteering abroad can be attractive to some graduates. It may help grads gain similar skills they’d learn volunteering here at home, while also giving them the opportunity to learn how to interact with people from different cultures, try to learn a new language, and see new perspectives on solving problems.

Though it can be beneficial to the volunteers, volunteering abroad isn’t always as ethical as it seems. And, not all volunteering opportunities always benefit the local community.

It could take research to find organizations that are doing ethically responsible work abroad. One key thing to look for is organizations that put the locals first and have them directly involved in the work.

6. Taking a Gap Year

According to the Gap Year Association , a gap year is “a semester or year of experiential learning, typically taken after high school and prior to career or post-secondary education, in order to deepen one’s practical, professional, and personal awareness.”

While a gap year is generally taken after high school or after college, one common purpose of the gap year is to take the time to learn more about oneself and the world at large—which can be beneficial after graduating from college and trying to figure out what to do next.

Not only might a gap year help grads build insights into what they’d like to do with their later careers, it may also help them home in on a greater purpose in life or build connections that could lead to future job opportunities.

Graduates might want to spend a gap year doing a variety of activities—including:

•   trying out seasonal jobs
•   volunteering
•   interning
•   teaching or tutoring
•   traveling

A gap year can be whatever the graduate thinks will be most beneficial for them.

7. Traveling Before Working

Going on a trip after graduation is a popular choice for graduates that can afford to travel after college. Traveling can be expensive, so graduates may want to budget in advance (if they want to have this experience post-graduation.

On top of just being really fun, travel can have beneficial impacts for an individual’s stress levels and mental health. Research from Cornell University published in 2014 suggests that the anticipation of planning a trip might have the potential to increase happiness.

Traveling after graduation is a convenient time to start ticking locations off that bucket list, because graduates won’t be held back by a limited vacation time. Going abroad before working can give students more time and flexibility to travel as much as they’d like (and can afford to!).

With proper research, graduates can find more affordable ways to travel—such as a multi-country rail pass, etc. It doesn’t have to be all luxury all the time. Budget travel is possible especially when making conscious decisions, like staying in hostels and using public transportation.

If graduates are determined to travel before working, they can accomplish this by saving money and budgeting well.

Navigating Post Graduation Decisions

Whether a recent grad opt to start their careers off right away or to pursue one of the above-mentioned things to do after college besides work, student loans are something that millions of university students have taken out.

After graduating (or if you’ve dropped below half-time enrollment or left school), the reality of paying back student loans sets in. The exact moment that grads will have to begin paying off their student loans will vary by the type of loan.

For federal loans, there are a couple of different times that repayment begins. Students who took out a Direct Subsidized, Direct Unsubsidized, or Federal Family Education Loan, will all have a six month grace period before they’re required to make payments. Students who took out a Perkins loan will have a nine month grace period.

When it comes to the PLUS loan, it depends on the type of student that’s taken one out. Undergraduates will be required to start repayment as soon as the loan is paid out. Graduate and professional students with PLUS loans will be on automatic deferment while they’re in school and up to six months after graduating.

Some graduates opt to refinance their student loans. What does that mean? Well, refinancing student loans is when a lender pays off the existing loan with another loan that has a new interest rate. Refinancing can potentially lower monthly loan repayments or reduce the amount spent on interest over the life of the loan.

Both US federal and private student loans can be refinanced, but when federal student loans are refinanced by a private lender, the borrower forfeits guaranteed federal benefits—including loan forgiveness, deferment and forbearance, and income-driven repayment options.

Refinancing student loans may reduce money paid to interest. For graduates who have secured well-paying jobs and have improved their credit score since taking out their student loan, refinancing could come with a competitive interest rate and different repayment terms.

Graduating from college means officially entering the realm of adulthood, but that transition can take many forms. There are various financial tips that recent graduates may opt to look into.

Thinking about refinancing your student loans? With SoFi, you could get prequalified in just two minutes.



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

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The Ultimate College Senior Checklist

Earning a college degree is no easy feat. Think countless late-night cram sessions, tedious loan applications, heavy textbooks to haul around. For some college seniors, June cannot come fast enough, and it’s understandable why senioritis kicks in. That said, there’s still a lot of important work to do before crossing that graduation stage.

From jumping through the logistical hoops of making it to graduation day to launching a job search and addressing student loan payments, there are a lot of important pre-graduation to-do’s that may require prompt attention.

Here’s a comprehensive checklist that will help college seniors be prepared to graduate and enter the working world.

Dotting I’s and Crossing T’s

Ideally, before senior year begins (or sooner for those planning to graduate early), students should meet with their guidance counselor to make sure they have all of their ducks in a row in order to graduate. Switching majors, studying abroad, or misunderstanding degree requirements can lead to confusion about which classes must be taken to graduate.

Before setting a class schedule for the year, it can’t hurt to double-check with a college counselor that all requirements are being met. Some schools even have a certain amount of community service or chapel hours required in order to graduate, so again, it’s smart to confirm that everything is moving along as it should be.

Preparing for the graduation ceremony needs to be done in advance. Colleges and universities often require students to apply to graduate and register their planned attendance at the ceremony well ahead of the actual day.

To streamline the process, many schools have grad fairs where students can pick up their commencement tickets; buy a cap and gown, class rings and commencement announcements; and ask questions about the logistics of graduation day.

Transcripts can come in handy when applying for jobs and graduate school programs, so picking up a few copies while still on campus can save time down the road. And don’t forget to turn in those library books! No one will want to trek back to campus after graduation to pay late fees.

Getting a Jumpstart on a Job Search

It’s no secret that college graduates flood the job market each June, so getting ahead of the pack can make job searching a little easier. Applying for jobs earlier in the spring can lessen the competition and give seniors confidence that they have a job lined up when they graduate.

If launching a full-blown job search during school isn’t possible, college seniors can at least take steps toward preparing for the job search.

Stop by the career center and see what resources it can provide. Schools have a career center for a reason! Most are ready to help students prepare their resumes and perfect their cover letters, and they typically have job postings from companies looking to hire recent graduates.

Some career centers may offer mock interviews so students can hone those skills, or they may provide support when issues arise during a job search. Popping by between classes to see what services are offered will only take a few minutes.

At the very least, college seniors can poke around online job boards and research local companies to see what opportunities are out there.

Making Connections

As a student, it may feel like having a professional network is unattainable, but many build one while in school without realizing it. One easy way to get a head start on a job search, without doing too much work during a hectic final year of school, is to focus on building relationships and requesting references.

Professors, employers, and intern supervisors can all provide references that can strengthen a job search. Finding that first job out of college can be tricky, when resumes are on the shorter side, so a handful of strong references can make all the difference.

While requesting references, college seniors should tell their connections what career path they’re hoping to pursue. One never knows where the next opportunity might come from.

Paying Back Student Loans

Preparing to navigate life after college can be overwhelming, especially when it comes to finances. No one wants to think about student loan payments, but it can be helpful to start making repayment plans before graduation day.

Try beginning the planning process by simply looking up the current balance for each student loan held, including both federal and private loans. Then note when the grace period ends for each loan and when the lender expects payment. It’s important to plan to make loan payments on time each month, as that can boost a credit score.

Lenders usually provide repayment information during the grace period, including repayment options. Many federal student loans qualify for a minimum of one income-driven or income-based repayment plan.

Federal student loans may qualify for a variety of repayment plans, such as the Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plans, Revised Pay As You Earn Repayment Plan, Income-Based Repayment Plan, Income-Contingent Repayment Plan, and Income-Sensitive Repayment Plan. It is important to carefully research each payment plan before choosing one.

For private student loan repayment, it is best to speak directly with the loan originator about repayment options. Many private student loans require payments while the borrower is still in school, but some offer deferred repayment. After the grace period, the borrower will have to make principal and interest payments. Some lenders offer repayment programs with budget flexibility.

Whether students or their parents chose to take out federal or private student loans (or both), reviewing all possible repayment plan options can provide choices. And who doesn’t like choices?

One Loan, One Monthly Payment

Some graduates may want to consider refinancing or consolidating their student debt.

Borrowers who have federal student loans may qualify for a Direct Consolidation Loan after they graduate, leave school, or drop below half-time enrollment.

Consolidating multiple federal loans into one allows borrowers to make just one loan payment each month. In some cases, the repayment schedule may be extended, resulting in lower payments, after consolidating (but increasing the period of time to repay loans usually means making more payments and paying more total interest).

Refinancing allows the borrower to convert multiple loans—federal and/or private—into one new private loan with a new interest rate, repayment term, and monthly payment. The goal is a lower interest rate. (It’s worth noting that refinancing a federal loan into a private loan can lead to losing benefits only available through federal lenders, such as public service forgiveness and economic hardship programs.)

Refinancing can be a good solution for working graduates who have high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans.

If that sounds like a good fit, SoFi offers student loan refinancing with zero origination fees or prepayment penalties. Getting prequalified online is quick and easy.

Learn more about SoFi Student Loan Refinancing options and benefits.



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

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.
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.

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What is a Financial Coach?

If you need help getting your finances organized or setting up a plan to effectively work towards your financial goals, you might benefit from the help of a financial coach.

A financial coach works with clients to help them better manage their money and to develop healthy, long-lasting, finance-related habits.

These professionals can help clients pay off debt, create an emergency savings fund, stabilize their finances, and develop an overall plan to reach their financial goals.

Unlike financial advisors, financial coaches spend more time helping their clients understand the fundamentals of finances, rather than recommending investments and managing their investment portfolios.

Read on to learn more about financial coaches, what they do, how much they cost, and how to find one.

What Does a Financial Coach Do?

According to the Consumer Financial Protection Bureau , a financial coach is a trained professional who collaborates with and guides their clients to reach their financial goals, including:

•   Better money management skills
•   Improved savings, debt levels, and credit scores
•   More financial confidence
•   Increased goal attainment

Financial coaches typically individualize their approach based on the needs of each client, with the goal of helping them make progress in the area of their financial life that they identify as most important.

A financial coach can help you reach your financial goals by teaching you money management skills, such as how to build savings, avoid overspending, or pay down debt.

Financial coaches also often assist their clients with the behavioral and emotional components of managing money. A coach can help you uncover what drives your financial decisions, so you can create a healthier attitude that leads to better money habits.

Coaches often work with their clients over the period of several weeks to several months, and may meet with weekly or biweekly to provide advice and check on progress.

The full coaching process typically consists of a series of steps that may include: building awareness around spending habits (usually by tracking daily, weekly and monthly spending), defining the client’s financial goals, and developing a budget and a financial plan to achieve those goals.

Accountability is typically built into the process—so, rather than managing a client’s person’s finances, a financial coach gives clients the tools to help make informed and responsible financial decisions.

What a financial coach can’t do: offer investment recommendations or help clients manage their investment portfolios.

While coaches can provide basic advice on the concept of investing, they are not licensed to provide financial advice like financial advisors are, and therefore cannot provide specific product recommendations.

How Much Does a Financial Coach Cost?

Unlike financial advisors, who typically charge their fees based on a percentage of the assets under management, financial coaches generally work on a fee-only basis

Some may charge a flat fee based on how long you plan to work together (such as three or six months), while others might charge per session.

Coaching rates typically run between $100 to $300 an hour. But because of the wide range of fees charged by coaches, it’s a good idea to ask about costs upfront.

How do I Find a Financial Coach?

While there is no required coursework or license, and there are no certifications to become a financial coach, there are training programs run by the Association for Financial Counseling and Planning Education (AFCPE) .

You can begin looking for financial coaches in your area through the AFCPE website. It’s also a good idea to ask for personal referrals from friends and family, as well as other financial professionals you know or work with (such as an accountant or financial advisor).

Before selecting a coach, it can help to consider specifically what you are looking for in a financial mentor. This can involve thinking about your own financial strengths and weaknesses, and what your goals are.

Are you, for example, struggling to save enough money for a down payment on a house? Or, do your credit card balances keep going up? Identifying your needs can help you suss out the best coach for your situation.

Once you have a list of financial coaches, you may want to reach out to each candidate to get a sense of their personality, methods, and coaching style.

Some questions to consider asking:

•   How long have you been a coach?
•   What’s your business specialty?
•   How long do you typically work with clients?
•   What’s your plan to help me reach my goals?
•   What is your availability?
•   What are your fees?

The Takeaway

Maybe you’ve tried to make a budget, but just can’t stick to it. Or, perhaps you’ve run up so much debt between credit cards and loans that you don’t know the best way to pay it off.

A financial coach can help you structure your budget, build a financial plan, and hold you accountable throughout the process.

Financial coaches can also help clients understand and work through deep-seated emotions around money that may be preventing them from reaching their financial goals.

If you’re looking to better manage your money or simplify your finances on your own (or before meeting with a financial coach), SoFi Money® can help.

SoFi Money is a cash management fund that allows you to earn, spend, and save–all in one place.

Using the SoFi app, you can easily track your spending and saving, and even create separate savings “vaults” for specific financial goals.

Learn how SoFi Money can help you manage your finances today.



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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.

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Understanding Seller Concessions

Buying a new home requires managing a lot of moving parts, from mortgage preapproval to closing. Even after an offer is accepted, buyers and sellers are still at the negotiating table. If closing costs or surprise expenses become too much for the buyer, a seller concession could help seal the deal.

Although seller concessions can work to a buyer’s advantage, they are neither a guaranteed outcome nor a one-size-fits-all solution for every real estate transaction.

To determine if seller concessions are the right move from a buyer’s perspective, here are some key things to know, including what costs they can cover and when to consider asking for them.

Recommended: How Much Are Closing Costs on a New Home?

What Are Seller Concessions?

Seller concessions represent a seller’s contribution toward the buyer’s closing costs, which include certain prepaid expenses and discount points. A seller concession is not the equivalent of a price reduction; nor is it received as cash or a loan discount.

Closing costs usually range from 2% to 5% of a home’s purchase price. When combined with a down payment, the upfront expense of buying a home can be burdensome, especially for first-time homebuyers.

Buyers can ask for concessions on the initial purchase offer or later if the home inspection reveals problems that require repairs.

Although this can be a helpful tool to negotiate a house price, there are rules for eligible costs and limits to how much buyers can ask for.

Recommended: Home Buyer’s Guide

What Costs Can Seller Concessions Cover?

A buyer’s closing costs can vary case by case. Generally, buyers incur fees related to the mortgage loan and other expenses to complete the real estate transaction.

There are also types of prepaid expenses and home repairs that can be requested as a seller concession.

Some common examples of eligible costs include the following:

•   Property taxes: If the sellers have paid their taxes for the year, the buyer may be required to reimburse the sellers for their prorated share.

•   Appraisal fees: Determining the estimated home value may be required by a lender to obtain a mortgage. Appraisal costs can vary by geography and home size but generally run between $300 and $500.

•   Loan origination fees: Money paid to a lender to process a mortgage, origination fees, can be bundled into seller concessions.

•   Homeowners insurance costs: Prepaid components of closing costs like homeowners insurance premiums can be included in seller concessions.

•   Title insurance costs: A title insurance company will search if there are any liens or claims against the property. This verification, which averages $1,000 but varies widely, protects both the homeowner and lender.

•   Funding fees: One-time funding fees for federally guaranteed mortgages, such as FHA and VA loans, can be paid through seller contributions. Rates vary based on down payment and loan type.

•   Attorney fees: Many states require a lawyer to handle real estate closings. Associated fees can run $500 to $1,500, based on location.

•   Recording fees: Some local governments may charge a fee to document the purchase of a home.

•   HOA fees: If a home is in a neighborhood with a homeowners association, there will likely be monthly dues to pay for maintenance and services. A portion of these fees may be covered by the seller.

•   Discount points: Buyers may pay an upfront fee, known as discount points, to lower the interest rate they pay over the life of the mortgage loan. (The cost of one point is 1% of the loan amount.)

•   Home repairs: If any issues emerge during a home inspection, the repair costs can be requested as a seller concession.

Closing costs can also be influenced by the mortgage lender. When shopping for a mortgage, evaluating expected fees and closing costs is a useful way to compare lenders. Factoring in these costs early on can give buyers a more accurate idea of what they can afford and better inform their negotiations with a seller.

Recommended: Home Improvement Calculator

Rules and Limits for Seller Concessions

Determining how much to ask for in seller concessions isn’t just about negotiating power. For starters, the seller’s contributions can’t exceed the buyer’s closing costs.

Other factors can affect the allowable amount of seller concessions, including the type of mortgage loan and whether the home will serve as a primary residence, vacation home, or investment property.

Here’s a breakdown of how concessions work for common types of loans.

Conventional Loans

Guidance on seller concessions for conventional loans is set by Fannie Mae and Freddie Mac. These federally sponsored enterprises buy and guarantee mortgages issued through lenders in the secondary mortgage market.

With conventional loans, the limit on seller concessions is calculated as a percentage of the home sale price based on the down payment and occupancy type.

If it’s an investment property, buyers can only request up to 2% of the sale price in seller concessions.

For a primary or secondary residence, seller concessions can add up to the following percentages of the home sale price:

•   Up to 3% when the down payment is less than 10%
•   Up to 6% when the down payment is 10-25%
•   Up to 9% when the down payment is greater than 25%

FHA Loans

FHA loans, which are insured by the Federal Housing Administration, are a popular financing choice because down payments may be as low as 3.5%, depending on a borrower’s credit score.

For this type of mortgage, seller concessions are limited to 6% of the home sale price.

VA Loans

Active service members, veterans, and surviving spouses may qualify for a mortgage loan guaranteed by the Department of Veterans Affairs. For buyers with this type of mortgage, seller concessions are capped at 4% of the home sale price.

VA loans also dictate what types of costs may qualify as a seller concession. Some eligible examples: paying property taxes and VA loan fees or gifting home furnishings, such as a television.

Seller Concession Advantages

There are a few key ways seller concessions can benefit a homebuyer. For starters, they can reduce the amount paid out of pocket for closing costs. This can make the upfront costs of a home purchase more affordable and avoid depleting savings.

Reducing closing costs could help a buyer make a higher offer on a home, too. If it’s a seller’s market, this could be an option to be a more competitive buyer.

Buyers planning significant home remodeling may want to request seller concessions to keep more cash on hand for their projects.

Seller Concession Disadvantages

Seller concessions can also come with some drawbacks. If sellers are looking for a quick deal, they may view concessions as time-consuming and decline an offer.

When sellers agree to contribute to a buyer’s closing costs, the purchase price can go up accordingly. The deal could go awry if the home is appraised at a value less than the agreed-upon sale price. Unless the seller agrees to lower the asking price to align with the appraised value, the buyer may have to increase their down payment to qualify for their original financing.

Another potential downside is that buyers could ultimately pay more over the loan’s term if they receive seller concessions than they would otherwise. If a buyer offers, say, $350,000 and requests $3,000 in concessions, the seller may counteroffer with a purchase price of $353,000, with $3,000 in concessions.

The Takeaway

Seller concessions can make a home purchase more affordable for buyers by reducing closing costs and expenses, but whether it’s a buyer’s or seller’s market will affect a buyer’s potential to negotiate. A real estate agent can offer guidance on asking for seller concessions.

The vast majority of homebuyers finance their purchase. So for most buyers, finding the right mortgage is an important step in landing their dream home.

SoFi offers home loans with competitive rates and down payments as low as 5%. And prequalifying takes just a few minutes.

Buying a home? Find out how much you could qualify for with SoFi.



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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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

Is It Worth Doing a Laundry Room Remodel?

Laundry rooms are the workhorses of the home. They’re also often sandwiched into small spaces, or in areas of the home that aren’t all that convenient, causing some homeowners to consider a remodel.

Whether you should undertake a laundry room remodel depends on what you plan to use it for, its size, the kinds of appliances you need, and any special décor touches you’d like to add.

A remodel might be worth it if it creates a perky and efficient space or creates a room that has a dual function.

Before Starting Your Laundry Room Remodel

If you’ve been thinking about giving your laundry room a clean start, you’ve probably got a lot of ideas and inspiration swimming in your head.

Before embarking on your project, you want to really think through what you’re hoping to accomplish by asking yourself the following questions.

What’s the Scope of the Project?

Some remodels involve small improvements like new paint and cabinetry, while others call for tearing through walls, moving plumbing, or even relocating your laundry room to another area of the home.

Appliances should also be addressed. Will you need a new washer and dryer, or do you plan on using the ones you currently have?

What Do You Plan to Use Your Laundry Room For?

While most laundry rooms are used solely for handling laundry, others also act as mudrooms and storage for cleaning supplies, sports gear, and bulk shopping items like bottled water, paper products, and even pet food.

What your laundry room is used for will affect the laundry room remodel ideas available to you.

How Often and When Do You Do Laundry?

If you have a large family and do frequent washing and drying, that will influence the design of your new laundry room. You may need ample counter space for folding, for example, a fold-down ironing board, or bins to hold each person’s clean clothing.

If you tend to do the laundry during the day, you may consider adding a window. Are you more of a nighttime launderer? Under-cabinet lighting may help weary eyes.

What Are Your Must-Haves?

Some homeowners struggle with disorganization and need bins and baskets to keep things tidy. Others are looking to add features like a sink, or build out their laundry room to accommodate more counter space.

Whatever your desire, it’s a good idea to list what you can’t live without so you can build them into your budget.

How Much Can You Spend?

The scope of your project will dictate your budget and how you plan to pay for your remodel.

Some homeowners, seeing a laundry room remodel as a way to increase their home’s value, may opt to borrow to pay for the project. Others may choose to keep things scaled down so they don’t spend beyond what they have on hand.

Recommended: Home Improvement Cost Calculator

Laundry Room Remodel Ideas

Now that you’ve got the foundation of your project mapped out, it’s time to envision how your laundry room remodel will take shape. That will depend on the following factors.

If You Have Limited Space

Small laundry rooms can still pack a punch, thanks to creative ways to maximize your available space. You can do that by tucking laundry baskets under counters, adding a rod under cabinets to hang clothes, and using wall space for hooks to hang laundry bags or baskets that can hold clothespins, detergent, and dryer sheets.

Don’t forget that laundry rooms don’t need to be true rooms; if you’re short on space, consider tucking your washer and dryer into an unused closet and installing a farmhouse door for easy access.

Depending on its size, you can then use the prior laundry room as a guest room, home office, nursery, or kids’ playroom.

Recommended: Closet Remodel Guide

If You’ll Be Using the Room for More Than Cleaning Clothes

The list of ways to use a laundry room is endless, and will largely depend on each household’s needs.

•   Got a large dog? You might consider installing a pet-washing station, especially if you are already planning on undertaking plumbing work.
•   Need a quiet place to conduct conference calls at home? A fold-down workstation meets both needs.
•   Larger families may tuck an additional fridge in the laundry room.
•   People who love to entertain may find storage for plates and glassware in the laundry room.

Your Budget

A laundry room remodel can quickly add up if new plumbing, cabinetry, and construction work are involved.

If you find yourself running beyond what you’re willing to spend, think of creative ways to get the laundry room you want without breaking the bank.

That might entail painting cabinets instead of replacing them, using open shelving instead of custom built-ins, and opting for durable paint in place of tiled backsplashes.

Recommended: Easy Home Improvement Projects for Beginners

DIY vs. Calling In an Expert

Many homeowners are comfortable with do-it-yourself projects. In a laundry room remodel, these might include painting, replacing cabinetry, and installing shelving and hanging rods.

Other projects—moving water lines, installing new sinks or drywall, and demolition— require hiring a professional. Mapping out which projects you will need to outsource will affect your budget and may also affect the scope of your project.

Paying for It

Smaller laundry room remodels, or those that require just a new coat of paint, a new washer, and dryer, or a retrofitting of shelving to maximize storage space can be done with fairly little outlay, especially if you do it yourself or have a friend or family member lend a hand.

Larger ones, or those that call for extensive demolition, architecture work, or the services of a general contractor, will be more expensive, of course.

The size of the project—and therefore how much money you’ll need—matters, as does your timeline for paying back any loan.

Here are some options:

•   Cash
•   A home improvement loan, aka personal loan. Your home isn’t used as collateral to secure the loan.
•   A home equity loan or a revolving home equity line of credit, which do use your home as collateral.
•   Cash-out refinance, which replaces your mortgage with a new loan for more than you owe. The difference goes to you in cash, for home improvements or anything else.

The Takeaway

Laundry room ideas range from DIY tweaks to soap-operatic overhauls. A laundry room remodel may increase the value of your home or simply make life a little easier. Start by listing what you want to achieve and how you’re going to pay for it.

SoFi offers a range of ways to pay for home improvements like a more inviting space in which to do laundry or a room that does double duty.

If you need a home loan (with as little as 5% down), an investment property loan, a cash-out refi, or an unsecured personal loan, SoFi offers all of them at competitive rates.

Plus you become a SoFi member, which comes with a laundry list of perks.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (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 Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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.

SOHL21009

Source: sofi.com

7 Signs it’s Time for a Mortgage Refinance

Maybe you’ve considered refinancing your mortgage, but you’ve only dipped your toe in the exploratory waters. Is now the right time? Will rates stay low? Could they go lower?

It can be hard to know when to take the plunge.

Whether you purchased a home recently or bought a home years ago, you probably noticed that average mortgage rates continued to hover near historic lows in early 2021.

But as with any financial rate or data point, it is hard—if not impossible—to time the market or predict the future.

Homeowners often look to refinance when it could benefit them in some way, like with a lower monthly payment. Refinancing is the process of paying off a mortgage loan with new financing, ideally at a lower rate or with some other, more favorable, set of terms.

Here are seven signs that locking in a lower mortgage rate now could be the right move.

1. You Can Break Even Fairly Quickly

Refinancing a mortgage costs money—generally 2% to 5% of the principal amount. So if you are refinancing to save money, you’ll likely want to run numbers to be sure the math checks out.

To calculate the break-even point on a mortgage refinance—when savings exceed costs—do this:

1. Determine your monthly savings by subtracting your projected new monthly mortgage payment from your current monthly payment.
2. Find your tax rate (e.g., 22%) and subtract it from 1 for your after-tax rate.
3. Multiply monthly savings by the after-tax rate. This is your after-tax savings.
4. Take the total fees and closing costs of the new mortgage loan and divide that number by your monthly after-tax savings. This yields the number of months it will take to recover the costs of refinancing—or the break-even point.

For example, if you’re refinancing a $300,000, 30-year mortgage that has a fixed 6% rate to a new 4% rate, refinancing will reduce your original monthly payment from $1,799 to $1,432—a monthly savings of $367. Assuming a tax rate of 22%, the after-tax rate would be 0.78, which results in an after-tax savings of $286.26. If you have $12,000 in refinancing costs, it will take nearly 42 months to recoup the costs of refinancing ($12,000 / $286.26 = 41.9).

The length of time you intend to own the home can affect whether refinancing is worth the expense. You’ll want to run the calculations to make sure that you can break even on a timeline that works for you.

The rate and fees usually work in tandem. The lower the rate, the higher the cost. (“Buying down the rate” means paying an extra fee in the form of discount points. One point costs 1% of the mortgage amount.)

If you’re shopping, each mortgage lender you apply with is required to give you a loan estimate within three days of your application so you can compare terms and annual percentage rates. The APR, which includes the interest rate, points, and lender fees, reflects the true cost of borrowing.

2. You Can Reduce the Rate by at Least 0.5%

You may have heard conflicting ideas about when you should consider refinancing. The reason is that there is no one-size-fits-all answer; individual loan scenarios and goals differ.

One commonly espoused rule of thumb is that the home refinance rate should be a minimum of two percentage points lower than an existing mortgage’s rate. What may work for each individual depends on things like loan amount, interest rate, fees, and more.

However, the combination of larger mortgages and lenders offering lower closing cost options has changed that. For a large mortgage, even a change of 0.5% could result in significant savings, especially if the homeowner can avoid or minimize lender fees.

Maybe rates are low enough that you choose to take a higher rate with a no closing cost refi.

3. You Can Afford to Refinance to a 15-Year Mortgage

When you refinance a loan, you are getting an entirely new loan with new terms. Depending on your eligibility, it is possible to adjust aspects of your loan beyond the interest rate, such as the loan’s term or the type of loan (fixed vs. adjustable).

If you’re looking to save major money over the duration of your mortgage loan, you may want to consider a shorter term, such as 15 years. Shortening the term of your mortgage from 30 years to 15 years will likely cost you more monthly, but it could save thousands in interest over the life of the loan.

For example, a 30-year $1 million loan at a 7.5% interest rate would carry a monthly payment of approximately $6,992 and a total cost of around $1,517,172 over the life of the loan.

Refinancing to a 15-year mortgage with a 5.5% rate would result in a higher monthly payment, about $8,171, but the shorter maturity would result in total loan interest of around $470,750—an interest savings over the life of the loan of about $1,046,422 vs. the 30-year term.

One more perk: Lenders often charge a lower interest rate for a 15-year mortgage than for a 30-year home loan.

4. You’re Interested in Securing a Fixed Rate

Borrowers may take out an adjustable-rate mortgage because they may get a lower rate (at least initially) than on a fixed-rate mortgage for the same property. But just as the name states, the rate will adjust with market fluctuations.

Typically, ARMs for second mortgages such as home equity lines of credit are “pegged” to the prime rate, which generally moves in lockstep with the federal funds rate. First mortgage ARM rates are tied more closely to mortgage-backed securities or the 10-year Treasury note.

Even though ARM loans come with yearly and lifetime interest rate caps, if you believe that interest rates will move higher in the future and you plan to keep your loan for a while, you may want to consider a more stable fixed rate.

Refinancing to a fixed mortgage can protect your loan against rate increases in the future and provide the security of knowing how much you’ll be paying on your mortgage each month—no matter what the markets do.

5. You’re Considering an ARM

You may also be considering a move in the other direction—switching from a fixed-rate mortgage to an adjustable-rate mortgage. This could potentially make sense for someone with a 30-year fixed loan but who plans to leave their home much sooner.

For example, you could get a 7/1 ARM with a potential lower interest rate for the first seven years, and then the rate may change once a year, when up for review, as the market changes. If you plan to move on before higher rate changes, you could potentially save money.

It’s best to know exactly when the rate and payment will adjust, and how high. And it’s important to understand the loan’s margin, index, yearly and lifetime rate caps, and payments.

6. You’re Considering a Strategic Cash-Out Refi

In addition to updating the rate and terms of a mortgage loan, it may be possible to do a cash-out refinance, when you take out a new loan at a higher loan amount by tapping into available equity.

The lender will provide you with cash and in exchange will increase your loan amount, which will likely result in a higher monthly payment.

If you go this route, realize that you’re taking on more debt and using the equity you have built up in your home. Market value changes may result in a loss of home value and equity. Also, a mortgage loan is secured by your home, which means that the lender can seize the property if you are unable to make mortgage payments.

A cash-out refi may make sense if you use it as a tool to pay less interest on your overall debt load. Using the cash from the refinance to pay off debts carrying higher rates, like credit cards, could be a good move.

Depending on loan terms and other factors, a lower rate may allow for overall faster repayment of your other debts.

7. Your Financial Situation Has Improved

When putting together an offer for a mortgage, a lender will often take multiple aspects into consideration. One of those is prevailing interest rates. Another is your financial situation, like your credit history, credit score, income, and debt-to-income ratio.

The better your personal financial situation in the eyes of the lender, the more creditworthy you are—and the better the terms your loan offer could be.

Therefore, it may be possible to refinance your mortgage loan into better terms if your financial situation has improved since you took out the original loan, especially when paired with relatively low market rates.

The Takeaway

Is it time to refinance? Is the prospect of a lower interest rate or different loan term exciting? Locking in a lower rate now could help you achieve your long-term goals by freeing up cash for other stuff, like retirement or a big vacation.

Sometimes folks spend so much time sweating the small purchases (like the dang lattes) when really, it’s the big money moves—like refinancing—that can make the biggest difference over time.

If you’re interested in refinancing, you may want to look for a lender that’s offering competitive rates and great customer service.

That’s SoFi.

SoFi offers a regular mortgage refinance and a cash-out refinance.

Check your rate in two minutes.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (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 Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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

How to Hire An Attorney

Maybe you’re buying or selling real estate, trying to resolve a dispute with a neighbor, starting a business, or going through a divorce. When life gets legal, you’ll likely need access to a good attorney.

But there’s a lot to think about when hiring the services of a lawyer, especially if you’ve never retained one before.

While personal referrals can be a great place to start, it’s also important to find an attorney who has experience that is relevant to your legal situation.

Fortunately, there are a number of resources and websites that can help you hone in on a reputable lawyer that fits your needs, as well as your budget.

Knowing the right questions to ask before you sign on the dotted line is also key to getting the right fit.

Here are some beginner tips and tricks to help guide you through the process of hiring a lawyer.

Knowing Where to Look

Most lawyers concentrate in a few legal specialties (such as family law or personal injury law), so it’s important to find a lawyer who not only has a good reputation, but also has expertise and experience in the practice area for which you require their services.

Below are some simple ways to begin your search:

Word of Mouth Referrals

One of the best ways to find a lawyer is through word of mouth. Ideally, your family and friends may have worked with someone that they can refer you to. Better still if their situation is similar to yours.

But even if a recommended lawyer doesn’t have the right expertise, you may still want to contact that attorney to see if they can recommend someone who does.

You might consider asking your accountant for a recommendation as well, since these two types of professionals often refer clients back and forth.

Local Bar Associations

Your local and state bar associations can also be a great resource for finding a lawyer in your area.

County and city bar associations often offer lawyer referral services to the public (though they don’t necessarily screen for qualifications).

The American Bar Association also maintains databases to help people looking for legal help.

Your Employer

Many companies offer legal services plans for their employees, so it’s worth checking with your human resources department to see if yours does.

You’ll want to understand the details, however, before you proceed. Some programs cover only advice and consultation with a lawyer, while others may be more comprehensive, and include not only advice and consultation, but also document preparation and court representation.

Legal Aid or Pro Bono Help

Those who need a lawyer, but can’t afford one, may be able to get free or low-cost help from the Legal Aid Society. You can often find out who to contact by searching online and typing “Legal Aid [your county or state]” in your computer’s search bar.

Consider reaching out to local accredited law schools as well. Many schools run pro bono legal clinics to enable law students to get real world experience in different areas of law.

Online Resources

There are a number of online consumer legal sites, such as Nolo and Avvo , that offer a way to connect with local lawyers based on your location and the type of legal case you have.

Nolo, for example, offers a lawyer directory that includes profiles of attorneys that clue you in on their experience, education, fees and more. (Nolo states that all listed attorneys have a valid license and are in good standing with their bar association).

Martinedale-Hubbell also offers an online lawyer locator , which contains a database of over one million lawyers and law firms worldwide. To find a lawyer, you can search by practice area or geographic location.

Doing Some Detective Work

Once you’ve assembled a short list, it’s a good idea to do a little bit of sleuthing before you pick up the phone.

This includes checking each attorney’s website–does it look cheap or professional? Is there a lot of style but little substance?

By perusing the site, you can also get details about the lawyer or firm, such as areas of expertise, significant cases, credentials, awards, as well as the size of the firm–and, size can actually be an important consideration.

A solo practitioner may not have much bandwidth if they have a heavy caseload to give you a lot of hand holding if that matters to you. However, their prices may be more budget-friendly than a mid-sized or larger firm.

While larger firms may be more expensive, they may have more resources and expertise that makes them the better option.

You may also want to make sure the lawyers on your consideration list are in good standing with the bar, and don’t have any record of misconduct of disciplinary orders filed against them.

Your state bar, once again, is a good place to get this kind of information. Some state bar websites allow you to look up disciplinary issues. The site may also have information on whether the attorney has insurance.

You may also be able to search the state bar’s site by legal specialty, which can help you confirm the lawyers you’re looking at really do have expertise in the area of law you need council in.

The Martindale-Hubbell online directory can be helpful here as well–it offers detailed professional biographies and lawyer and law firm ratings based upon peer reviews, which may help when choosing between two equally qualified candidates.

Asking the Right Questions

Many lawyers will do a free initial consultation. If so, you may want to take advantage of this risk- and cost-free way to get a sense of the attorney’s expertise and character. This is also a good opportunity to get a sense of the costs.

Whether you’re able to arrange a face-to-face meeting, or just speak over the phone, here are some key topics and questions you may want to address:

•  Do they have experience in the area of law that applies to your circumstances?

Further, you may want to get the percentage break-down of their practice areas. If you need someone to help you with setting up a business, for example, and that’s only 10 percent of what they do, that practice may not be the best fit.

•  Do they work with people in your demographic? If the practice only represents high net worth clients, and you’re not in that income bracket, they could be a mismatch. You can also get a sense of their typical clientele by asking for references from clients.

•  How much time can they commit to you? And, how do they like to communicate–phone calls? Email? Ideally, you want a lawyer who can make you a priority and is able to respond to your questions in a timely manner, rather than leave you dangling for days or weeks.

•  What are the fees and how are they charged? For example, they may charge hourly, or they may work on a contingency basis, meaning if you successfully resolve your case they get paid. Also find out if they require a retainer (an upfront fee that functions as a downpayment on expenses and fees), as well as what is included in their fees, and what might be extra (such as, charges for copying documents and court filing fees). Ideally a lawyer will explain their fees and put them in writing.

You may also want to use this meeting or conversation to judge the lawyer’s character and personality, keeping in mind that chemistry counts.

The attorney you’re interviewing could have all the right credentials and awesome experience, but in the end, if their personality strikes you as a little prickly, or the vibe is off, even if you can’t exactly put your finger on it, you may want to trust your gut, walk away and keep searching.

The Takeaway

Choosing an attorney is an important decision–much like choosing a financial advisor, doctor, or other professional who will have a significant impact on your life.

As much as you want to just get on with what may be a challenging or stressful situation that you need legal help with, it’s a good idea to take your time, cast a wide net for referrals, then create–and carefully vet–your short list.

Finally, you’ll want to have an open conversation with any lawyer you are considering to make sure you feel he or she is a good fit for you and that you understand, and can afford, all the fees involved.

Whether you’re looking for a lawyer to help you buy a home, start a business or facilitate any other life transition, it’s a good idea to get your finances in order as well.

One simple move that can help is to sign up for SoFi Money®. SoFi Money is a cash management account that allows you to earn competitive interest, spend and save–all in one account.

Another perk: SoFi Money doesn’t have any account fees, monthly fees, or many other common fees.

Check out everything a SoFi cash management account has to offer today!



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
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.
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

What We Like About The Snowball Method of Paying Down Debt

If the goal is debt reduction, paying off debts in order of the smallest amount due to the largest amount due—gaining momentum as each balance is paid off—can make sense for some people. Once the smallest debt is paid in full, apply the amount that was being paid on that to the next largest debt, and so on. The amount being paid on each of the remaining debts will increase, just like a snowball gets bigger with each layer of snow added.

Building the Snowball

It’s all about changing behavior. Getting rid of the smallest debt first can work wonders because it gives a psychological boost. Try paying down the largest debt first, and it can feel like throwing a pebble into an ocean.

The numbers on that large debt will start to decrease, for sure, but it’s probably not going to give the same feeling of getting rid of the smallest debt first. Paying that small debt first is meeting a goal, which can be empowering.

When it’s time to take on the Big One (the largest debt), there will be more freed-up cash, creating a more stable financial situation to pay it off.

A Word about Paying off High-interest Debt First

But wouldn’t it make more sense to first tackle the debt that comes with higher interest rates and large balances?

While that makes sense from a financial perspective because it means paying less interest over the life of the loans, statistics suggest a different solution. Psychologically, getting rid of the smallest debts first often provides the momentum needed to pay off debt sooner.

A study by Northwestern University’s Kellogg School of Management found that “consumers who tackle small balances first are more likely to eliminate their overall debt” than trying to pay off high-interest-rate balances first.

Even the Harvard Business Review came to the same conclusion . Their research suggests that people are more motivated to get out of debt not only by concentrating on one account but also by beginning with the smallest account.

Making Minimum Payments Doesn’t Equal Minimum Payoff Time

Even if the minimum payments on a person’s credit cards are somewhat manageable, they can be a trap. It’s more than likely that paying only the minimum on the debt will mean paying on it for years to come—and paying substantially more money than the amount originally borrowed. That’s because most credit card companies make their money by charging high interest rates and compounding interest on balances not paid in full each billing cycle.

The Snowball Plan, Step By Step

Following these steps could result in shrinking a debt load, giving someone who is feeling hopeless about their debt a little room to breathe.

1. List all debts from smallest to largest. List them by the total amount owed, not the interest rates. If two debts have similar totals, place the debt with the higher interest rate first.
2. Continue to pay the minimum payment on every debt.
3. Decide how much extra can be paid toward the smallest debt (the first debt on the list).
4. Pay the minimum payment on that smallest debt, but also add in the extra amount from step three. Repeat until the debt is paid off.
5. Once that smallest debt is paid off, add the amount that was being paid on it as an extra amount to the next smallest debt on the list. Now that second debt is on its way to being paid in full.
6. Repeat the steps until all debts are paid off.

A Word About Principal Reduction

It’s a good idea to find out how lenders apply extra payments to a debt (they don’t all do it the same way) before starting this process. Some debt companies that handle mortgages, school loans, or car payments need instruction about how any extra money should be applied (to principal or interest). Credit card companies, though, typically apply the entire payment to the current billing cycle.

Perks of the Snowball Method

The psychological boost from entirely paying off one debt is the main idea behind the snowball method. Seeing the results—sometimes quickly, if the smallest debt is very small—can be a great motivator to press on and continue paying off debt. With fewer debt obligations every month, it’s likely debt will be less of an emotional burden.

Of course, the flip side is that if the smallest debts are being tackled first, high-interest debts may be accruing interest for quite a while. Ultimately, the snowball method may be the most effective psychologically, but it isn’t the most cost effective.

Alternatives to the Snowball Method

There are other ways to pay off debt. Here are just two:

The Avalanche Method

Also known as the “debt-stacking” method, the avalanche method works in contrast to the snowball method. Saving money on high interest rates is the goal. This method is not as simple as paying off the smallest debt first.

It involves making a list of debts in order of interest rates, with the highest interest rate being first on the list. If some debts have variable interest rates, they might need to be moved around in the list from time to time as their rates change. This method’s focus is on paying down the debt with the highest interest rate with as many extra payments as possible.

The Debt Snowflake Method

The debt snowflake method involves finding extra income through a part-time job or selling items no longer needed or wanted, and sprinkling that extra cash on debt obligations every day. Those extra payments could go a long way to helping someone become debt-free.

The Takeaway

Merging all debt owed into one unsecured personal loan could make it easier to pay down that debt each month. Taking out a personal loan to consolidate multiple high-interest credit card debts means just one payment per month, streamlining the debt repayment process.

If you’re considering this strategy, an unsecured personal loan from SoFi might be right for you. Checking your rate takes just two minutes and you may qualify for rates that will help you get out of debt sooner compared to credit card rates. SoFi personal loans have no fees and low fixed rates.

Learn more about SoFi Personal Loans.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (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.
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.

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Source: sofi.com

The History of Federal Student Loan Interest Rates

More than two out of three of recent college students took out loans to help cover the costs of furthering their education—averaging $29,900 per borrower, including private and federal debts.

When it comes to paying back student loans, both the total amount borrowed (i.e., the principal) and the interest rates (i.e., the percentage charged on top of the principal) can shape how much a borrower ends up shelling out over the life of the loan.

And, just as the cost of attending college in the US has changed with the times, the interest rates charged on educational loans have historically fluctuated.

While the cost of attending college has steadily gone up, the history of student loan interest rates shows both ups and downs. For instance, the 2020-2021 federal loan rates for undergraduates are now 2.75%—compared to 4.29% just five years ago.

A wide variety of educational loans are available to eligible students—including subsidized and unsubsidized federal ones and those handled by private lenders.

Interest rates for different loans change over time. The US government plays a major role in shaping the student loan landscape, setting fixed interest rates each year on federal loans, which can impact the total amount a borrower ends up paying back.

To understand the history of student loan interest rates, it can be helpful to zoom out and take a wide-lens view of the student loan landscape in the US.

The US federal government is the major player in student lending—with $1.51 trillion in debt owed by more than 40 million borrowers. (By comparison, private lenders account for $119 billion in student debts).

Below is an overview of how current rates compare to the recent history of student loan rates:

Understanding US Student Debt

Of the around $14 trillion of outstanding household debt, more than $1.7 trillion comes from student debt—that totals more than what Americans owe for cars or credit card debt, respectively.

Besides mortgages, student loan debt accounts for the largest form of household debt. More than 90% of all outstanding student loans are federal student loans, making the student loan interest rate set by the federal government a significant factor for millions of student borrowers.

Whereas private student loans tend to be set according to a combination of prevailing interest rates and the lender’s projection of the student’s ability to pay, federal student loan rates can be shaped, in part, by something even more confusing than the fine print on a financial statement: politics.

Federal student loans are fixed interest (but the rates are adjusted annually), while private lenders often provide both fixed-rate and variable-interest loans.

Here’s an overview of federal student loan rates and some changes they’ve seen:

What Did the Coronavirus Pandemic Change?

Right now represents an exceptional period in student lending. Typically, federal student loan interest rates are set according to a formula established by the US Congress.

However, presently, the rate is set to zero through September 30, 2021. This means interest will not accrue on Direct Loans, FFEL loans, and Perkins loans issued by the Education Department.

Payments due on federally held student loans have also been paused through at least Sept. 30, 2021. Both actions are a result of a presidential executive order that extended benefits first established in the CARES Act—in response to the extraordinary economic situations triggered by the novel Coronavirus pandemic.

Federal Student Loans

Federal student loans represent the lion’s share of student lending. But, there’s more than one type of federal student loan. There are a variety of federal educational loans with different student loan interest rates that, historically, have changed with time—from subsidized to unsubsidized, from undergraduate to graduate.

Current federally owned student loans include Direct Loans, Direct PLUS loans, and Parent Plus Loans.

Direct Loans

“Direct Loans” are responsible for the majority of federal student lending. Issued by the US Department of Education, these loans include both subsidized and unsubsidized student loans.

Subsidized loans are for borrowers who can demonstrate financial need and are exclusively available for undergraduate education, while unsubsidized loans can be used by graduate students. There are also Direct PLUS loans for graduate students and parents of students.

Direct Loans for the 2020-2021 school year have a fixed interest rate of 2.75% for both direct subsidized and direct unsubsidized loans—notably lower than the interest set on federal loans in previous years.

As a point of comparison, Direct Loans for the 2019-2020 academic year were set at 4.53% for subsidized loans and unsubsidized loans. Two years ago (2018-2019), that rate was 5.05%.

Additional Types of Federal Student Loans

The other type of direct loans are PLUS loans and PLUS parent loans. These both carry interest rates determined through a federal government formula. For the 2020-21 school year, the rate on PLUS loans is 5.3%, coming down from 7.08% in 2019-20, and 7.6% two years ago.

For those going to graduate or professional school, the rate for direct loans is now 4.3%. Federal PLUS education loans have a fixed interest rate.

Disused Federal Student Loan Types

The Federal Perkins Loan Program offered fixed-rate loans, at a 5% interest, to qualifying students. This program was aimed at students with exceptional financial need. Schools stopped disbursing Perkins Loans in 2018—after their authority to do so expired under federal law.

How Are Rates Determined?

Traditionally, federal student loan interest rates have been determined in response to laws passed by the US Congress. According to a piece of legislation from 2013 known as the “Bipartisan Student Loan Certainty Act,” the rate on direct loans is determined by a formula pegged to borrowing cost for government debt.

The first year under this formula produced 3.86% rates on direct loans. During the year before, the 2012-2013 academic year, subsidized loans were 3.4% and unsubsidized loans were 6.8%. (A 2007 bill had lowered the subsidized rate to 3.4%, but it was due to expire in 2012 and go back to 6.8%.) The bill, which set up the formula currently governing federal student loan rates, was meant to address this snapback to a higher rate.

Before the legislation passed, Congress directly set the student loan interest rate, with 3.4% rates on subsidized loans and 6.8% on unsubsidized loans for the 2012-2013 school year. The 2013 bill also introduced caps that limit how high interest rates could go on the new formula.

The cap for direct loans to undergraduates was 8.25%, for graduate student loans it was 9.5%, and for PLUS loans, it was 10.5%. Since 2013, the rates have remained well below the legal caps. You can find previous rates for Direct on the Federal Student Aid website .

Politics and Student Loans

Today’s rates are governed by a formula that differs for different types of loans.

For undergraduate loans, the formula is the interest rate on one type of government debt at a certain time of year plus 2.05%. (The extra interest is added to cover the cost of deferrals, forbearance, and defaults). For graduate student loans it’s that same government debt rate plus 3.6%. And, for PLUS loans, it’s that rate plus 4.6%.

Put another way, the cost students pay to borrow money from the federal government is determined by the cost the government pays to borrow money—plus a fixed buffer of extra interest, which is intended to reduce risk to the government of students not being able to pay back their loans.

Since late 2018, government borrowing costs have been coming down and since the coronavirus epidemic slammed the brakes on the world economy, borrowing costs have been especially low. So, since the 2018-19 school year, rates have been falling, from just over 5% to under 3%.

Federal student loan interest rates for the 2020-21 school year dropped considerably, in part due to the COVID-19 pandemic and resulting economic downturn. The interest rate on direct subsidized and unsubsidized loans is just 2.75%, down from 4.53% during the 2019-20 school year.

The Takeaway

The interest rates on federal student loans are set by congress each year and are fixed for the life of the loan. The interest rates are determined based on a formula that the rate on direct loans is determined by a formula tied to borrowing cost for government debt. Federal student loan interest rates for the 2020-21 school year are historically low . The interest rate on direct subsidized and unsubsidized loans is 2.75%.

Millions of students use federal student loans to help them pay for their higher education. These loans come with benefits baked in—including grace periods, income-driven repayment options, forgiveness for public service, and forbearance—that are not guaranteed by private student loans.

But sometimes, federal student aid isn’t enough to cover the cost of tuition and other expenses. For some, a private student loan may help cover the total cost of attending college—including school-certified expenses like, tuition, fees, room and board, and transportation.

Private loans are disbursed by non-government institutions. SoFi, for instance, offers competitive rate in-school loans that come with no fees. And, when a borrower enrolls in autopay, they could get a rate discount.

For those with outstanding student debt, refinancing may be an option to consider. Refinancing student loans may help eligible borrowers pay off their loans faster or lower their monthly payments. (It’s worth noting that refinancing a federal loan with a private lender eliminates federal benefits).

Looking to pay off your student loans? Learn how refinancing with SoFi might help save thousands and lower your interest rate. Check your rate in just two minutes.



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