Feb
26
2024

Test Your Financial Literacy

By | Budgeting & Goals, Financial Independence, Terminology | No Comments

Financial literacy is a way of saying that you have a good working knowledge of the basics of managing money and using it to reach your goals. It typically means you understand budgeting; you know how different financial products can help you protect and grow your cash; and you are aware of how the financial climate (from inflation to interest rates) can impact your personal situation.

Building financial literacy is a valuable move because it helps you achieve goals like saving for the down payment on a house, affording your kid’s college costs, and being prepared for retirement.

Read on to take a financial literacy quiz, learn more about financial literacy, and find out how to build it.

Why Financial Literacy Is Important

Higher levels of financial literacy have been consistently linked to responsible money management. This can help consumers:

•   Avoid high-cost debt

•   Plan for financial goals

•   Avoid defaulting on mortgages

•   Build an emergency savings fund

•   Earn higher interest on investments

Boosting your financial literacy can be a great way to be confident that you have the information and insight you need to manage your finances well, today and tomorrow.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

Are You Financially Literate?

If you feel as if you are not fully financially literate, it might be a case of not having focused on this aspect of your life. After all, financial literacy isn’t usually a part of the curriculum in high school or college.

Also, age plays a factor in financial literacy. The younger you are, the less money know-how you are likely to have. One recent study found that Gen Z (born between 1997 and 2012) had less financial savvy than Millennials, Gen X, and Boomers. Which could be understandable: The younger a person is, the less likely it can be that they’ve gone mortgage shopping, waded deeply into retirement planning, or researched health insurance.

Typically, financial literacy based on such key components of this type of knowledge as:

•   Knowing how to create an effective budget so that you’re aware of and accountable for where your money is going

•   Understanding how interest works when you save and invest, as well as how it works when you borrow, including the concept of compound interest

•   Saving, whether that means for emergencies or for a specific goal, such as a big-ticket item or even a house

•   Knowing the facts about credit card debt, managing your debt well, and avoiding the credit card debt roller-coaster

•   Protecting your identity and otherwise using practices to safeguard your funds

•   Investing wisely, and understanding how the average stock market return

Financial Literacy Quiz

Educating Yourself

If you’ve taken our quiz, the financial literacy questions will likely have helped you to pinpoint if you need to bolster your understanding of money matters.

Financial topics can be challenging, but fortunately, there are plenty of resources to help you increase your knowledge. Your bank may have a library of information as well as tools and calculators to help you do some number crunching and give you a better picture of your finances.

Your local library and book retailers, as well as financial magazines and websites, probably have plenty of information too. It can be a smart move to veer towards those publications that are well-regarded vs. following, say, an influencer without credentials but a lot of lofty promises on social media.

Podcasts, newsletters, and continuing-ed classes are other options. It can also make good sense to find a financial planner, who can walk you through your own unique challenges and opportunities.

💡 Quick Tip: Want a simple way to save more each month? Grow your personal savings by opening an online savings account. SoFi offers high-interest savings accounts with no account fees. Open your savings account today!

Government Resources for Building Financial Literacy

There are also government resources, including those available at the Financial Literacy and Education Commission (FLEC), connected to the Treasury Department. This commission was founded to boost literacy.

Another government site, one created by FLEC, is dedicated to financial education: MyMoney.gov . This site provides practical information about each of what they call the five building blocks for money management (MyMoney Five), which are:

•   Earn: Understand your pay and benefits to make the most out of what you earn.

•   Save and Invest: Start as soon as you can to save for future goals, even if you need to begin by saving small amounts.

•   Protect: Create an emergency savings fund, choose the right insurance for your needs, and otherwise take precautions to protect your finances.

•   Spend: Shop around and compare prices and products to get a good value on purchases, especially with larger ones.

•   Borrow: Borrowing allows you to make essential purchases and also helps you to build credit, so it makes sense to understand how to borrow in the smartest way possible for your situation.

You can also access the government resource known as Federal Reserve Education , which provides resources for educators and students alike, while also empowering consumers to boost their understanding of banking. Topics include central banking and monetary policy, economics/macroeconomics, our government’s role in money regulation, personal finances, and more.

Here’s one more financial literacy resource from the federal government: FDIC’s Money Smart . This program provides resources to help people learn how to improve their financial management skills, from computer-based educational games to podcasts that focus on saving and borrowing.

Another Way to Gain Financial Literacy

Another way to help with your financial literacy is to opt for a banking partner that delivers insight into your spending and saving.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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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Feb
26
2024

Guide to Tax-Loss Harvesting

By | Investing, Terminology | Comments Off on Guide to Tax-Loss Harvesting

Tax-loss harvesting enables investors to use investment losses to help reduce the tax impact of investment gains, thus potentially lowering the amount of taxes owed. While a tax loss strategy – sometimes called tax loss selling — is often used to offset short-term capital gains (which are taxed at a higher federal tax rate), tax-loss harvesting can also be used to offset long-term capital gains.

Of course, as with anything having to do with investing and taxes, tax-loss harvesting is not simple. In order to carry out a tax-loss harvesting strategy, investors must adhere to specific IRS rules and restrictions. Here’s what you need to know.

🛈 Currently, SoFi does not provide tax loss harvesting services to members.

What Is Tax-Loss Harvesting?

Tax-loss harvesting is a strategy that enables an investor to sell assets that have dropped in value as a way to offset the capital gains tax they may owe on the profits of other investments they’ve sold. For example, if an investor sells a security for a $25,000 gain, and sells another security at a $10,000 loss, the loss could be applied so that the investor would only see a capital gain of $15,000 ($25,000 – $10,000).

This can be a valuable tax strategy for investors because you owe capital gains taxes on any profits you make from selling investments, like stocks, bonds, properties, cars, or businesses. The tax only hits when you profit from the sale and realize a profit, not for simply owning an appreciated asset.

How Tax-Loss Harvesting Works

In order to understand how tax-loss harvesting works, you first have to understand the system of capital gains taxes.

Capital Gains and Tax-Loss Harvesting

As far as the IRS is concerned, capital gains are either short term or long term:

•   Short-term capital gains and losses are from the sale of an investment that an investor has held for one year or less.

•   Long-term capital gains and losses are those recognized on investments sold after one year.

Understanding Short-Term Capital Gains Rates

The one-year mark is crucial, because the IRS taxes short-term investments at the investor’s much-higher marginal or ordinary income tax rate. There are seven ordinary tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

For high earners, gains can be taxed as much as 37%, plus a potential 3.8% net investment income tax (NIIT), also known as the Medicare tax. That means the taxes on those quick gains can be as high as 40.8% — and that’s before state and local taxes are factored in.

Understanding Long-Term Capital Gains Rates

Meanwhile, the long-term capital gains taxes for an individual are simpler and lower. These rates fall into three brackets, according to the IRS: 0%, 15%, and 20%. Here are the rates for tax year 2023, per the IRS.

The following table breaks down the long-term capital-gains tax rates for the 2023 tax year (for taxes that are filed in 2024) by income and filing status.

Capital Gains Tax Rate

 Income – Single

 Married, filing separately

 Head of household

 Married, filing jointly
0% Up to $44,625 Up to $44,625 Up to $59,750 Up to $89,250
15% $44,626 – $492,300 $44,626 – $276,900 $59,751 – $523,050 $89,251 – $553,850
20% More than $492,300 More than $276,900 More than $523,050 More than $553,850

Source: Internal Revenue Service

So if you’re an individual filer, you won’t pay capital gains if your total taxable income is $44,625 or less. But if your income is between $44,626 to $492,300, your investment gains would be subject to a 15% capital gains rate. The rate is 20% for single filers with incomes over $492,300.

As with all tax laws, don’t forget the fine print. As noted above, the additional 3.8% NIIT may apply to single individuals with a modified adjusted gross income (MAGI) of $200,000 or married couples with a MAGI of at least $250,000.

Also, long-term capital gains from sales of collectibles (e.g, coins, antiques, fine art) are taxed at a maximum of 28% rate. This is separate from regular capital gains tax, not in addition to it.

Short-term gains on collectibles are taxed at the ordinary income tax rate, as above.

Recommended: Everything You Need to Know About Taxes on Investment Income

Rules of Tax-Loss Harvesting

The upshot is that investors selling off profitable investments can face a stiff tax bill on those gains. That’s typically when investors (or their advisors) start to look at what else is in their portfolios. Inevitably, there are likely to be a handful of other assets such as stocks, bonds, real estate, or different types of investments that lost value for one reason or another.

While tax-loss harvesting is typically done at the end of the year, investors can use this strategy any time, as long as they follow the rule that long-term losses apply to long-term gains first, and short-term losses to short-term gains first.

Bear in mind that although a capital loss technically happens whenever an asset loses value, it’s considered an “unrealized loss” in that it doesn’t exist in the eyes of the IRS until an investor actually sells the asset and realizes the loss.

The loss at the time of the sale can be used to count against any capital gains made in a calendar year. Given the high taxes associated with short-term capital gains, it’s a strategy that has many investors selling out of losing positions at the end of the year.

Tax-Loss Harvesting Example

If you’re wondering how tax-loss harvesting works, here’s an example. Let’s say an investor is in the top income tax bracket for capital gains. If they sell investments and realize a long-term capital gain, they would be subject to the top 20% tax rate; short-term capital gains would be taxed at their marginal income tax rate of 37%.

Now, let’s imagine they have the following long- and short-term gains and losses, from securities they sold and those they haven’t:

Securities sold:

•   Stock A, held for over a year: Sold, with a long-term gain of $175,000

•   Mutual Fund A, held for less than a year: Sold, with a short-term gain of $125,000

Securities not sold:

•   Mutual Fund B: an unrealized long-term gain of $200,000

•   Stock B: an unrealized long-term loss of $150,000

•   Mutual Fund C: an unrealized short-term loss of $80,000

The potential tax liability from selling Stock A and Mutual Fund A, without tax-loss harvesting, would look like this:

•   Tax without harvesting = ($175,000 x 20%) + ($125,000 x 37%) = $35,000 + $46,250 = $81,250

But if the investor harvested losses by selling Stock B and Mutual Fund C (remember: long-term losses apply to long-term gains and short term losses to short term gains first), the tax picture would change considerably:

•   Tax with harvesting = (($175,000 – $150,000) x 20%) + (($125,000 – $80,000) x 37%) = $5,000 + $16,650 = $21,650

Note how the tax-loss harvesting strategy not only reduces the investor’s tax bill, but potentially frees up some money to be reinvested in similar securities (restrictions may apply there; see information on the wash sale rule below).

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Considerations Before Using Tax-Loss Harvesting

As with any investment strategy, it makes sense to think through a decision to sell just for the sake of the tax benefit because there can be other ramifications in terms of your long-term financial plan.

The Wash Sale Rule

For example, if an investor sells losing stocks or other securities they still believe in, or that still play an important role in their overall financial plan, then they may find themselves in a bind. That’s because a tax regulation called the wash sale rule prohibits investors from receiving the benefit of the tax loss if they buy back the same investment too soon after selling it.

Under the IRS wash sale rule, investors must wait 30 days before buying a security or another asset that’s “substantially identical” to the one they just sold. If they do buy an investment that’s the same or substantially identical, then they can’t claim the tax loss.

For an investment that’s seen losses, that 30-day moratorium could mean missing out on growth — and the risk of buying it again later for a higher price.

Matching Losses With Gains

A point that bears repeating: Investors must also be careful which securities they sell. Under IRS rules, like goes with like. So, long-term losses must be applied to long-term gains first, and the same goes for short-term losses and short-term gains. After that, any remaining net loss can be applied to either type of gain.

How to Use Net Losses

The difference between capital gains and capital losses is called a net capital gain. If losses exceed gains, that’s a net capital loss.

•   If an investor has an overall net capital loss for the year, they can deduct up to $3,000 against other kinds of income — including their salary and interest income.

•   Any excess net capital loss can be carried over to subsequent years and deducted against capital gains, and up to $3,000 of other kinds of income — depending on the circumstances.

•   For those who are married filing separately, the annual net capital loss deduction limit is only $1,500.

How to Use Tax-Loss Harvesting to Lower Your Tax Bill

When an investor has a diversified portfolio, every year will likely bring investments that thrive and others that lose money, so there can be a number of different ways to use tax-loss harvesting to lower your tax bill. The most common way, addressed above, is to apply capital losses to capital gains, thereby reducing the amount of tax owed. Here are some other strategies:

Tax-Loss Harvesting When the Market Is Down

For investors looking to invest when the market is down, capital losses can be easy to find. In those cases, some investors can use tax-loss harvesting to diminish the pain of losing money. But over long periods of time, the stock markets have generally gone up. Thus, the opportunity cost of selling out of depressed investments can turn out to be greater than the tax benefit.

It also bears remembering that many trades come with trading fees and other administrative costs, all of which should be factored in before selling stocks to improve one’s tax position at the end of the year.

Tax-Loss Harvesting for Liquidity

There are years when investors need access to capital. It may be for the purchase of a dream home, to invest in a business, or because of unforeseen circumstances. When an investor wants to cash out of the markets, the benefits of tax-loss harvesting can really shine.

In this instance, an investor could face bigger capital-gains taxes, so it makes sense to be strategic about which investments — winners and losers — to sell by year’s end, and minimize any tax burden.

Tax-Loss Harvesting to Rebalance a Portfolio

The potential benefits of maintaining a diversified portfolio are widely known. And to keep that portfolio properly diversified in line with their goals and risk tolerance, investors may want to rebalance their portfolio on a regular basis.

That’s partly because different investments have different returns and losses over time. As a result, an investor could end up with more tech stocks and fewer energy stocks, for example, or more government bonds than small-cap stocks than they intended.

Other possible reasons for rebalancing are if an investor’s goals change, or if they’re drawing closer to one of their long-term goals and want to take on less risk.

That’s why investors check their investments on a regular basis and do a tune-up, selling some stocks and buying others to stay in line with the original plan. This tune-up, or rebalancing, is an opportunity to do some tax-loss harvesting.

How Much Can You Write Off on Your Taxes?

If capital losses exceed capital gains, under IRS rules investors can then deduct a portion of the net losses from their ordinary income to reduce their personal tax liability. Investors can deduct the lesser of $3,000 ($1,500 if married filing separately), or the total net loss shown on line 21 of Schedule D (Form 1040).

In addition, any capital losses over $3,000 can be carried forward to future tax years, where investors can use capital losses to reduce future capital gains. This is known as a tax loss carryforward. So in effect, you can carry forward tax losses indefinitely.

To figure out how to record a tax loss carryforward, you can use the Capital Loss Carryover Worksheet found on the IRS’ Instructions for Schedule D (Form 1040).

Benefits and Drawbacks of Tax-Loss Harvesting

While tax-loss harvesting can offer investors some advantages, it comes with some potential downsides as well.

Benefits of Tax-Loss Harvesting

Obviously the main point of tax-loss harvesting is to reduce the amount of capital gains tax on profits after you sell a security.

Another potential benefit is being able to literally cut some of your losses, when you sell underperforming securities.

Tax-loss harvesting, when done with an eye toward an investor’s portfolio as a whole, can help with balancing or rebalancing (or perhaps resetting) their asset allocation.

As noted above, investors often sell off assets when they need cash. Using a tax-loss harvesting strategy can help do so in a tax-efficient way.

Drawbacks of Tax-Loss Harvesting

While selling underperforming assets may make sense, it’s important to vet these choices as you don’t want to miss out on the gains that might come if the asset bounces back.

Another of the potential risks of tax-loss harvesting is that if it’s done carelessly it can leave a portfolio imbalanced. It might be wise to replace the securities sold with similar ones, in order to maintain the risk-return profile. (Just don’t run afoul of the wash-sale rule.)

Last, it’s possible to incur excessive trading fees that can make a tax-loss harvesting strategy less efficient.

Pros of Tax-Loss Harvesting Cons of Tax-Loss Harvesting
Can lower capital gains taxes Investor might lose out if the security rebounds
Can help with rebalancing a portfolio If done incorrectly, can leave a portfolio imbalanced
Can make a liquidity event more tax efficient Selling assets can add to transaction fees

Creating a Tax-Loss Harvesting Strategy

Interested investors may want to create their own tax-loss harvesting strategy, given the appeal of a lower tax bill. An effective tax-loss harvesting strategy requires a great deal of skill and planning.

It’s important to take into account current capital gains rates, both short and long term. Investors would be wise to also weigh their current asset allocation before they attempt to harvest losses that could leave their portfolios imbalanced.

All in all, any strategy should reflect your long-term goals and aims. While saving money on taxes is important, it’s not the only rationale to rely on for any investment strategy.

The Takeaway

Tax loss harvesting, or selling off underperforming stocks and then potentially getting a tax reduction for the loss, can be a helpful part of a tax-efficient investing strategy.

There are many reasons an investor might want to do tax-loss harvesting, including when the market is down, when they need liquidity, or when they are rebalancing their portfolio. It’s an individual decision, with many considerations for each investor — including what their ultimate financial goals might be.

FAQ

Is tax-loss harvesting really worth it?

When done carefully, with an eye toward tax efficiency as well as other longer-term goals, tax-loss harvesting can help investors save money that they can invest for the long term.

Does tax-loss harvesting reduce taxable income?

Yes. The point of tax-loss harvesting is to reduce income from investment gains (profits). But also when net losses exceed gains, the strategy can reduce your taxable income by $3,000 per year.

Can you write off 100% of investment losses?

It depends. Investment losses can be used to offset a commensurate amount in gains, thereby lowering your potential capital gains tax bill. If there are still net losses that cannot be applied to gains, up to $3,000 per year can be applied to reduce your ordinary income. Net loss amounts in excess of $3,000 would have to be carried forward to future tax years.

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies 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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Feb
26
2024
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Important FAFSA Deadlines to Know

By | Debt Payoff, Student Loans, student_loan | No Comments

The Free Application for Federal Student Aid, or FAFSA®, is a form students should fill out each school year to apply for college grants, work-study programs, federal student loans, and certain state-based aid.

Typically, the FAFSA becomes available on October 1 for the following academic year. The 2024-2025 academic year was an exception. Due to form revisions and adjustments to how student aid is calculated, the application wasn’t available until December 31, 2023. The three-month delay had a domino effect, pushing out deadlines for college admissions and financial aid offers.

For the 2025-2026 school year, the FAFSA will be released in phases. Some students will get access on October 1, 2024, with the remainder able to apply on or before December 1.

Try not to let the staggered rollout throw you off your game. If you fail to complete the form or miss the FAFSA deadline, you may not receive financial aid that could help you pay for college. In fact, you should aim to fill out your FAFSA as early as possible, since there is a limited amount of aid available.

Read on for updated federal, state, and institutional FAFSA deadlines to know.

What Is the FAFSA?

The FAFSA is the online form that you must fill out to apply for financial aid from the federal government, state governments, and most colleges and universities. The form requires students and their parents to submit information about household income and assets. That information is used to calculate financial need and determine how much aid will be made available.

If you are a dependent student, you will need to submit your parents’, as well as your own, financial information. If you are considered independent, you are not required to submit your parents’ financial information.

If you are already in school, remember that the FAFSA must be filled out every year, even if your income and tax information haven’t changed.

Federal financial aid includes student loans, grants, scholarships, and work-study jobs. In general, federal and state aid requires that students:

•   demonstrate financial need. Though there is some non-need based aid, such as unsubsidized student loans.

•   be a U.S. citizen or an eligible noncitizen.

•   be enrolled in a qualifying degree or certificate program at their college or career school.

For further details, take a look at the basic eligibility requirements on the Student Aid website .

FAFSA Open Date and Deadline

ASAP: File Your FAFSA for Next Year

Generally, it makes sense to submit the FAFSA promptly after the application release. Some aid is awarded on a first-come, first-served basis, so submitting it early can improve your chances of receiving financial help for college.

May 1: College Decision Time

May 1 is traditionally National College Decision Day, when applicants must inform the colleges they applied to whether they’ll be attending. Make sure you understand the deadlines for the colleges you applied to — they may be different.

June 30: File Your FAFSA for Last Year

You must file the FAFSA no later than June 30 for the school year you are requesting aid for. For the academic year 2024-25, you must file by June 30, 2025, at the very latest.

This FAFSA deadline comes after you’ve already attended and, likely, paid for school. You generally don’t want to wait this long. However, if you do, you can often receive grants and loans retroactively to cover what you’ve already paid for the spring and fall semester. In some cases, you may be able to apply the funds to pay for summer courses.

State and Institutional FAFSA Deadlines

Individual states and colleges have different financial aid deadlines — which may be much earlier than the federal deadline. Here’s a look at two other key FAFSA deadlines to know.

Institutional FAFSA Deadlines

While students have until the end of the school year to file the FAFSA, individual schools may have earlier deadlines. That means you need to get your FAFSA application in by the school’s date to be considered for the college’s own institutional aid. So if you are applying to several colleges, you may want to check each school’s FAFSA deadline and complete the FAFSA by the earliest one.

While filling out your FAFSA, you can include every school you’re considering, even if you haven’t been accepted to college yet.

State FAFSA Deadlines

States often have their own FAFSA deadlines. You can get information about state deadlines at
Studentaid.gov . Some states have strict cutoffs, while others are just best-practice suggestions — so you’ll want to check carefully. States may have limited funds to offer as well.

Federal FAFSA Deadline

Typically, the FAFSA becomes available on October 1, almost a full year in advance of the year that aid is awarded. For the 2024-25 academic year, the FAFSA opened a few months later than usual. However, the federal government gives you until June 30 of the year you are attending school to apply for aid.

It’s generally recommended that students fill out the FAFSA as soon as possible after it’s released for the next school year’s aid to avoid missing out on available funds. Plus, as noted above, there are often earlier school and state deadlines you’ll need to meet.

Taking the Next Steps After Submitting the FAFSA

So what happens after you hit “submit” on your FAFSA? Here’s a look at next steps:

•   Wait for your Student Aid Report (SAR) . If you submitted your FAFSA online, the U.S. Department of Education will process it within three to five days. If you submit a paper form, it will take seven to 10 days to process. The SAR summarizes the information you provided on your FAFSA form. You can find your SAR by logging in to fafsa.gov using your FSA ID and selecting the “View SAR” option on the My FAFSA page.

•   Review your SAR. Check to make sure all of the information is complete and accurate. If you see any missing or inaccurate information, you’ll want to complete or correct your FAFSA form as soon as possible. The SAR will give you some basic information about your eligibility for federal student aid. However, the school(s) you listed on the FAFSA form will use your information to determine your actual eligibility for federal — and possibly non-federal — financial aid.

•   Wait for acceptance. Most college decisions come out in the spring, often March or early April. If you applied to a college early action or early decision, you can expect an earlier decision notification, often around December. Typically, students receive a financial aid award letter along with their acceptance notification. This letter contains important information about the cost of attendance and your financial aid options. However, due to the FAFSA delays, you may be waiting longer on your financial aid offer.

Understanding Your Financial Aid Award

Receiving financial aid can be a great relief when it comes to paying for higher education. Your financial aid award letter will include the annual total cost of attendance and a list of financial aid options. Your financial aid package may be a mix of gift aid (which doesn’t have to be repaid), loans (which you have to repay with interest), and federal work-study (which helps students get part-time jobs to earn money for college).

If, after accounting for gift aid and work-study, you still need money to pay for school, federal student loans might be your next consideration. As an undergraduate student, you may have the following loan options:

•   Direct Subsidized Loans Students with financial need can qualify for subsidized loans. With this type of federal loan, the government covers the interest that accrues while you’re in school, for six months after you graduate, and during periods of deferment.

•   Direct Unsubsidized Loans Undergraduates can take out direct unsubsidized loans regardless of financial need. With these loans, you’re responsible for all interest that accrues when you are in school, after you graduate, and during periods of deferment.

•   Parent PLUS Loans These loans allow parents of undergraduate students to borrow up to the total cost of attendance, minus any financial aid received. They carry higher interest rates and higher loan origination fees than Direct Subsidized and Unsubsidized Loans.

If financial aid, including federal loans, isn’t enough to cover school costs, students can also apply for private student loans, which are available through banks, credit unions, and online lenders.

Private loan limits vary by lender, but students can often get up to the total cost of attendance, which gives you more borrowing power than you have with the federal government. Each lender sets its own interest rate and you can often choose to go with a fixed or variable rate. Unlike federal loans, qualification is not need-based. However, you will need to undergo a credit check and students often need a cosigner.

Keep in mind that private loans may not offer the borrower protections — like income-based repayment plans and deferment or forbearance — that come with federal student loans.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

The Takeaway

Completing the FAFSA application allows you to apply for federal aid (including scholarships, grants, work-study, and federal student loans). The FAFSA form is generally released on October 1 of the year before the award year and closes on June 30 of the school year you are applying for.

The 2025–26 FAFSA will be released to a limited number of students on October 1, 2024. All students should have access on or before December 31, 2024. That application will close on June 30, 2026. However, individual colleges and states have their own deadlines which are typically earlier than the federal FAFSA deadline. Try to submit your form as soon as possible, since some aid is awarded on a first-come, first-served basis.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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-criteria 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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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Feb
23
2024
Credit Hours: What Are They & What You Need to Know

Credit Hours: What Are They & Why They Matter

By | Going to College, Student Loans, student_loan | Comments Off on Credit Hours: What Are They & Why They Matter

Credit hours are the building blocks of a college career. They measure progress, and define full- and part-time status and degree types such as bachelor’s and master’s. And these factors determine federal aid eligibility.

A credit hour is defined as one classroom hour and two hours of student work per week. Students who take 12 or more credit hours a semester are considered full-time. University semesters are a minimum of 15 weeks.

What Is a Credit Hour?

A credit hour is a system to measure college course loads. They were invented in 1906.

According to Encyclopedia Britannica, the Carnegie Foundation created the credit hour system to determine how to give scholarship funds to colleges. However, it quickly became a useful tool for universities to measure higher ed programs and student progress. Nearly every U.S. university adopted the system within six years.

Credits are also key in accreditation, an evaluation process that ensures a college’s academic merit. It’s granted to universities that have met minimum credit requirements and other academic standards.


💡 Quick Tip: Pay down your student loans faster with SoFi reward points you earn along the way.

1 Credit Hour Is Equal to How Many Hours?

One credit hour is equal to one hour of classroom or direct faculty instruction and at least two hours of out of class student work per week. That means you can expect to spend three hours of work and classroom instruction per week in a one-credit course.

How Many Hours of Study Time per Credit Hour Online?

Credit hours are no different in-person than online, depending on the type of online course. There are two types: synchronous and asynchronous programs.

Synchronous programs are virtual classes that students can attend in real time. These courses may involve digital lectures, class discussions, presentations, and other styles of scheduled interactive learning. Students also work together outside of class, whether virtually or in-person. This type of program offers ease of access.

In asynchronous programs, students access pre-recorded classes and forums on their own time. Students in these programs set their own pace and manage coursework completion deadlines. Virtual attendance is not required and students may communicate with staff and their peers in board-style forums and email.

Synchronous programs have a similar structure to in-person college classes — and therefore have similar credit hour requirements. Some universities suggest more study hours for online credits. For instance, the University of North Carolina suggests four to five hours of study time each week per credit for a bachelor’s degree program.

Asynchronous programs, on the other hand, have more loosely defined requirements for credit courses. Students meet program requirements by fulfilling coursework needs on deadline.


💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too.

Credit Hour Calculator

To determine total time spent on classes in a semester, add the credits of all your courses. Multiply that number by two hours, or more depending on your university’s requirements. Then multiply that total with the weeks in a semester.

Courses can be one to six credit hours. Below is an example credit hour calculator chart to determine total hours spent on one or more credits. Rice University has a great example of a chart that converts credits to study time.

Credits

 Study Hours Per Credit

 Total Study and In-Person Hours Per Semester (15 Weeks)
1 2 Hours 45
3 6 Hours 135
12 24 Hours 540

How Many Credit Hours Do You Need to Graduate?

The credit hours you need depend on the degree type — but the federal minimum is the same for all. The range of credit hours required also varies by major, so be sure to check with your registrar that you have all the information you need.

Higher education programs include associate, bachelor’s, master’s, professional, and doctorate degrees. Depending on the degree, students can expect to complete around 30 to 120 credit hours.

Bachelor’s Degree Credit Hours

Bachelor’s degrees are generally 120 credits minimum and usually take four years to complete. Schools that operate on a quarterly basis (four terms a year), usually require 180 credits to graduate.

Students enrolled in a bachelor’s program complete core curriculum and various credit hour types: general education, major/minor, and elective credits.

General education courses are required courses for a degree. They often cover foundational subjects such math, English, and sciences. However, the core curriculum might vary by major. For instance, a student majoring in marketing might take intro economics courses, whereas an architect student may take intro art history courses.

Major and minor credit hours are classes related to a student’s field of study. They are categorized into lower- and upper-division credits. Students must complete lower-division courses in order to enroll in upper level courses. Internships may also be mandatory and are converted into credits (up to six).

Finally, bachelor’s programs require elective credits — courses unrelated to a student’s major and general requirements. Students sign up for courses out of interest or to complement their major.

Recommended: What Is the Difference Between BA and BS Degrees?

Master’s Degree Credit Hours

A master’s degree can range from 30 to 60 credits, and usually lasts two years. Students complete a thesis or project at the end of the program.

Master of Arts (MA), Master of Science (MS), and Master of Business Administration (MBA) are common types of masters, but vary widely in credit requirements. MAs and MSs tend to be 30 credits, while MBAs can take up to 60 credits to complete.

How Many Credit Hours Does a Course Have?

As mentioned, a college class must be at least one hour of classroom instruction and two hours of student coursework per week — the federal minimum. Courses can range from one to six credits — but typically are three to four credits.

How Do Semester Credit Hours Influence GPA?

With credit hours and GPAs, the general rule is this: More credits are better.

Your weighted GPA point values determine your GPA — where the weights are the number of credits for each class. To determine your college GPA with credits, multiply your GPA Point Value with the course’s total credits. Then divide the GPA point value total by the credit total.

For example, if you score an A in your three-credit chemistry class, it has more impact on your overall GPA than the A in your one-credit photography class. Below is an example of the impact of an 18-credit semester and a 12-credit semester on GPAs.

Course

 Grade

 Credits

 GPA Point Value

 Quality Points
Chemistry A 3 4 12
Microeconomics A 3 4 12
Psychology B 1 3 3
Computer Science B 1 3 3
Photography B 1 3 3
English A 3 4 12
Total 12 45
Quality Points/Credits 3.75 GPA

If you score all As in your three-credit courses, but all Bs in your one-credit courses, you still walk away with a 3.75 GPA.

Course

 Grade

 Credits

 GPA Point Value

 Quality Points
Chemistry B 3 3 9
Microeconomics B 3 3 9
Psychology A 1 4 4
Computer Science A 1 4 4
Photography A 1 4 4
English B 3 3 9
Total 12 39
Quality Points/Credits 3.25 GPA

In contrast, if all your one-credit courses are As, and three-credit courses are Bs, you end up with a lower GPA. The weight of the courses’ credits impacts your GPA.

What Is the Cost per Credit Hour?

The average college credit costs $477 — or about $1,431 per 3-credit class, according to the Education Data Initiative. Private four-year universities charge $1,200 per credit, or $3,600 for a three-credit class. These averages exclude Cost of Attendance (COA) such as room and board, books, and daily living expenses.

University tuition inflation has an impact on figures too. In 1963, the cost per credit was $21 per credit hour, or $187 adjusted for inflation. That’s a 255% increase to today’s credit hour rate of $477!

Recommended: What Is the Average Cost of College Tuition?

Paying for College

Higher education is a substantial spend, so it’s worth researching ways to earn aid and cut costs.

Determine what your family is expected to cover, as measured by the Student Aid Index (SAI). Apply for scholarships and grants from your school, fill out the FAFSA®, or Free Application for Federal Student Aid, which is used to determine federal aid, and look into cutting expenses like room and board.

Finally, look into undergraduate student loan options and understand the difference between private student loans vs federal student loan options. Federal loans often have lower interest rates, more flexible repayment plans, and offer subsidized loan options for students who demonstrate financial need. However, there is an annual borrowing maximum for students.

Private lenders offer competitive rates for qualifying borrowers. Repayment plans are generally determined by the individual lender. Unlike most federal student loans, private lenders will generally evaluate a borrower’s credit score and history, among other factors. Potential borrowers may be able to apply with a cosigner if they aren’t able to qualify for a private student loan on their own.

While private student loans can be a powerful tool to help fill financing gaps for college, they don’t always offer the same benefits as federal student loans, so are generally borrowed as a last-choice option.

Recommended: How to Pay for College

The Takeaway

Understanding how universities build programs with college credits will help you understand its cost. College credits define degree types, such as master’s and bachelor’s programs. The amount can also determine a student’s status and progress. Finally, these dictate the eligibility rules for federal and private lenders.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

Photo credit: iStock/asbe

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-criteria 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 Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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Feb
23
2024
Do I Need Uninsured Motorist Insurance?

What Is Uninsured Motorist Coverage?

By | Insurance, Life & Career | Comments Off on What Is Uninsured Motorist Coverage?

Uninsured motorist coverage shields you from having to pay for injuries and property damage in accidents that weren’t your fault and were caused by an uninsured driver.

According to the Insurance Research Council, 14.0% of motorists on the road are uninsured. Purchasing uninsured motorist coverage reduces the likelihood that you’ll have to pay out of pocket if you’re involved in an accident caused by one of these irresponsible drivers.

It’s generally a good idea to add uninsured motorist coverage to your auto insurance policy, as it’s fairly inexpensive, usually only costing an extra $5 – $10 a month, per vehicle, for policyholders with clean driving histories. Below, we give you the scoop on the different kinds of uninsured motorist coverage and what these policies entail.

Breaking Down Uninsured Motorist Coverage Variations

There are two main kinds of uninsured motorist coverage. Similar to your standard auto insurance policy’s collision and bodily injury coverage, this kind of policy breaks down into uninsured motorist bodily injury coverage and uninsured motorist property damage coverage.

•   Uninsured motorist bodily injury coverage: Covers your party’s medical expenses and related costs in accidents caused by uninsured drivers.

•   Uninsured motorist property damage coverage: Covers your repair bills and related costs in accidents caused by uninsured drivers.

Bodily injury and property damage coverage for uninsured motorists are sometimes packaged and sold together when you purchase uninsured motorist insurance. However, this isn’t the case with all policies; check with your insurance provider to know for sure. Now, let’s take a closer look at each of these kinds of coverage.

Uninsured Motorist Bodily Injury Coverage (UMBI)

Uninsured motorist bodily injury coverage (UMBI) pays for the cost of medical bills, lost wages, pain and suffering, and funeral costs (though we hope that is never needed) in the event an uninsured driver causes an accident in which you’re the victim.

In some instances, this policy may pay out if you, as a pedestrian or bicyclist, are involved in an accident caused by an uninsured driver. Check with your insurance provider to confirm whether this might be covered.

UMBI typically does not have a deductible to meet; you would get full reimbursement of the costs.

Uninsured Motorist Property Damage Coverage (UMPD)

Uninsured motorist property damage coverage (UMPD) pays for the cost of repair bills for either your vehicle or property in the event either is involved in an accident caused by an uninsured driver.

Unlike bodily injury coverage, UMPD often requires the payment of a deductible when used. This is usually set by state law and typically is between $100 and $1,000.


💡 Quick Tip: If your car is paid off and worth only a few thousand dollars, consider updating your car insurance: You might choose to opt out of collision coverage and double down on liability.

Uninsured vs Underinsured Motorist Coverage

Here’s another kind of coverage you should know about: underinsured motorist coverage, which helps cover your costs if you’re involved in an accident where the party at fault has insufficient insurance coverage to pay for your medical costs.

Underinsured motorist coverage differs from uninsured motorist coverage in that it’s designed to cover any shortfalls in your costs due to the underinsured motorist’s inadequate insurance policy. By contrast, uninsured motorist coverage covers your bills due to the uninsured driver’s failure to purchase insurance.

Similar to uninsured motorist coverage, underinsured motorist coverage also comes in bodily injury and property damage variants. Both bodily injury and property damage coverage is usually packaged and sold together, though insurance policies may vary.

Underinsured motorist coverage is sold separately from uninsured motorist coverage, and states can have different coverage requirements for each. Check with your insurance provider to verify whether you need to purchase these separately.

Uninsured Motorist Coverage Limits

Your auto insurance quote will typically break down your uninsured motorist coverage limits into two numbers: a smaller dollar figure followed by a larger dollar figure, separated by a slash. For example, $100,000/$300,000.

This can also be expressed as follows:

•   $100,000 per person

•   $300,000 per accident

These two numbers represent the per person and per accident coverage limits of your uninsured motorist insurance. The per person limit is the maximum your insurance company will pay for any single individual injured in a covered accident. Conversely, the per accident limit is the maximum your insurance company will pay for a covered accident, regardless of how many injured people are in your party.

How Uninsured Motorist Coverage Limits Work

If you’re thinking, “But what exactly does that mean?” we hear you. Let’s spell out how this coverage would work. If you have a family of five that’s riding in a car and it gets hit by an uninsured driver, the maximum amount your insurance company will pay for their cumulative medical bills is $300,000, despite each individual’s coverage limit being $100,000.

If you’re ever involved in an accident caused by an uninsured driver where your costs exceed your coverage limits, in most cases, your health insurance policy will usually kick in to cover the balance. Consult your insurance providers for the specifics on your policies.

Recommended: How Much Auto Insurance Do I Really Need?

How Much Uninsured Motorist Coverage Do I Need?

The answer depends on whether your state requires uninsured motorist coverage. If it does, you must buy at least the state’s minimum (for more details, see below). Typically, this amount will match your liability coverage amounts. If your state does not require this kind of coverage, consider variables like the healthcare costs in your state and how much your vehicle is worth. Generally, uninsured motorist coverage is fairly affordable and is a worthy investment for some peace of mind.

According to the Insurance Research Council, approximately one in seven drivers on the road are uninsured. This figure is even higher in states like Mississippi and Michigan, where over 25% of drivers on the road are estimated to be uninsured.

Based on those figures, residents of higher risk states may be well-served by purchasing uninsured motorist coverage, while it might not be as high of a priority for residents of lower-risk states, like Massachusetts or New Jersey, where 3.5% and 3.1% of drivers respectively are estimated to be uninsured.

Now, let’s circle back to the states that do require this kind of policy. The table below lists the regulations regarding the minimum required uninsured and underinsured motorist coverage for each state.

Recommended: What Does Liability Auto Insurance Typically Cover?

Uninsured/Underinsured Motorist Coverage Requirements by State

Let’s take a look at the guidelines in every state, so you can see how much coverage may be required where you live. In each category, the amount shown is per person/per accident. When there is not a figure in an area of the chart, that means the insurance isn’t required.

State

 Uninsured Bodily Injury

 Uninsured Property Damage

 Underinsured Bodily Injury

 Underinsured Property Damage
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut $25,000/$50,000 $25,000/$50,000
Delaware
District of Columbia $25,000/$50,000 $5,000
Florida
Georgia
Hawaii
Idaho
Illinois $25,000/$50,000 $25,000/$50,000
Indiana
Iowa
Kansas $25,000/$50,000 $25,000/$50,000
Kentucky
Louisiana
Maine $50,000/$100,000 $50,000/$100,000
Maryland $30,000/$60,000 $15,000 $30,000/$60,000 $15,000
Massachusetts $20,000/$40,000
Michigan
Minnesota $25,000/$50,000 $25,000/$50,000
Mississippi
Missouri $25,000/$50,000
Montana
Nebraska $25,000/$50,000 $25,000/$50,000
Nevada
New Hampshire* $25,000/$50,000 $25,000 $25,000/$50,000 $25,000
New Jersey $15,000/$30,000
New York $25,000/$50,000
North Carolina $30,000/$60,000 $25,000 $30,000/$60,000 $25,000
North Dakota $25,000/$50,000 $25,000/$50,000
Ohio
Oklahoma
Oregon $25,000/$50,000
Pennsylvania
Rhode Island
South Carolina $25,000/$50,000 $25,000
South Dakota $25,000/$50,000 $25,000/$50,000
Tennessee
Texas
Utah
Vermont $50,000/$100,000 $10,000 $50,000/$100,000 $10,000
Virginia* $30,000/$60,000 $25,000 $30,000/$60,000 $25,000
Washington
West Virginia $25,000/$50,000 $25,000
Wisconsin $25,000/$50,000
Wyoming

*New Hampshire and Virginia do not require drivers to purchase auto insurance, but drivers who do choose to purchase auto insurance must have at least the minimum uninsured/underinsured motorist coverage amounts listed.

Recommended: 5 Steps to Switching Your Car Insurance

How Much Does Uninsured Motorist Coverage Cost?

Depending on how much uninsured motorist coverage you choose to purchase and your personal driving habits, your costs could be as little as $5 to $10 per month. This figure also tends to vary widely based on the overall percentage of uninsured motorists in your area, according to national insurance data.

Insurance premiums vary widely across drivers, states, and even insurance providers, so make sure you check around for a personalized quote.


💡 Quick Tip: Saving money on your fixed costs isn’t always easy. One exception is auto insurance. Shopping around for a better deal really can pay off.

The Takeaway

The prospect of being in an accident caused by an uninsured driver is a real concern, given the number of these motorists on the road. Adding uninsured motorist coverage to your auto insurance policy may be a good idea. In some states, it may even be required by law. For a relatively low cost, you can protect yourself from the possibility of being left with bills because another driver didn’t have enough insurance. The right package of car insurance policies is one way to protect yourself from unexpected circumstances.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

Photo credit: iStock/RyanJLane

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies 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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