Financial Topics Archives | Page 476 of 808

Sep

2023

Benefits, Drawbacks, and Options of a Self-Directed 401(k) Plan

By Brian O'Connell | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Self-directed 401(k) accounts aren’t as common as managed or target-date 401(k) plans, but they can be of real value for DIY-minded investors.

What is a self-directed 401(k)? These 401(k) plans — which may be employer-sponsored or available as a solo 401(k) for self-employed individuals — expand account holders’ investment choices, giving them more control over their own retirement plans. Instead of being limited to a packaged fund, an investor can choose specific stocks, bonds, mutual funds, and sometimes even alternative investments, in which to invest their retirement money.

What Is a Self-Directed 401(k) Account?

The key promise of self-directed 401(k) plans is control. They allow retirement plan savers to basically act as a trustee for their own retirement funds.

A self-directed 401(k) plan offers expanded investment choices, from stocks, bonds, funds, and cash, to alternative investments like Real Estate Investment Trusts (REITs) and commodities.

For a plan holder who believes they have the investment know-how to leverage better returns than a managed fund or target-date fund, a self-directed 401(k) can be an appealing choice.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

¹Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

Who Is Eligible for a Self-Directed 401(k)?

As long as your employer offers a self-directed 401(k), and you have earned taxable income for the current calendar year, you can enroll.

Alternatively, if you are self-employed and own and run a small business alone, with no employees (aside from a spouse), and your business earns an income, you are also eligible. You can search for a financial institution that offers self-directed plans, which might include a solo 401(k).

This is one of the self-employed retirement options you may want to consider.

How to Set Up a Self-Directed 401(k)

Setting up a self-managed 401(k) plan can be fairly straightforward. Once a 401(k) account is established, employees can fund it in the following ways:

• Plan transfer. An employee can shift funds from previous or existing 401(k) plans and individual retirement accounts (IRAs). However, Roth IRAs can’t be transferred.

• Profit sharing. An employee receiving funds from a company through profit sharing can use that money to open a self-directed 401(k) plan — up to 25% of the profit share amount.

• Direct plan contributions. Any income related to employment can be contributed to a self-directed 401(k) plan.

Recommended: How to Manage Your 401(k)

Pros and Cons of Self-Directed 401(k)s

Like most investment vehicles, self-managed 401(k) plans have their upsides and downsides.

Pros of Self-Directed 401(k) Plans

These attributes are at the top of the self-directed 401(k) plan “advantages” list:

• More options. Self-directed 401(k) plans allow retirement savers to gain more control, flexibility, and expanded investment choices compared to traditional 40k plans, putting their money exactly where they want — without relying on established funds.

• Tax deferral. Like regular 401(k) plans, all self-directed 401(k) plan contributions and asset gains are tax-deferred.

• Employee matching. Self-directed 401(k) plans make room for employer matching plan contributions, thus potentially paving the way for more robust retirement plan growth.

• Plan diversity. Account holders can invest in assets not typically offered to 401(k) plan investors. Alternative investments like real estate, gold, silver and other commodities, and private companies are allowed, thus lending additional potential for diversity to self-directed 401(k) plans.

Cons of Self-Directed 401(k) Plans

These caveats and concerns are most often associated with self-directed 401(k) plans:

• Higher-risk investments. Historically, alternative investments like precious metals and real estate come with more volatility — and hence more risk — than stocks and bonds.

• Diversification is on you. You’ll need to choose among stocks, bonds and funds to augment your self-directed 401(k) plan asset allocation.

• Higher fees. Typically, self-directed employer retirement plans cost employees more to manage, especially if an investor makes frequent trades.

• Larger time investment. Since self-directed 401(k) plans offer access to more investment platforms, savers will likely need to spend more time doing their due diligence to research, select, and manage (especially in the area of risk assessment) their plan options.

How Much Money Can be Put in a Self-Directed IRA?

The amount an investor can contribute to a self-directed IRA is the same as the amount that can be contributed to a traditional IRA savings account. For 2023, the limit is $6,500. Those aged 50 and older can also make an additional catch-up contribution of $1,000 in 2023.

For a self-directed 401(k), the amount that can be contributed is the same as the contribution limits for a traditional 401(k). For 2023, the limit is $22,500. For those age 50 and older, there is the option of making an additional catch-up contribution of up to $7,500. That means an individual 50 or older could contribute as much as $30,000 to a self-directed 401(k) in 2023.

Recommended: IRA vs 401(k)

Common Self-Directed 401(k) Investments

The ability to choose from an expanded list of investment categories is an intriguing benefit for a 401(k) plan holder who believes they have the investment know-how to leverage better returns from investments like self-directed 401(k) real estate, precious metals, or shares of private companies, among other eligible alternative investments.

For any retirement saver looking to leverage those options, the key is understanding what potential opportunities and what risks those extra self-directed investment vehicles bring to the table. Here’s a closer look at two of the more common alternative investments linked to self-directed 401(k) plans.

Real Estate Investment Trusts (REITs)

Investing in real estate simply means investing in residential or commercial properties, or real estate funds, with the goal of income generation. A self-directed 401(k) plan allows for real estate investing outside of the plan holder’s personal residence.

Examples of residential properties include:

• Single-family homes

• Condos

• Townhouses

Examples of commercial real estate include:

• Multi family homes

• Office or retail buildings

• Storage facilities and warehouses

To invest in real estate with a self-directed 401(k) plan, an investor would use their 401(k) funds to purchase the property, as well as to pay for maintenance, taxes, and other property-related expenses.

Real estate can be cyclical in nature, and can require large amounts of cash when investing in direct real estate properties. Thus, risk of investment loss is real and must be treated prudently by self-directed 401(k) real estate investors.

Precious metals

Investing in “hard commodities” like gold, silver, titanium, copper, zinc, and bronze, among other metals, are allowable with self-directed 401(k) plans. Self-directed 401(k) plan participants can either invest in precious metals directly, like buying gold bullion or coins, or invest in precious metals via stocks or precious metal funds.

Precious metal investing can be high risk, as gold, silver, and other metals can be highly volatile in value. As with real estate, investors have to be able to ride out chaotic market periods for commodities — but for some, the potential payoff may be worth it.

Investments That Aren’t Allowed Under Self-Directed 401(k) Plan Rules

While the list of investment vehicles that are included in a self-directed 401(k) plan are substantial, regulatory rules do prohibit specific investment activities tied to several of those asset classes. The following investment strategies and associated transactions, for example, would not pass muster in self-directed 401(k) plans.

Real Estate with Family Ties

While investing in real estate is allowed in a self-directed 401(k) plan, using that real estate for extended personal gain is not allowed. For example, that could include buying an apartment and allowing a family member to live there, or purchasing a slice of a family business and holding it as a 401(k) plan asset. Neither of these scenarios is allowed under 401(k) plan regulatory rules.

Loans

Self-directed 401(k) plan consumers may not loan any plan money to family members or sign any loan guarantees on funds used in a self-directed 401(k) plan.

No Investment Benefit Beyond Asset Returns

Self-directed 401(k) plan holders cannot earn “extra” funds through transactions linked to plan assets. For example, a plan holder can buy a real estate property under 401(k) plan rules but he or she cannot charge any management fees nor receive any commissions from the sale of that property.

Basically, a self-directed 401(k) plan participant cannot invest in any asset category that leads to that plan participant garnering a financial benefit that goes beyond the investment appreciation of that asset. That means not using 401(k) funds to purchase a personal residence or investing in assets like investments of collectibles (i.e. vehicles, paintings or jewelry or real estate properties that the plan participant personally uses.

Manage Your Retirement Savings With SoFi

While self-directed 401(k) plans can add value to a retirement fund, self-directed retirement planning is not for everyone.

This type of account requires more hands-on involvement from the plan holder than a typical target-date or managed fund might. Additionally, investing in alternative investments like precious metals, real estate, and other risk-laden investment vehicles, require a realistic outlook on downside risk and a healthy knowledge of how investments work beyond stocks, bonds, and funds.

In the meantime, you might want to consider rolling over any old 401(k) accounts to an IRA rollover to better manage your retirement savings overall.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

What is the difference between an individual 401(k) and a self-directed 401(k)?

A self-directed 401(k) gives account holders more investment choices, as well as more control over their own retirement plans. Instead of being limited to a packaged fund as they would be with an individual 401(k), an investor can choose specific stocks, bonds, mutual funds, and even alternative investments, in which to invest their retirement money.

Can I roll my traditional 401(k) into a self-directed 401(k)?

Yes. You can shift funds from a previous or existing 401(k) plan or individual retirement account (IRA) into a self-directed 401(k). The exception is a Roth IRA, which can’t be transferred.

How is a self-directed 401(k) taxed?

Like regular 401(k) plans, all self-directed 401(k) plan contributions and asset gains are tax-deferred until withdrawn. With self-directed 401(k)’s, there is a 10% tax penalty for early withdrawals (before age 59 ½), the same as with traditional 401(k)s.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

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Sep

2023

41 Things to Do With Your Tax Refund

By Pam O’Brien | Growing Wealth, invest, Investing | No Comments

If you got a tax refund this year, you may be tempted to spend it all on something fun. And, there’s certainly nothing wrong with that.

But before you get too impulsive, you may also want to think about how that refund might be able to help you get to the next level in life. In fact, smart use of your tax refund check may draw you closer to reaching financial security.

So what should you do with the refund you received? Read on for a mix of smart, practical, and also fun, ways to spend your tax refund.

How Should I Spend my Tax Refund?

With the average taxpayer getting a refund of roughly $3,000 for each of the past several years, you may have a nice lump sum of money to play with. Here are a whopping 41 “how should I use my tax refund?” ideas to consider for both your long-term and short-term financial goals.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

1. Unloading Your High-Interest Debt

If you have credit card or other high-interest debt, a tax refund can be a great way to reduce your balance, or even wipe it out completely.

Doing this will help you stop throwing money away on interest charges each month. And, if you manage to wipe out that debt completely, you’ll have one less financial responsibility to deal with monthly.

2. Starting an Emergency Fund

How are you fixed for life’s unexpected emergencies? If you were to lose your job, would you have about three-to-six months of living expenses at the ready? How about a car or home repair? Would you be able to cover that? Taking that tax refund and stashing it away in an emergency fund may save you in a pinch. Your future self may thank you.

3. Saving for Your Kid’s College Education

If you have kids, using your tax refund to start a 529 college savings plan could be a great first step toward dealing with the rising cost of college education. Money in these funds grows tax-free.

Additionally some states and 529 savings plans enable you to deduct your contributions from your state income taxes, so these contributions could save you tax dollars in the future.

4. Improving Yourself

When you get your tax refund, you could use it to make yourself more marketable to future employers. That could mean investing in additional or new career training, attending conferences, joining professional organizations, earning an MBA, or pursuing networking events.

This could all work toward creating a new you, and possibly a bigger paycheck with bigger tax refunds in the future.

5. Planning for Retirement

Does your company offer to match your retirement savings in your 401(k)? If so, you could take advantage of this “free money” by investing your tax refund in your retirement plan. Doing this could potentially increase your contribution level to maximize the benefit your employer offers.

If you don’t have a 401(k), you could use your tax refund to open an Individual Retirement Account (IRA), or add to an existing one, keeping in mind that there are annual limits to how much you can put into a retirement account each year.

6. Becoming a Homeowner

You could also use your tax refund to help fund a down payment on a new home. Offering a larger down payment will reduce your mortgage, which means you’ll pay less in interest. That could translate into lower monthly payments and paying less for the home overall.

7. Making Much-Needed Repairs

Already own a house? You might consider using your refund to make repairs and/or upgrades that could make your home more functional and also more re-sellable.

8. Starting an Investment Plan

If you’ve been putting off any serious investing until you have some available cash, now might be your chance. Of course, it’s important to do your research before making any investments, but this could be the time to start financially planning for the future.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

9. Paying Monthly Fees Up Front

Do you have subscriptions to streaming services? How about a gym membership? If possible, you could pay the annual fee in one fell swoop, which is often cheaper than paying month-to-month. It will also mean one or two less bills to pay each month.

10. Gifting a Loved One

The IRS sets a limit on the gifts you are able to give to family members and others without having to pay a gift tax. That limit is $18,000 for 2024 and $17,000 for 2023 per recipient.

This means that you can give the person up to that much without triggering taxes.

11. Going on Vacation

If you’re thinking about what to do with a tax refund that might also be fun, consider taking a trip with some of the money. Then, you won’t get stuck paying for your vacation on a credit card like you might have in the past — and potentially paying even more due to interest charges.

12. Buying Things That Will Save You Money

If only you had a smart thermostat in your home, you could save on your electricity, A/C, and heating every month. Or, if you got a good oven, you would cook more and wouldn’t eat out as much. If you purchased a set of weights, you could cancel your expensive gym membership. You may want to think about ways you can spend your tax refund that will end up saving you money on an everyday basis, and then make those investments.

13. Making Appointments You’ve Been Putting Off

When thinking about what to do with your tax refund, you might consider spending it on services that you may have been delaying but could improve your life. For instance, if you’ve had some back pain and need to get it checked out, you could use the money to see your doctor or chiropractor. Using your tax refund to take care of your health is generally always a good idea.

14. Funding Your Business Idea

Have you always wanted to start a small business? Then now may be the time. When you’re thinking about what to do with a tax refund, you might want to put it toward getting your business up and running. You may even be able to avoid taking out a loan to start your venture.

15. Donating It

If there’s an organization you believe in and want to support, you might consider donating your tax refund to that group. You’ll not only be doing good, but you may also be able to deduct your donation on your taxes next year for a win-win.

16. Making Extra Mortgage Payments

If you’re contemplating what to do with your tax return, you could always make extra payments towards your mortgage (just be sure it goes toward the principal, not interest). Reducing your principal can help you save significant money in interest over the long haul.

17. Purchasing Life Insurance

Signing up for a term life policy when you have the resources to do so can be a smart idea, especially if you are married and/or have children. That way, you will know that your loved ones are protected should anything happen to you.

18. Hiring an Estate Planning Attorney

This is another way you can plan for the future. If you have a spouse or young children, an estate planning attorney can help you devise an estate plan that protects them in the event that you pass away. This could include designating guardians and setting up a trust for your children.

19. Purchasing Renter’s Insurance

While your landlord is protected if something happens to their property, you are not. If you’re thinking about what to do with your tax refund that could save you money in the long run, you might consider buying a renter’s insurance policy.

This kind of policy will typically cover the cost of your belongings should anything happen, and also help protect you if someone gets injured in your home, since they can make a claim with the insurance company instead of coming after you.

20. Paying for a Subscription-Canceling Service

A subscription-canceling service can help you figure out which subscriptions you can cancel, and may even be able to negotiate with your service providers to lower your monthly bills. The fee for this service might ultimately save you money — not to mention all that time you would have spent on hold trying to do this yourself.

21. Taking a Class

Education can improve your life in so many ways. You could take a class in a subject that interests you, or to learn a new hobby, like photography or watercolor painting. If you look for courses at your local community college or adult ed program, you may be able to save significantly on tuition.

22. Hiring a Financial Advisor

If you don’t know what to do with money when it comes to saving, investing, and becoming financially stable, you may want to use your tax refund to hire a financial advisor. To find an advisor, you can ask family and friends for recommendations. You can also consult industry associations, such as the National Association of Personal Financial Advisors and the Financial Planning Association.

23. Signing Up for a Meal Subscription Service

Do you eat out all the time? Then it might make sense to put your tax refund towards a meal service that sends you ingredients and simple recipes each week. While it’s typically not as cheap as going to the grocery store, these services can make cooking at home easy and convenient. Eventually, after you learn some good recipes, you can likely cancel and switch to completely DIY meals instead.

24. Saving for Holiday Gifts

During the holidays, are you always short on cash to buy gifts for your family and friends? Even if you get your tax refund early, you might want to put some of it aside in an interest-bearing account until your favorite stores and websites are running sales. For example, you can save big by waiting for Amazon Prime Day, Black Friday, or Cyber Monday.

25. Investing in Your Health

When it comes to what to do with a tax refund, you might want to use it to improve your health and wellness. You could sign up for a gym, hire a nutritionist, purchase exercise equipment, or get a personal trainer. You may end up saving much more in the long run on your healthcare bills.

26. Investing in Your Children’s Needs

If your children need new clothes or school supplies, or you think they could benefit from summer camp or after-school lessons, then you may want to put your tax refund towards those costs.

27. Investing in Your Pets

Does your dog need a teeth cleaning? Have you been putting off getting your cat an MRI because it’s too expensive? Then you could finally take care of some of their needs with your tax return. You could also purchase pet insurance, which could save you money on your vet bills.

28. Purchasing a Car

Is your car always breaking down? Does it guzzle gas? Do you normally use Ubers? Then purchasing a new or used car with your tax refund could save you money over time. If you currently rely on public transportation, owning a car can also open you up to new job opportunities that may have been inaccessible before.

29. Paying Off Your Car Loan

If you’re wondering what to do with a tax refund, you could always make advance payments on your car loan. If you’re paying high interest every month, paying the loan off early could save you significant money. And, if you pay it off in full, you won’t have to worry about that annoying monthly payment anymore.

30. Investing in a Second Income Stream

You can take your tax refund and start making money with it by investing in a new income stream. For example, you could start drop shipping with Amazon, which involves buying items at a discount from a wholesaler then selling them at a profit. Or, you could fix up your spare bedroom and start renting it out on Airbnb.

31. Investing in REITs

If you want to start investing in real estate but don’t have the funds to buy a property, you could invest in real estate investment trusts (REITs) instead. REITs are companies that own, operate, and finance real estate that produces an income. If you put your money into the right REIT, you may see healthy returns. Just remember that no investment is risk-free. Research the pros and cons of REITs before you decide to go this route.

32. Investing in Crowdfunded Real Estate

Another way to get into real estate with your tax refund is to consider investing in crowdfunded real estate. On crowdfunded real estate platforms, you can generally invest for less and potentially reap the benefits of buying into the real estate market. However, there is also the possibility you could lose money, so weigh the benefits and drawbacks carefully. If you decide to go ahead, just be sure to thoroughly investigate any platform before investing on it.

33. Funding a Startup

While investing in startups can definitely be very risky, the rewards could potentially be high. When you’re looking into what to do with a tax refund, you might want to check out services that let you invest in small businesses. Again, make sure you do due diligence and check out the service fully before you sign up with it.

34. Saving for Next Year’s Tax Payment

If you do freelance work or you’re an independent contractor, you may have to make estimated payments every quarter. You could get a head start on your taxes by saving your refund and then using it to make those estimated payments on time.

35. Hiring an Accountant

If you believe you could have gotten a higher tax refund this year, then you may want to put aside your refund so you can use it to hire a good accountant to help you file next year’s tax return. The additional tax savings could far exceed the accountant’s fee.

36. Moving to a Better Rental

In the past, it may have been hard to move to a better rental because you didn’t have the funds necessary — like the first and last month’s rent and security deposit — to make it happen. Now that you have your refund, you might be able to make it a reality. You’ll want to make sure, however, that the rent works with your budget.

37. Getting Dental Insurance

You may have been delaying going to the dentist because it’s too expensive. Or, you might need dental work done, but can’t afford it. If so, you may want to put your tax refund towards purchasing dental insurance for the year. Then, you can take care of your teeth.

38. Buying New Clothes

The right clothes can make a big difference in your day. You not only have to wear the right clothes in a professional setting, but being comfortable in what you’re wearing can give you more confidence as well. It can be a good idea to look for deals, however, so you don’t spend your entire tax refund on a fancy pair of shoes or designer coat.

39. Purchasing Stocks

While investing in the stock market can be risky, if you buy shares in a company with a solid track record that pays dividends, you may end up making money on dividends as the company grows. You can always talk with your financial advisor about how to carefully invest in stocks.

40. Investing in Bonds

If you want to invest your tax refund, but don’t have much tolerance for risk, you might consider investing the money in bonds such as Treasury bonds. These are fixed-income investments that typically make regular interest payments to investors. On the maturity date, your principal investment will be returned to you.

41. Pampering Yourself

Whether you filed on time or missed the deadline and filed late, tax time can be stressful. If you have some tension to work out, you may want to use some of your refund to reward yourself for getting it all done. You could get a massage to help release tension in your shoulders, or splurge on a day at the spa.

The Takeaway

While your tax return may feel like “free money,” it’s really your money given back to you by the government. Uncle Sam was merely holding on to it for a while. It’s yours, so it can be a good idea to be smart with it. For instance, you could use it to save for a house or to invest in your future.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Invest with as little as $5 with a SoFi Active Investing account.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

Sep

2023

Why Making Minimum Student Loan Payments Isn't Enough

Minimum Student Loan Payments (And Why You Should Try to Pay More)

By Kayla McCormack | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

The Debt Ceiling Bill signed into law in June 2023 finally brought an end to the federal student loan payment pause, with payments resuming on October 1, 2023 (and interest accrual resuming a month earlier). The result is that millions of federal student loan borrowers — at least, those not taking advantage of the student loan “on-ramp” — will need to begin making minimum payments again as of October 1. However, some borrowers may opt to make more than the student loan minimum payment so that they can expedite the repayment process on their loan.

What Is the Minimum Payment on Student Loans?

The minimum payment on student loans is the lowest amount of money a borrower can pay each month. The actual student loan minimum payment amount owed each month might be determined by factors including the loan type, interest rate, and the repayment plan. Generally, the minimum monthly payment includes the principal (the original amount borrowed), interest, and fees.

For federal student loans, the minimum monthly payment depends on the repayment plan a borrower is on, as follows:

Standard Repayment Plan: On this plan, your payments are a fixed minimum amount of at least $50 a month, and your loans are paid off within 10 years.

Saving on a Valuable Education (SAVE) Plan: With SAVE, a new income-driven repayment (IDR) plan introduced by President Biden in late June 2023, borrowers with undergraduate federal student loans will get the lowest monthly payments of any IDR plan. For those who are single and make $32,800 a year or less and for families of four who make $67,000 or less annually, the minimum monthly payment is $0 (meaning they owe no loan payment). Those who earn more than those amounts will save at least $1,000 a year on the SAVE plan compared to current IDR plans.

Pay As You Earn (PAYE) Plan: Under the PAYE plan, borrowers’ payments are 10% of their discretionary income and are also based on their family size. With PAYE, their payment could be as low as $0 per month, and they won’t owe more monthly than they would have on the Standard Repayment Plan.

Income-Based Repayment Plan: Borrowers on this plan need to have a high debt-to-income ratio in order to be eligible. Their monthly payments will be 10% to 15% of their discretionary income, and could be as low as $0. Borrowers won’t owe more monthly than they would have paid on the Standard Plan.

Income-Contingent Repayment Plan: Borrowers with Direct loans who are eligible for this plan will have monthly payments that are the lesser of 20 percent of their discretionary income or the amount they would pay on a fixed repayment plan over 12 years, adjusted for their income. Their payments may be as low as $0 a month.

Graduated Repayment Plan: With this plan, a borrower’s monthly payments are lower at first and then increase, usually every two years. The monthly amounts they will pay will be enough to repay their loans within 10 years.

Extended Repayment Plan: For those on the Extended plan, their payments may be fixed or graduated, and the amount they pay each month will be enough to ensure their loans are paid off in 25 years. Their payments will be lower on this plan than they would be on the Standard or Graduated plans.

You can use the Federal Student Aid’s Loan Simulator to help calculate how much you’ll owe and find the best repayment plan option for your situation.

Can I Pay More Than The Minimum on Student Loans?

It’s possible to make more than the minimum payment on student loans without being charged for any prepayment penalty fees. Both federal student loans and private student loans are required to allow borrowers to make extra payments and pay off their loan early without charging any additional fees.

Making extra payments can help decrease the interest paid and help reduce the overall cost of the loan. Typically, you can contact your lender to specify that the extra payment be applied to your highest interest loan and be applied to the principal value of the loan.

Making payments directly to the principal value of the loan can help speed up repayment. And, because most student loan interest is charged per day, making additional payments on the principal value of the loan can help reduce the amount you pay in interest over the life of the loan.

💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Why Would You Pay off Your Student Debt Sooner?

As with any debt, a primary motive for paying off student debt early is to more quickly remove debt that’s racking up interest. Prioritizing debt repayment could help lower your debt to income ratio and could help you reduce the amount of money you owe in interest over the life of the loan. Here are a few reasons you may want to pay off your student loans sooner rather than later.

Interest. Interest. Interest.

Interest continues to accrue for the life of most student loans. (Note: The timetable of when interest starts to accrue on your student loans depends on the type of student loans you’ve been awarded. Contact your lender for all the details.) The sooner you pay off your loans, the sooner you stop interest from accruing.

Student loan interest does qualify for a tax deduction. But only $2,500 of the interest can be deducted each year — less if your modified adjusted gross income is greater than $70,000 a year.

Your Debt-to-Income Ratio May Be Lowered

When borrowing a mortgage or a car loan, the lender will usually consider the applicant’s debt-to-income ratio. And the lower it is, the better it looks from a financial perspective. Do you need a new car? Want to buy a house? Start a family? The sooner you get your student loan debt paid off, the more money you will likely have to put toward those dreams being realized.

Your Credit Score Could Strengthen

Your FICO® credit score is a powerful component of your total financial picture; tend it like a garden, and it could grow. There’s something to be said for the fact that if you’re managing an open debt responsibly by making on-time payments, that may have a positive impact on your credit score. And a higher FICO® score can help you get a better interest rate on a loan you might need for a home or car.

It’s Easier to Save Money When You’re Not Paying Down Debt

The conventional wisdom is the less debt you have, the more money you likely have to save. Think of successfully managing and paying off debt as a necessary exercise routine, like working your core. As your financial “core” gets stronger, you’re likely to become better able to balance your finances and save more money.

When you’ve repaid your student loans, the money you were spending each month on loan payments can instead be used to help you reach financial goals like starting an emergency fund, saving for a down payment on a house, or more.

💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.

How to Accelerate Your Student Loan Payments

You may be able to pay off your student loan debt more quickly by setting reasonable goals, including payments larger than the student loan repayment minimum required. As mentioned, both federal and private student loans generally allow for penalty-free prepayment but be sure to contact your loan provider before doing so to ensure your prepayments are being applied in the way that you want them to be. Here is a checklist that may help you eliminate your student loan debt sooner.

Calculating Your Costs

Make a list or spreadsheet of all your student loans. You can use a student loan calculator to help determine how much you ultimately owe (including interest) and when, ideally, you’d like to complete your student loan payments.

Making a Budget

Track your spending and make a realistic budget of your monthly and annual expenses. And leave some wiggle room for unexpected expenditures. Be honest with yourself. If you feel you’re spending too much on unnecessary expenses, maybe it’s time to skip your next urge to splurge.

Setting Manageable Goals

Now that you know how much money you have coming in and where it’s going, it might be time to make some uncomfortable, but fair, spending decisions with the intention of eliminating your student loans by your goal date. That means you may want to sacrifice some unnecessary expenses. Cutting back on non-necessities isn’t fun, but it may make it easier for you to save.

Paying Beyond the Minimum Required

As we mentioned, you can accelerate your loan payoff by paying more than the minimum student loan payment required by your loan provider. It’s okay to start small — even an extra $25 a month can start to add up. Paying more each month can also save you money on interest. You can ask your loan provider to put that extra cash toward the principal.

Avoiding Late Fees

An easy way to help ensure you pay at the same time every month is to set up an auto-draft from your checking or savings account. Some lenders may even offer a rate discount to student loan borrowers who enroll in automatic payments.

Maximizing “Surprise” Money

Are you doing so well at work that you got a raise or bonus? Rather than splurging on something new, lighten the burden of your current reality by putting that money toward your student loan debt.

Finding Extra Work

Every little bit of extra income can help. A part-time job could get you closer to your goal more quickly. If fitting in an extra 15 or 20 scheduled hours a week isn’t feasible, try finding a side hustle where you can make your own hours. You can work as a dog walker, become a rideshare driver, or even recharge electric scooters — all through an app.

Refinancing Your Student Loans

Refinancing your student loans might offer yet another step closer to your goal. Student loan refinancing is when you borrow a new loan (which is used to pay off your original loans) at a new interest rate and/or a new loan term.

One potential benefit of refinancing is the possibility of securing a lower interest rate. You could also potentially shorten your loan repayment term. But opting to shorten your loan term generally means paying more each month.

If you have a combination of private and federal loans, it’s possible to roll them into a single refinanced loan, which means having one monthly payment instead of multiple payments to multiple lenders. This is what is known as loan consolidation.

However, it’s very important to understand that by refinancing your federal loans, you lose federal student loan protections such as deferment and forbearance, and access to income-driven repayment programs. Take this into very careful consideration before moving forward with student loan refinancing with a private lender.

The Takeaway

Making more than the minimum student loan payments each month can help borrowers speed up their loan repayment and spend less in interest over the life of their loan. Lenders generally do not charge any fees for prepayment. To make the most of your extra payments, contact your lender to be sure they are being made to the principal value of the loan.

Refinancing could be another option for some borrowers to consider if they are interested in securing a lower interest rate on their loan — and provided that they don’t need access to federal programs or protections.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What happens if I only pay the minimum on my student loans?

Making the minimum monthly payments on your student loan will generally result in your loan being paid off according to the original terms of the loan.

Is it worth paying off student loans early?

Paying off student loans ahead of schedule can make borrowing less expensive, because the borrower will likely spend less in interest over the life of the loan. Repaying student loans early could also have benefits like improving an individual’s debt-to-income ratio. Without the burden of student loans, borrowers might also be able to focus on other financial goals.

What is the average minimum student loan payment?

A borrower’s average monthly minimum federal student loan payment depends on factors including the total amount they owe, their interest rate, and the type of payment plan they’re enrolled in. For instance, on the Standard Repayment Plan, your payments are a fixed minimum amount of at least $50 a month.

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.

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.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

SOSL0723011

Sep

2023

What Happens if You Just Stop Paying Your Student Loans

By Lisa Moran | Student Loans, student_loan | No Comments

If your student loan payments seem overwhelming, you’re not alone. U.S. borrowers owe a combined $1.77 trillion in student loan debt, and one in ten Americans has defaulted on a student loan, according to the Education Data Initiative.

And now, for the first time in a long time, many student loan borrowers are faced with making payments again. The reason: The end of the three-year pause on federal student loan payments, which requires interest accrual to resume on September 1, 2023 and payments to resume on October 1, 2023. This resumption in federal student loan payments was part of the debt ceiling bill that President Biden signed into law in early June 2023.

In addition, the Supreme Court’s ruling against the President’s plan to forgive up to $20,000 in federal student loan debt means that student loan borrowers who may have been hoping for that forgiveness now don’t have that option.

You may be thinking, I haven’t paid my student loans in years – do I really have to start now? What happens if I just don’t pay?

The answer is that borrowers do indeed have to start paying their student loans again, and simply not paying can have consequences. Late or missed “delinquent” payments can make it harder to get a credit card, car loan, or apartment lease. And if you default on a loan, the balance of the loan will become immediately due, your wages may be garnished, and your tax refund can be withheld, among other serious consequences.

There are several options that can help you avoid defaulting on your student loan, such as deferment, forbearance, and income-driven repayment plans. Here’s what to know before you stop making payments on your student loans.

Table of Contents

Do Student Loans Ever Go Away?
Is There a Student Loan Statute of Limitations?
Is Getting Out of Paying Student Loans Possible?
The Takeaway

Key Points

• Stopping student loan payments can lead to delinquency and default, affecting credit and future loan approvals.

• Delinquent payments can hinder the ability to secure credit cards, car loans, or apartment leases.

• Defaulting on a loan triggers the entire balance due, potential wage garnishment, and withholding of tax refunds.

• Several options like deferment, forbearance, and income-driven repayment plans can prevent default.

• It’s essential to compare these options to determine the best course for managing student loan debt.

Do Student Loans Ever Go Away?

The short answer to the question of do student loans ever go away? is no, unless you’re part of the Public Service Loan Forgiveness Program. Unlike other forms of debt, such as home and auto loans, student loans generally cannot be discharged during bankruptcy. Borrowers are still required to repay student loans even if they don’t graduate or are struggling to find a job.

So what happens if you don’t pay student loans? In addition to the interest that accrues over time and increases in the amount you owe, failing to repay a student loan on time can result in additional fees if your debt gets moved into collections.

Because on-time payments account for a portion of a borrower’s credit score, failing to make payments can negatively impact a person’s credit score. Having a low credit score can impact your ability to get a mortgage, car loan, credit card, or apartment lease.

If you default on federal student loans, the government can take your tax refund or up to 15% of your wages. You can also be sued, though this is more common with private loans.

💡 Quick Tip: Often, the main goal of refinancing student loans is to lower the interest rate — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Is There a Student Loan Statute of Limitations?

There is no statute of limitations for federal student loans. That means you can be sued at any point for not paying your loans.

There is a statute of limitations for private student loans, which is set by individual states and generally ranges from three to 10 years. But even this limit just means the lender can’t sue you anymore — it doesn’t mean the loan goes away or they stop trying to collect what is owed.

Take control of your student loans.
Ditch student loan debt for good.

Is Getting Out of Paying Student Loans Possible?

There are options that allow borrowers to temporarily stop making student loan payments. Here’s what happens if you don’t pay your student loans because you’ve been approved for one of these plans.

Relief for Federal Student Loans

If you have federal student loans, the end of the federal payment pause requires payments to resume on October 1, 2023. To help borrowers, the Department of Education is launching a 12-month “on-ramp” to repayment, running from October 1, 2023 to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

Federal student loan borrowers can also temporarily pause payments by requesting a deferment or forbearance. You might qualify if you’re still in school at least part-time, unable to find a full-time job, facing high medical expenses, or dealing with another financial hardship. The type of loan held by the borrower will determine whether they can apply for a deferment or forbearance.

Federal student loans can be deferred for up to three years. There are two types of forbearance; general and mandatory. Borrowers facing financial difficulties can request a general forbearance, and their loan servicer determines whether they qualify. General forbearance is awarded in 12-month increments and can be extended for a total of three years.

You can temporarily pause payments on your federal loans by requesting a deferment or forbearance.

Loan servicers are required to award qualifying borrowers a mandatory forbearance. Qualifications include participating in AmeriCorps, National Guard duty, or medical or dental residency. The Federal Student Aid website has a full list of criteria for mandatory forbearance. Mandatory forbearances are also granted in 12-month increments but can be extended so long as the borrower still meets the criteria to qualify for mandatory forbearance.

Borrowers who enroll in an income-based repayment plan can qualify to have their loan balance forgiven after a certain amount of time; the amount of time depends on the plan. (Keep in mind, you’d still have to pay taxes on the amount forgiven.)

For instance, under President Biden’s new SAVE Plan, which is based on income and family size, qualifying federal student loan borrowers with undergraduate federal loans can get their monthly payments reduced by half — from 10% to 5% of their discretionary income.

In rare cases, certain loans can be canceled or discharged, if your school closes while you’re enrolled or you are permanently disabled. For obvious reasons, these aren’t options to count on, so you can assume your loans will be sticking with you.

💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

Consequences of Defaulting on Your Student Loans

As mentioned earlier, what happens when you stop paying student loans is that the loan is at risk of going into default. The national default rate was 2.3% for fiscal year 2019 (the most recent year for which numbers are available), according to the U.S. Department of Education. (Because of the pause on federal student loans payments during the pandemic, the default rate dropped significantly from 7.3% in 2018.)

There are serious financial repercussions for defaulting on a student loan.

For federal student loans, if a borrower fails to make payments for more than 270 days on a loan from the William D. Ford Federal Direct Loan Program or the Federal Family Education Loan Program, the loan will go into default. (For loans made under the Federal Perkins Loan Program, the loan can be declared in default after the first missed payment.)

At this point, the balance of your loan becomes due immediately through a process called “acceleration.” You’ll also lose eligibility for federal programs such as deferment, forbearance, income-driven repayment plays, and additional federal aid.

Recommended: Student Loan Refinancing Guide

Your wages may be garnished (meaning that your employer may be required to hold back a portion of your paycheck) and any tax refunds or federal benefit payments may be withheld.

Defaulting on a student loan will damage your credit rating and you may not be able to buy or sell certain assets, such as real estate. If your loan holder sues you, you may also be charged related expenses such as attorney fees.

Temporary Relief for Private Student Loans

Private lenders sometimes offer relief like forbearance when you’re dealing with financial hardship, but they aren’t required to. If you have a private student loan, check with your lender directly to see what temporary relief programs or policies they may have.

Private student loans generally go into default after 90 days. Private lenders may also take you to court or use collection agencies to collect your student loan debt. Whether you have federal or private student loans, contact your loan servicer immediately if your loan is delinquent so you can understand what options are available to you before your loan goes into default.

The Takeaway

Because student loans don’t disappear, it’s important to stay on top of payments, especially with federal student loan payments resuming on October 1, 2023. Borrowers with federal student loans may be able to take advantage of the Department of Education’s 12-month on-ramp to repayment until September 30, 2024. Or they might qualify for deferment, forbearance, or income-based repayment options which can provide some temporary relief or help make monthly payments more manageable.

Options available for borrowers facing financial hardships with private student loans vary by lender.

For some borrowers, student loan refinancing may be a way to lower interest rates, reduce monthly payments, and combine all your loans into a single monthly payment. Reducing monthly student loan payments by extending the life of the loan may result in more interest over the life of the loan. If you qualify for a lower interest rate, you could save money over the life of the loan.

It’s also possible to refinance both federal or private loans, or a combination of the two. However, it’s very important to understand that if you refinance federal loans, you’ll lose access to federal benefits and protections, including deferment, forbearance, income-driven repayment, and loan forgiveness for public service, so it’s not recommended for borrowers who are planning to take advantage of those programs.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

Sep

2023

How to Get Out of Student Loan Debt: 6 Options

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

Dealing with substantial student loan debt can be overwhelming, especially if you find yourself struggling to make your payments.

Fortunately, there are some options that may help minimize the amount of money you pay back on your federal student loans, such as the Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) programs.

When trying to figure out how to get rid of student loans, it’s important to understand that you might be able to reduce your monthly payment with a student loan refinance. Or you may be able to temporarily postpone your federal loan payments through deferment or forbearance.

Table of Contents

Loan Forgiveness Programs
Income-Driven Repayment Plans
Disability Discharge
Temporary Relief: Deferment or Forbearance
Student Loan Refinancing
Filing for Bankruptcy: A Last Resort

Key Points

• Federal programs like Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) can reduce or eliminate federal student loan debt.

• Refinancing student loans may lower monthly payments and total interest paid.

• Deferment or forbearance options allow temporary suspension of federal loan payments.

• Disability discharge is available for federal student loans if the borrower has a permanent disability.

• Bankruptcy is a last resort for discharging student loans, requiring proof of undue hardship.

Options to Get Out of Repaying Student Loans Legally

1. Loan Forgiveness Programs

Depending on your eligibility, there are a few different federal loan forgiveness programs available to borrowers with federal student loans. These programs could help you get out of paying a portion of student loan debt as they forgive your loan balance after a certain number of years.

President Joe Biden proposed a federal student loan debt cancellation of up to $20,000 for those who met household income eligibility. However, the Supreme Court ruled against Biden’s plan, saying the president did not have the necessary authority to take such action. Since then, President Biden has announced various programs to provide relief for those carrying federal loans, along with calling attention to existing plans.

Each forgiveness program has different eligibility criteria.

Teacher Loan Forgiveness

This federal student loan forgiveness program forgives the loans of highly qualified teachers. Depending on the subject area they teach, teachers who meet the eligibility requirements may have up to $17,500 or up to $5,000. Teachers are eligible to apply for this loan forgiveness program after they have completed five years of service.

Public Service Loan Forgiveness

This program is designed for those working in public service. In order to qualify, applicants must meet the programs eligibility requirements, including:

• Work for a qualified employer

• Work full-time

• Hold Direct Loans or have a Direct Consolidation Loan

• Make 120 qualifying payments on an income-driven repayment plan

Borrowers who are interested in pursuing PSLF will have to follow strict requirements in order to qualify and have their loan balances forgiven.

Take control of your student loans.
Ditch student loan debt for good.

2. Income-Driven Repayment Plans

Income-driven repayment plans for federal student loans tie a borrower’s monthly loan payments to their income and family size.

The repayment period for income-driven repayment plans varies from 20 to 25 years. While these plans help make loan payments more affordable for borrowers, extending the loan terms may result in accruing more interest over the life of the loan.

President Biden has announced the creation of the Saving on a Valuable Education (SAVE) Plan , which replaces the existing Revised Pay As You Earn (REPAYE) Plan. Borrowers on the REPAYE Plan will automatically get the benefits of the new SAVE Plan.

The SAVE Plan, like other income-driven repayment (IDR) plans, calculates your monthly payment amount based on your income and family size. According to the White House, the SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers.

Starting next summer, borrowers on the SAVE Plan will have their payments on federal undergraduate loans cut in half (reduced from 10% to 5% of income above 225% of the poverty line).

A beta version of the updated IDR application was made available in early August 2023 and includes the option to enroll in the new SAVE Plan. The DOE says that if you apply for an IDR plan (such as the SAVE Plan) in the summer of 2023, your application will be processed in time for your first federal student loan payment due date.

3. Disability Discharge

When working out how to get rid of student loans, take into account that It may be possible to have federal student loans discharged if you have a permanent disability. To be eligible for the disability discharge, you need to show the Department of Education that you are not able to earn an income now or in the future because of your disability.

To do so, you need to get an evaluation from a doctor, submit evidence from Veterans Affairs, or show that you are receiving Social Security Disability Insurance. You cannot apply for disability discharge until you have been disabled for 60 months unless a doctor writes a letter saying that your disability and inability to work will last at least 60 months.

4. Temporary Relief: Deferment or Forbearance

Federal student loan repayment was put on pause over three years ago due to the Covid-19 shutdown. As part of the agreement reached in the Debt Ceiling bill, the Department of Education’s student loan forbearance program ends in 2023, with interest resuming on September 1, 2023 and payments due beginning in October 2023.

However, in late June, President Biden announced the creation of the On-Ramp Program . The Department of Education is instituting a 12-month “on-ramp” to repayment of federal student loans, running from October 1, 2023 to September 30, 2024, so that “financially vulnerable borrowers” who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.

Apart from the On-Ramp Program, forbearance and deferment both offer borrowers the ability to pause their federal student loan payments if they qualify.

Depending on the type of loan you have, interest may continue to accrue even while the loan is in deferment or forbearance. However, applying for one of these options can help borrowers avoid missed payments and potentially defaulting on their student loans.

Note that private student loans don’t offer the same benefits as federal student loans, but some may offer their own benefits.

5. Student Loan Refinancing

This option won’t get rid of your student loans, but it could help make student loans more manageable. By refinancing your student loans, you can potentially qualify for a lower interest rate, which can possibly lower your monthly payments or save you money on interest over the life of your loan.

If you refinance with a private lender, you can also change the length of your student loan. While private lenders can refinance both your federal and private student loans, you do lose access to the protections that federal student loans provide, such as income-based repayment programs, on the amount that is refinanced.

6. Filing for Bankruptcy: A Last Resort

Bankruptcy is a legal option for the problems caused by people struggling with how to take out student loans. However, it is rare that student loans are eligible for discharge in bankruptcy. In some instances, if a borrower can prove “undue hardship,” they may be able to have their student loans discharged in bankruptcy.

Filing for bankruptcy can have long-term impact on an individual’s credit score and is generally a last resort. Before considering bankruptcy, review other options, such as speaking with a credit counselor or consulting with a qualified attorney who can provide advice specific to the individual’s personal situation.

The Takeaway

When you are learning how to take out student loans, the future debt may not be obvious. It can be challenging to pay student loan debt, but there are options that can temporarily reduce or eliminate your payment. It is only in extremely rare circumstances that student loans can be discharged in bankruptcy.

For federal student loans, some options that can help alleviate the burden of student loan debt include deferment or forbearance, which may be helpful to those who are facing short-term issues repaying student loans. Another avenue to consider may be income-driven repayment plans, which tie a borrower’s monthly loan payments to their income, helping make monthly payments more manageable.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

SOSL0723003

Benefits, Drawbacks, and Options of a Self-Directed 401(k) Plan

What Is a Self-Directed 401(k) Account?

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

Who Is Eligible for a Self-Directed 401(k)?

How to Set Up a Self-Directed 401(k)

Pros and Cons of Self-Directed 401(k)s

Pros of Self-Directed 401(k) Plans

Cons of Self-Directed 401(k) Plans

How Much Money Can be Put in a Self-Directed IRA?

Common Self-Directed 401(k) Investments

Real Estate Investment Trusts (REITs)

Precious metals

Investments That Aren’t Allowed Under Self-Directed 401(k) Plan Rules

Real Estate with Family Ties

Loans

No Investment Benefit Beyond Asset Returns

Manage Your Retirement Savings With SoFi

FAQ

What is the difference between an individual 401(k) and a self-directed 401(k)?

Can I roll my traditional 401(k) into a self-directed 401(k)?

How is a self-directed 401(k) taxed?

41 Things to Do With Your Tax Refund

How Should I Spend my Tax Refund?

1. Unloading Your High-Interest Debt

2. Starting an Emergency Fund

3. Saving for Your Kid’s College Education

4. Improving Yourself

5. Planning for Retirement

6. Becoming a Homeowner

7. Making Much-Needed Repairs

8. Starting an Investment Plan

9. Paying Monthly Fees Up Front

10. Gifting a Loved One

11. Going on Vacation

12. Buying Things That Will Save You Money

13. Making Appointments You’ve Been Putting Off

14. Funding Your Business Idea

15. Donating It

16. Making Extra Mortgage Payments

17. Purchasing Life Insurance

18. Hiring an Estate Planning Attorney

19. Purchasing Renter’s Insurance

20. Paying for a Subscription-Canceling Service

21. Taking a Class

22. Hiring a Financial Advisor

23. Signing Up for a Meal Subscription Service

24. Saving for Holiday Gifts

25. Investing in Your Health

26. Investing in Your Children’s Needs

27. Investing in Your Pets

28. Purchasing a Car

29. Paying Off Your Car Loan

30. Investing in a Second Income Stream

31. Investing in REITs

32. Investing in Crowdfunded Real Estate

33. Funding a Startup

34. Saving for Next Year’s Tax Payment

35. Hiring an Accountant

36. Moving to a Better Rental

37. Getting Dental Insurance

38. Buying New Clothes

39. Purchasing Stocks

40. Investing in Bonds

41. Pampering Yourself

The Takeaway

Minimum Student Loan Payments (And Why You Should Try to Pay More)

What Is the Minimum Payment on Student Loans?

Can I Pay More Than The Minimum on Student Loans?

Why Would You Pay off Your Student Debt Sooner?

Interest. Interest. Interest.

Your Debt-to-Income Ratio May Be Lowered

Your Credit Score Could Strengthen

It’s Easier to Save Money When You’re Not Paying Down Debt

How to Accelerate Your Student Loan Payments

Calculating Your Costs

Making a Budget

Setting Manageable Goals

Paying Beyond the Minimum Required

Avoiding Late Fees

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.¹

Take control of your student loans.
Ditch student loan debt for good.

Take control of your student loans.
Ditch student loan debt for good.

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