If you’re considering refinancing some or all of your student loans, you may wonder what comes next on your financial to-do list.
On June 3, President Biden signed the debt ceiling bill into law, ending the three-year federal student payment pause. Payments are expected to resume in October.
Refinancing student loans can often result in a lower monthly student debt payment, either due to a lower interest rate, a longer loan term, or both. A lower monthly payment can be a big relief to borrowers who are still reeling financially from the effects of Covid-19 and higher inflation.
Lower payments can also free up some of your income for other key financial goals. That’s what we’ll look at here.
What Happens When You Refi Student Loans?
Understanding what happens after a refinance is key to planning your next steps.
As mentioned above, when you refinance, you may find a more favorable interest rate or more flexible loan terms that will help reduce your monthly payment. The SoFi Student Loan Refinancing Calculator can help determine how much refinancing could save you.
Keep in mind, when you refinance a federal student loan into a private loan, you lose the benefits and protections that come with a federal loan, like deferment and public service-based loan forgiveness (PSLF).
What Is Your Next Financial Goal?
As you consider refinancing, it’s a good idea to keep your other financial goals in mind. How can refinancing student debt — and perhaps lowering the percentage of income dedicated to repayment — help you achieve those goals? Take a look at the following scenarios that might apply to you.
1. Pay Down High Interest Debt
Once your student loan debt is under control, turn your attention to any high-interest debt you may be carrying on credit cards. There are two common ways people approach paying down debt. Which one you choose depends on your financial situation.
• The Debt Avalanche. With this system, you start by paying your highest interest rate card first, with payments above the monthly minimum. You do this while still keeping up with minimum payments on any other debt. When you eliminate your highest rate debt first, you can more quickly lower your overall debt picture.
• The Debt Snowball. In this scenario, you pay off your debt in order of the smallest to the largest balances, regardless of interest rate. This way you see some of your smallest debts paid off quickly and get a psychological boost from doing so. As you pay off each debt, you assign the amount of the payment you were making on that balance to the next debt. Your debt repayment builds momentum, known as “the snowball effect.”
Having money saved for unexpected expenses is a vital part of financial wellness.
But saving for emergencies is a challenge for many Americans. According to Bankrate’s 2023 annual emergency fund report, less than half (43%) of U.S. adults could pay for an unexpected emergency expense from their savings.
Starting or boosting your emergency fund with money saved on student loan payments is a great way to help keep your budget intact and stay out of debt.
How much should you save in your emergency fund? At least three to six months of living expenses (or take-home pay) is the rule of thumb. That way, if you lose your job, have an accident, or get sick, you’re likely to have enough to see you through until your situation improves.
3. Increase Retirement Contributions
Are you putting as much as you can away for retirement? Starting early can pay off big down the line, thanks to the magic of compound interest — and the fact that earnings grow tax-free in most retirement accounts such as IRAs and 401(k)s.
If your employer offers a matching contribution benefit, upping your game may be even more important. This is free money. Whenever possible, contribute the amount necessary to qualify for the full match so you take the best advantage of this key benefit.
4. Save for the Next Stage of Life
Life goes on well after student loans. Now with less student debt burden, you’re probably looking at what’s next. That may mean buying a car, saving for a down payment on a home, starting a family, or expanding a business.
Careful budgeting means you can put the difference between your old student loan payment and your new one toward other important life goals.
Once you establish the goal you’re saving for, consider opening a high-yield savings account dedicated to that purpose. You’ll earn interest while your nest egg accumulates but still have liquidity so your money is available when you’re ready to pursue your goal.
5. Invest
Starting an investment account outside of retirement savings can be an important financial goal in and of itself. The reason? Long-term stock market returns consistently outperform many other types of investments. Over the past decade through March 2022, the average annual return for the Standard & Poor’s 500 Stock Index was 14.5%.
Returns vary, of course, depending on the years you are invested and the economic environment. But over the long haul, investing in stocks early — even small amounts — can pay off in the future.
Mutual funds and exchange traded funds (ETFs) are two easy ways to start investing. A mutual fund is a collective investment which pools funds from many investors to invest in stocks, bonds or other securities. ETFs work much the same way but unlike mutual funds, ETFs can be bought and sold like a stock as the price goes up or down during the day.
How to Pay Off Student Loans Ahead of Schedule
As we’ve seen, a refinance can help lower your monthly payments and perhaps bring some much-needed wiggle room to the rest of your finances.
That may motivate you to keep the momentum going and look at ways you can repay your remaining student debt faster. Here are two tried and true strategies.
Pay More Than the Monthly Amount
Your monthly payment amount isn’t set in stone. You can always pay more than the minimum amount, and in most cases you probably should. Payments over the minimum monthly amount owed are applied directly to the principal. So even a little bit extra can lower the amount of your loan and help you save on interest over the life of the loan.
Another strategy for paying student debt faster: Whenever you get a windfall, use some or all of it to make a lump sum payment toward your student loan principal. Think tax refunds, cash gifts, work bonuses, or income from a side gig or inheritance.
What to Avoid After Refinancing Student Loans
After refinancing student loans, be careful not to fall into a common trap: It’s called “lifestyle creep,” and it happens when you spend all of your discretionary income instead of directing some of it to financial goals.
To avoid creep, mindfully adjust your budget to account for any increase in income — such as lower student loan payments. That way the money will be put to good use instead of being frittered away.
Refinancing your student loans may help you lower your monthly payments, freeing up funds to put toward other financial goals. You might choose to pay down high-interest credit card debt, boost your emergency fund or retirement account, or even pay off your student loans faster. With the end of the federal student loan payment pause in sight, now may be a good time to consider refinancing all or part of your student debt.
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.
Photo credit: iStock/RossHelen 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.
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.
If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.
It’s called tuition reimbursement, and it’s how many companies help employees pay for continuing their education. Tuition reimbursement programs are growing in popularity as companies work to attract and retain employees.
What is tuition reimbursement? It’s when companies such as Starbucks, Amazon, Target, and more offer programs to help employees pay for a portion of their educational costs. These programs vary by company. Some may only cover course costs if the path of education is related to your job. Others may require employees to remain with the company for a certain period of time after completing their degree.
If you’re wondering, how does tuition reimbursement work?, read on to learn the tuition reimbursement meaning and to find out the requirements involved.
• Tuition reimbursement is an employee benefit where companies cover part or all of an employee’s educational costs, helping them pursue further education while working.
• Eligibility for tuition reimbursement often includes specific requirements, such as maintaining a minimum GPA and completing relevant coursework, with reimbursement typically occurring after course completion.
• Employers offer tuition reimbursement to attract and retain talent, as it equips employees with skills that can be beneficial to the company.
• Receiving tuition reimbursement does not prevent individuals from applying for federal financial aid, but it may affect the amount of aid offered.
• Tax implications exist for tuition reimbursement, with the first $5,250 being tax-free; amounts above this limit are considered taxable income for employees.
What Is Tuition Reimbursement?
Tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education whether undergraduate degrees or graduate school.
How does tuition reimbursement work? Your employment contract may lay out the terms of the tuition reimbursement: how much of your tuition your company will cover, what courses qualify, any minimum GPA requirements, and the minimum time period of employment.
Tuition reimbursement is often offered as an employee benefit on top of a salary package, along with other benefits like health insurance, a 401(k), or transportation expenses.
This is different from student loan repayment assistance, when your company provides some amount of money toward student loans you already have.
Not every company offers tuition reimbursement, but many large ones do provide reimbursement or financial support for continuing education. Some companies may stipulate that courses must relate to your current work.
Tuition reimbursement is a perk that helps a company attract and retain employees, while also benefiting the company itself, since the courses you take may provide skills or knowledge you can put into practice at work.
Some companies are upping their educational benefits as a way to stay competitive. They may offer a range of benefits to their employees like refinancing student loans and student loan contributions.
Not sure if your employer offers tuition reimbursement? Check with your HR representative to see what options are available.
Tuition Reimbursement Requirements
The specifics of each company’s tuition reimbursement policy are likely laid out in an employment contract, but it’s common for a company to offer a tuition reimbursement only in accordance with certain eligibility requirements.
You’ll probably have to sign up and pay for the courses yourself first, so you’ll want to budget appropriately. In most cases you’ll need to pay for your courses out of pocket and then provide proof of completion and your grades in order to be reimbursed.
Program requirements
Your employer may limit its reimbursement program to certain institutions. For example, they may provide a list of accredited institutions you can choose from. Or they require that you attend a four-year program.
Coursework Requirements
Your company may reimburse you only for classes pertaining to your current job description.
Other times, companies will approve courses focused on moving you into a management role or on gaining skills you can put toward other future roles or assignments. For example, if you work in project management for a large corporation and are interested in learning how to use data visualization, you might be able to take community college courses in data production and visual graphics.
After understanding what courses qualify for tuition reimbursement, you could then look over the other requirements. For example, there may be minimum GPA or attendance requirements.
Timeframe Requirements
Sometimes a company will also require you to continue working with them for a set amount of time, since they’ve invested in your education and don’t want you to take those new skills to a competitor.
Tuition Reimbursement And the FAFSA®
An employer’s tuition reimbursement program doesn’t preclude you from filling out the Free Application for Federal Student Aid (FAFSA). In most scenarios, an employer is unlikely to cover 100% of tuition costs, and you may still qualify for aid in the form of federal loans and grants.
That said, you will be asked to note how much you are reimbursed for, which may have an effect on how much financial aid you’re offered.
Is Tuition Reimbursement Taxable?
While you should always consult with a licensed tax professional regarding the current tax law, and in no way should any of this information be considered tax advice, the IRS’ website currently states that employers can deduct the cost of tuition reimbursement (up to $5,250 annually). It’s a business expense for them. The IRS website also states that the first $5,250 of tuition reimbursement isn’t considered taxable income for employees. However, anything above that counts as part of your taxable wages and salary. Again, talking to a tax professional is always recommended.
The IRS does have some requirements on tax-free educational assistance benefits — which are not necessarily the same requirements your employer has.
Typically, for the IRS to consider tuition assistance as tax-free, it should be used to pay for tuition, fees, textbooks, supplies, or equipment.
And typically, it can’t be used for meals, lodging, transportation, or any equipment you keep after the course. It’s also not applicable to sports, games, or hobbies — unless they’re a degree requirement or you can prove they’re related to your employer’s business.
Again, consult with an accountant or tax attorney to get the complete picture.
What Are Other Options to Lower Education Costs?
The average cost of attending a four-year public college as an in-state student during the 2022-23 school year was $10,950, and that price tag only goes up for private schools and out-of-state students.
Federal Student Aid
For those who do not qualify for employer offered tuition reimbursement, there are other options that could be worth considering. As mentioned above, students can fill out FAFSA® annually. This allows them to apply for all types of federal student aid, including scholarships and grants, work-study, and federal student loans.
While one of the basics of student loans is that they offer students the opportunity to finance their education, private student loans don’t always have the same borrower protections, like income-driven repayment plans, that are afforded to federal student loans. For this reason, they are most often considered only after all other options.
If you already have student loans, when it comes time to repay you could consider refinancing to a lower interest rate. One of the advantages of refinancing student loans is that it could help you reduce the amount of money paid in interest over the total life of the loan; refinancing at a lower monthly payment could help with budgeting in the short term. However, lowering monthly payments is frequently the result of extending the loan term, which will result in increased cost over the life of the loan.
It’s important to know that there are various federal student loan repayment options and borrower protections (such as deferment or forbearance options). Refinancing federal loans eliminates them from these programs.
The Takeaway
Employers who offer tuition reimbursement programs will cover a portion of tuition costs if the employee meets specific program eligibility requirements. These requirements vary by company, but may include things like maintaining a minimum GPA, doing certain coursework, and stipulations around the length of employment.
Refinancing is another method that might help you lower your education costs. If you’re looking to refinance your student loans now, prequalifying online with SoFi takes just two minutes. SoFi offers student loan refinancing with low fixed and variable rates, flexible terms, and no fees.
Learn more about refinancing your student loans with SoFi.
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.
This article is not intended to be legal advice. Please consult an attorney for advice.
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.
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.
Most people have money goals. One person might want to pay off their student loans; another might be saving up for the down payment on a house; and yet another might want a seven-figure retirement fund.
Whatever your particular aspiration may be, there are smart strategies that can help you achieve your goals. These tactics can help improve your financial fitness, balance your budget, reduce debt, and save more money.
Read on to learn some of the best personal financial strategies that can scoot you closer to reaching your money goals.
Smart Financial Strategies to Aim For
Here are some solid ways to begin to enhance your financial fitness.
Build and Maintain an Emergency Fund
When faced with an unexpected big expense or being laid off, it can be helpful to have saved up an emergency fund, which is a cash reserve that is only tapped, well, in case of an emergency. When should you use your emergency fund? A layoff, an unexpected medical or car repair bill, or a relative in need may all be good reasons to dip in.
Starting an emergency fund might cover your basic living expenses for anywhere from three to six months or more. So, if a person normally spends $3,000 per month, then they could strive to set aside $9,000 to $36,000 in their emergency fund. Naturally, this amount will vary based on individuals’ unique financial situations and income vs. expenses.
Now, if that dollar amount sounds a little daunting, it’s always possible to start small — setting aside 50 or 100 dollars a month. With some accounts, users can even automatically transfer a set amount to a savings account on a specific date each month (e.g., payday). Over the course of a year, that bit-by-bit approach to saving money can add up to a much larger sum.
Once a person has tackled high-interest debt, they may have more income available to squirrel away towards their emergency fund.
Some savers prefer to host their emergency fund in a high-yield savings account, which, thanks to its higher annual percentage yield (APY) than standard accounts, can help your money grow faster.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.20% APY on savings balances.
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Paying Off Debt
Debt can be a budget killer. With high interest rates and fine-print fees, individuals can end up paying significantly more than an initial charge on outstanding recurring debts, whether student loans or credit cards.
When it comes to credit cards, for instance, the average interest rate is 20.09% for existing accounts and 22.29% for new accounts . If a person gets charged hundreds or even thousands of dollars in interest per month on existing debts, it could take longer to pay off the initial borrowed amount.
In terms of adopting smart strategies that can lead to greater financial independence, a good place to start is by paying off high-interest debts as quickly as possible.
Two popular debt-repayment approaches are called the snowball method and avalanche approach.
• With the snowball method, you pay down your smallest debts first — no matter what the interest rate is. Once that smallest debt is paid off, you could then apply that payment amount towards the next debt, and so on.
For instance, if a person pays $150 a month to one debt, they could continue paying that sum to their next smallest debt after the first one has been paid down. At the same time, you’ll make minimum payments on all other debts to keep the payment history intact. Over time, the additional payments “snowball,” building up to less overall debt.
• With the avalanche method, a person opts to pay off the debt with the highest interest rate first. Once the highest debt gets paid off, they’ll then roll the regular payments on that now-cleared debt into their next highest debt, all while paying the minimums on other debts at the same time.
While the avalanche method may make more sense mathematically, the snowball method can be more psychologically motivating. The snowball approach can keep some people engaged, since they’ll see quicker progress towards paying down one of their high-interest debts.
However, if a person can commit to the avalanche method, they may end up saving more in total interest paid than with the snowball financial strategy.
Using Credit Cards Wisely
Credit card debt can land cardholders in financial hot water. However, using credit cards judiciously can come with certain benefits (assuming the cardholder regularly pays down what they buy). Here’s a closer look:
• Many credit cards give rewards in return for account holders spending money when shopping. For instance, a user may be able to get 1% to 5% back on grocery store or other purchases at specific retailers. With some cards, it’s possible to earn points that can be used toward discretionary expenses like travel, eating out, hotels, and more.
• Generally, credit cards offer fraud protection, which means that if a card gets stolen (or their account gets hacked), fraudulent charges are not paid by the cardholder — unlike, say, with cash.
• When it comes to healthy financial strategies, it’s also possible to use your credit cards to maintain one’s credit score. One factor that lenders might consider is a loan applicant’s credit history (including the number of active accounts open and their debt-to-income ratio).
Smart financial strategies for credit cards include paying off the entire bill on time and keeping old lines of credit open so the account holder’s credit history is longer. Also, it’s advisable to aim for a lower credit utilization ratio — which is how much debt a person has in relation to how much credit is available. A credit utilization rate below 30% is, generally, considered “good,” though lower will be better.
• Another one of the smart financial strategies is to use credit cards for 0% interest balance transfers. If someone has a credit card with a high-interest rate, they could apply for a balance transfer credit card, pay a fee to transfer over their card’s balance, and then get more time to pay down the existing debt interest-free.
Some cards offer over a year of interest-free access. However, it can be smart to pay off the transferred debt before the end of the agreed-to 0% interest period. Otherwise, a higher interest rate will kick in on whatever has not been paid off. In some cases, the interest after the zero-interest period could be higher than what was paid on the original card.
Budgeting Incoming and Outgoing Money
Budgeting is a classic way to keep tabs on how much money is coming in and how much is being spent each month. If a person is not yet budgeting for their expenses, whether essential or discretionary, it can be one of the simplest ways to track money, and there are many different budgeting methods available.
When adopting financial strategies for budgeting, a good place to start with the 50/30/20 rule. With this budgeting rule, a person spends 50% on needs, 30% on wants and 20% on savings.
• Needs include housing, utility bills, food (basic groceries, not pricey takeout or restaurant meals), car payments, and debts.
• Wants span entertainment, travel new but unnecessary clothing and gadgets, and similar purchases.
• Savings could include an emergency fund, retirement account, and investments.
Budgeting can be made easier with Google Sheets or Excel, or by using an app, or taking advantage of tools that your financial institution offers. Digital personal finance apps can be easy to use. Many financial institutions offer solid ones that give users insights on spending patterns and money habits.
Considering Reducing Monthly Expenses
After tracking their monthly expenses, some people like to see where they can trim and tighten their spending. Some pricey expenses that could be pared down include:
• Housing costs: If rent is gobbling up a huge amount of income each month, moving to a less expensive place or area (i.e., lowering your cost of living) could help with cutting back on spending. If an individual ends up moving to a more economical city or town, it’s likely that local housing costs, groceries, and the general amount it takes to cover day-to-day living expenses will go down as well. Or you could take in a roommate.
• Transportation: In terms of transportation, drivers could try to get out of an expensive lease and purchase or lease a less expensive vehicle. Or a person could utilize public transit or carpool with colleagues to save on gas. One good financial strategy is to shop around for lower car insurance rates.
• Pricey cable plans: If a person spends a significant amount each month on non-essential items or services, they may want to try to reduce their discretionary costs, too. For instance, instead of paying an expensive cable bill every month, one could only pay for Hulu or Netflix as a way of lowering your streaming services costs. Many internet providers run promotions, so it may be worth thinking about switching to a less expensive provider.
• Eating out vs. cooking at home: In lieu of eating out every day, budget-minded individuals could cook at home. Buying ingredients is, generally, much less expensive than dining in a restaurant or picking up take-out. And, if cooking is intimidating, perhaps invest in a slow-cooker to ease into cooking at home.
• Shopping online: Online shopping can tempt many to spend unnecessarily. It’s just so darned easy to click-to-buy when a credit card is saved online. So, some savings seekers opt to delete their credit card details from their favorite online shops.
This adds one extra step (digging the card out of the wallet) before being able to purchase. Those added seconds can give shopping lovers a second chance to decide whether the item in their cart is really essential. You might also unsubscribe from shopping emails that can tempt you with sales and special offers.
Negotiating Better Deals
If you don’t have time to call up your providers and search for better deals, apps like Trim can analyze an individual’s spending patterns, negotiating internet, cable, phone and medical bills while canceling older subscriptions. Users pay a fee for this service, but it could end up saving dollars that would otherwise get spent unknowingly.
You might also call your credit card company and see if they can lower your rate, especially if you’ve found a better deal elsewhere. And if you have a major bill, don’t be shy about seeing if it can be reduced. You may even be able to negotiate medical bills.
Opening a Retirement Fund
When it comes time to retire, money will be needed to pay for everyday life. That’s why it’s a good financial strategy to start a retirement account as soon as a person starts working.
There are many different types of retirement accounts to choose from, including individual retirement accounts like a Roth IRA (which individuals can open on their own and contribute to with after-tax money), a 401(k) (which is a plan through an employer, and a traditional IRA (which people open on their own and gets taxed upon withdrawal).
If an employer offers retirement fund matching, take advantage of it! Matching entails putting a percentage of a paycheck automatically into one’s retirement. The employer then matches that deposit with the same amount. Employer matching can speed along an individual’s path towards saving for retirement; it’s pretty much free money.
In terms of how much to save for retirement, it can be smart to put aside at least 15% of pre-tax income every single year. Doing so can help you later on in life to avoid needing to delay retirement because not enough had been saved prior.
Searching for Low Interest Rates on Loans
Big expenses — going to college, purchasing a car, buying a home, repairing a house, or moving — can come with a big price tag. So, many individuals seek out loans to cover these big-ticket items. When taking out a loan, some smart financial strategies include shopping around and comparing interest rates — looking for the lowest interest rate possible.
As with any debt, it’s essential to pay back the loan on time every month to avoid late payment fees or dings to one’s credit history. For some, it may also be possible to refinance a loan and secure a lower interest rate.
Getting Started with Investing
For those stashing money in a traditional savings account, it’s likely that the money is earning very little interest. As a result, some individuals choose to invest their money with the hopes of earning a higher return over time.
Investing is one the financial strategies, however, that can come with higher risks. Few investments, including those in the volatile stock market, are guaranteed to make a return. For instance, investing in stocks can bear higher returns, but stocks can also plunge in value. Indeed, some investments are riskier than others.
Speaking with a financial advisor can help many to understand the pros and cons of investing and whether it’s the right choice for them.
Here’s an overview of common kinds of investments:
Investing in the Stock Market
While investing money in the stock market can result in a higher return, it’s not guaranteed. It can be safer to invest in already profitable companies that pay out dividends, which distribute some of a company’s earnings to investors. However, more seasoned investors may choose to take on more risks, investing in start-ups or lesser known companies.
Micro Investments
Should a person want to purchase stocks that are more expensive but can’t afford buying an entire share, it’s possible to complete a micro investment. Micro investments are fractions of stocks and a good way to get in on the market without taking too big of a risk.
Mutual Funds
Mutual funds are diverse investments; rather than investing in one stock, an investor is putting their money into a collection of them. The fund has a manager who decides what they’ll do with the money. Typically, investors are charged a fee to invest in these funds.
Investment Bonds
Investment bonds, which are loans made to a company or government, are significantly less risky than stocks. But, it’s worth remembering that lower risk also typically comes with a lower return. Many people get U.S. Treasury Savings Bonds when they’re children and cash them in at a later date.
High-interest Savings Accounts
Some high-interest savings accounts offer around 3.00% APY or higher on deposited funds — significantly higher than the 0.01% that many standard accounts offer. There’s no risk of lost saving, as long as account holders stay below the FDIC-insured limit of $250,000 per account holder, per account ownership category, per insured institution. Interest rates on savings accounts can, of course, vary over time and by bank.
Whichever method gets chosen, there are investment brokers and financial advisors who can offer guidance on how to utilize income and savings.
The Takeaway
Keeping tabs on income, expenses, savings, and investments is one smart financial strategy. With so much to track when it comes to personal finances, budgeting tools can help you develop smarter financial habits and trim back on unnecessary spending.
Opening an online bank account with SoFi lets you save and spend in one convenient place, while earning a competitive APY. Ready to track and then tweak your spending? A SoFi Checking and Savings Account has tools to help you do just that, as well as save towards different goals with our Vaults feature.
SoFi members with direct deposit activity can earn 4.20% 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 4.20% 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 4.20% 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 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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.
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.
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.
If you fail to make your car payments or otherwise default on your loan, you risk having your car repossessed, or taken back by the lender.
The process of vehicle repossession can be costly. You may be responsible for the deficiency balance on the car, which is the amount you owe on the car, minus the amount the lender sells the car for, as well as additional fees.
Repossession can also have a negative impact on your credit score, which can make it harder to qualify for another car loan, as well as credit cards or a mortgage, in the future.
Read on to learn more about car repossession, how to avoid it, and what your options are if it happens.
When you borrow money to buy a car, or you lease a car, you generally have to agree to specific terms outlined in the contract. You will likely have to agree, for instance, that you will make monthly payments on time and keep adequate insurance on the vehicle.
If you don’t meet those requirements, the lender (or leasing company) has the right to take the car. In some cases, a lender will alert you of your missed payments and attempt to collect payment prior to repossessing the vehicle.
Depending on the loan contract you signed, however, some lenders or leasing companies can take the car back after one missed payment, without any prior notice of late payment, or warning you that your car is going to be repossessed.
If having car insurance is a requirement of your auto contract, as it often is, your car can be repossessed if your auto insurance has lapsed and isn’t being paid.
What Rights Do I Have if My Car is Repossessed?
While the car does not technically belong to you and is the property of the lender or leasing company, you do have some basic rights if your car is repossessed. These include:
Your Personal Property
If you have any items of value in the car, such as a laptop or car seat, the bank or leasing company that owns the loan, or the car repossession agency, cannot keep or sell the property found inside the car.
In some states, a creditor must tell you what items were found in the car and how you can get them back.
If you’re having trouble retrieving personal items that are of significant value, you might want to file a complaint , or talk to an attorney about how to get your belongings back or if you can be compensated for them.
Selling Price
If your car is taken and sold, the lender doesn’t have to sell it for the highest possible price, but they are legally required to make an effort to get fair market value for the car and to sell it for a “commercially reasonable” price.
The reason is that the sales proceeds will go toward paying off your debt. It would be unfair to repossess a vehicle and then give it away for very little to somebody else
Also key: If the creditor holds onto the car and doesn’t resell it, you generally will not owe a deficiency balance on the car (which is the amount you owe minus what the car sells for).
Getting a Car Out of Repo
Should you be interested in getting a repossessed car back, that might be an option. You may be entitled to buy back the vehicle by paying the full amount you owe on the car. This typically includes your past due payments and the remaining debt, along with any fees that accumulated in the repossession process.
Another option for getting your car back is to try to buy back the repossessed car by bidding on it at the repossession sale.
Or, you might instead decide to save up for a car and get a less expensive vehicle.
How Much Does a Car Repossession Cost?
If the lender repossesses your car and then sells it at an auction, the sales proceeds go toward your loan balance. In many cases, the car sells for less than you owe, so your loan is still not paid off. The amount you owe is the deficiency balance.
In addition to the deficiency, you may also have to pay for costs related to repossession. Charges can include expenses for sending a repossession agent, storing the vehicle, and preparing the vehicle for sale.
If the deficiency balance goes unpaid, it can result in a lawsuit against you, along with wage garnishment or a lien against your property.
If you are able to buy the car back before it goes to auction, you will likely be responsible for paying the full amount you owe on the car, which may include your past due to payments and the remaining debt, along with any fees that accumulated in the repossession process.
How Car Repossession Affects Your Credit
On its own, a repossession is a red flag on your credit report and can have a serious impact on your scores. A repossession can also stay on your credit report for seven years, beginning with the date of your first late payment.
In addition to the repossession being listed in your credit report, failing to pay your auto loan on time may trigger other negative marks in your credit. For each month you are 30 days or more past due, the lender can report the account as delinquent. If the account was sent to a collection agency, a record of the collection account may also appear in your reports.
It can often be easier to prevent a vehicle repossession from happening than trying to fix it after the car has been taken away. Here are some ways you may be able to reduce the risk of repossession if you’re struggling with car payments.
Talking to Your Lender
If you fall behind on your auto loan or you think you soon may, it can be worthwhile to reach out to the lender to discuss what options you may have.
There is a chance your lender will allow you to defer your loan payments for a period of time or help you come up with another solution to allow you to keep your car. This shows good faith as you try to remedy your situation.
If you and the lender are able to come to an agreement about amending or skipping payments, it’s a good idea to get the new terms addressed in writing to avoid problems down the line.
Refinancing Your Car Loan
If you’re struggling to pay your auto loan, refinancing might help get your payment to an affordable level so you can continue to pay on time. Refinancing entails paying off your current auto loan with a new car loan. If you are approved for a new loan, refinancing could help you avoid repossession by satisfying what you owe on your existing loan and starting fresh with a new lender.
Considering Voluntary Repossession
If your lender won’t accept late payments and demands that you return the car, voluntarily repossessing (or surrendering) the car may be a better option than having it taken away.
Turning in your car can reduce the creditor’s expenses and, in turn, reduce how much you’re required to pay (though you’ll still likely be responsible for late payments, late fees, and possibly a deficiency balance). A voluntary repossession also gives you more control over when you give up your car than having the car suddenly taken away from you.
Your creditor may still enter the late payments and repossession on your credit report, where it can remain for seven years. However, a “voluntary surrender” can be less damaging to your credit than a “repossession.”
Impact Your Credit After a Car Repossession
While a repossession can negatively impact your credit report, it won’t be forever. As time passes, and as you handle your other credit obligations responsibly, the impact on your credit score can lessen.
• Paying off any outstanding debt on your car loan
• Making payments on other debts (such as student loans) on time
• Maintaining low balances on credit cards and paying them off in full every month
• Making timely payments for all of your bills (so none are ever sent to debt collection agencies)
Handling your money responsibly and getting more motivated to save money can help you pay your debts back diligently. This shows future lenders that you can make wise money decisions and will be trustworthy when it comes to paying off loans and credit in the future.
The Takeaway
If you have missed payments on your vehicle or let your car insurance lapse, the lender can repossess your car and sell it at an auction. You will then likely have to pay the difference between what the car sells for and what you still owe, plus various additional fees.
Depending on your loan or lease contract, you may have time to make the missing payments and retrieve your car before it’s sold at auction.
Either way, a car repossession can be costly, and also have a negative and lasting impact on your credit scores.
One of the best ways to avoid car repossession is to stay on top of your car payments, making them in full and on time each month. Setting up a monthly budget and learning how to save money from your salary can help you make this happen.
Another good safeguard is to wait until you’ve saved up for a substantial downpayment on a car before you buy, or use that money to go with a more affordable used car and pay for it in full.
A SoFi Checking and Savings online bank account can help make this happen. With SoFi Checking and Savings, you spend and save in one convenient place and can easily track your spending on your dashboard in the app. What’s more, your money earns a competitive annual percentage yield (APY) and you pay no account fees, both of which can help your money grow faster.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.20% APY on SoFi Checking and Savings.
SoFi members with direct deposit activity can earn 4.20% 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 4.20% 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 4.20% 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 10/31/2024. 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.
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 .
If you’re wondering “do you have to pay back FAFSA®?”or “do you have to pay back financial aid?,” what you really want to know is whether you have to pay back the federal student loans you’re eligible for after filling out your Free Application for Federal Student Aid (FAFSA).
You will have to pay back those loans, but other types of student aid you get through FAFSA likely won’t need to be repaid. Aside from federal student loans, you can also use FAFSA to apply for grants and scholarships as well as work-study jobs, for which you’d get funds you usually don’t need to pay back.
If you have loans through FAFSA and need to pay them back, read on for information on the three general types of federal student loans and your repayment options for each.
With Direct Subsidized Loans, the government (more specifically, the U.S. Department of Education) pays the interest while you’re still in school at least half-time. That’s what makes them “subsidized.”
The maximum amount you can borrow depends on whether you are a dependent or an independent student, as well as what year of school you are in. However, it is ultimately up to your school how much you are eligible to receive each academic year.
Not everybody qualifies for a subsidized loan. You have to be an undergraduate (not a graduate student) demonstrating financial need and attending a school that participates in the Direct Loan Program. Additionally, the academic program in which you’re enrolled must lead to a degree or certificate.
You also should check how your school defines the term “half-time” because the meaning can vary from school to school. Contact your student aid office to make sure your definition and your school’s match. The status is usually based on the number of hours and/or credits in which you are enrolled.
Direct Unsubsidized Loans
As you’re thinking about “do I have to pay back FAFSA?,” it’s good to know that you will have to pay back all the interest that accrues with Direct Unsubsidized Loans while you’re in school, because these loans are “unsubsidized.” That means the government doesn’t cover your interest while you’re in school like they do with a subsidized loan.
You don’t have to prove a financial need in order to qualify for a Direct Unsubsidized Loan. Additionally, these loans are available to graduate students as well as undergraduate students. Again, you need to be enrolled at least half-time in a school that will award a degree or certificate.
Direct PLUS Loans
There are two types of Direct PLUS Loans:
• Grad PLUS Loans: These are for graduate or professional degree students
• Parent PLUS Loans:Parent PLUS Loans can be taken out by parents for as long as their qualifying child is a dependent or undergraduate student
Unlike most other federal loans, PLUS loans require a credit check, and you cannot have an adverse credit history. If you or your parents have bad credit, a cosigner on the loan application may be an option.
With Direct PLUS Loans, you can borrow as much as you need for the cost of school attendance, subtracting the other financial aid you’re getting. However, the interest rate for PLUS loans is generally higher than it is for the other types of federal student loans.
Do I Get a Grace Period on My Federal Student Loan Repayment?
Whether you get a grace period — time after you graduate (or drop below half-time enrollment) during which you do not have to make loan payments — depends on what type of federal student loan you have. Not all federal student loans offer a grace period. Direct Subsidized and Unsubsidized Loans offer a grace period of six months, whereas Direct PLUS loans don’t offer a grace period at all.
Grace periods are meant to give you time to find a job and organize your finances before you have to start making loan payments. They are usually one-time deals; in most cases, you often can’t get a second grace period once the initial one ends.
Additionally, not all grace periods are exactly alike. Different loans may offer different grace periods. Policies vary. Check with your loan servicer so that you know for sure when your grace period begins and ends.
Keep in mind that grace periods are usually not interest-free. Some loans accrue interest during grace periods. Many students subscribe to the strategy of making interest payments even during the grace period. Doing this to put money toward student loans can ultimately lower the amount you owe, and interest payments are generally more affordable to handle than principal payments.
Also remember that loan servicers are paid by the Department of Education to handle billing and other services for federal loans. This is one of the basics of student loans. The government gives you a loan servicer; you don’t get to choose one yourself. The loan servicer you get is the one you should contact if you have questions regarding your loan.
Federal Student Loan Standard Repayment Plan
Once you graduate, your repayment plan will depend on various factors, but most of the time the government will place you on its Standard Repayment Plan. The general rule here is that you’re expected to pay off your loan over the course of a decade, and your payments will remain the same for the duration.
Before you are placed on that Standard Repayment Plan, the government gives you a chance to choose a few other repayment options (which we’ll discuss below). If you don’t choose one of those, you’ll automatically be placed on the Standard Repayment Plan.
Additional Repayment Options
Here are a couple of your other repayment options beyond the Standard Repayment Plan:
• The Extended Repayment Plan: The Extended Repayment Plan can extend your term from the standard 10 years to up to 25 years. To qualify, you must have at least $30,000 in outstanding Direct Loans. As a result, your monthly payments are reduced, but you could be paying way more interest.
• The Graduated Repayment Plan: Another option, the Graduated Repayment Plan lets you pay off your loan within 10 years, but instead of a fixed payment, your payments start low and increase over time. This may be a good option if your income is currently low but you expect it to increase over time.
Keep in mind that although you can choose these repayment options, you cannot refinance a federal student loan with the government on your own (you can, however, consolidate them). That’s because those interest rates are set by federal law, and they can’t be changed or renegotiated.
Difference Between Refinancing & Consolidating Student Loans
While you can’t refinance your federal loans with the government, you can do so with a private loan company. Before you consider refinancing, be sure to know the difference between refinancing and consolidating student loans:
• Refinancing means taking out a brand new loan so that you can pay off your existing loans. To refinance, you’ll choose the loan company you feel is best, with (hopefully) better interest rates and repayment terms. Refinancing student loans can be done via a private lender and can be used for both federal and private loans. Keep in mind that when you refinance federal loans with a private lender, you lose access to federal benefits and protections like loan forgiveness programs and repayment plans.
• Consolidation means placing all of your current loans into one big loan. Doing this typically extends your loan term so that your monthly payment is lowered. The problem with consolidating student loans is that it could mean you wind up paying additional interest. This is because when you consolidate multiple federal student loans, you’re given a new, fixed interest rate that’s the weighted average of the rates from the loans being consolidated.
Refinancing (as opposed to consolidating) your school loans may be a good option if you have high-interest, unsubsidized Direct Loans, Graduate PLUS loans, and/or private loans. One of the advantages of refinancing student loans with a longer term can reduce your monthly payments. Note: You may pay more interest over the life of the loan if you refinance with an extended term. Alternatively, you may be able to lower your interest rate or shorten your term.
Before you apply for that refinancing plan, it’s a good idea to check your credit score, as it is an important factor that lenders consider. Many lenders require a score of 650 or higher. If yours falls below that, you may consider a cosigner on the loan.
Lenders typically offer fixed and variable interest rates, as well as a variety of repayment terms (which is often based on your credit score and many other personal financial factors). The loan you choose should ultimately help you save money over the life of the loan or make your monthly payments more manageable.
The Takeaway
To answer the question, do you have to pay back FAFSA?, if you only got grants, scholarships, or work-study funding through FAFSA, you don’t have to worry about paying FAFSA back, so to speak. But if you got federal student loans through filling out FAFSA, you will have to pay those loans back.
Luckily, you have a number of options to do so. If you have high-interest loans, consider looking into student loan refinancing to see if you can reduce your monthly payments. SoFi offers loans with low fixed or variable rates, flexible terms, and no fees.
Check your rate for student loan refinancing in just two minutes with SoFi.
FAQ
If you fail a class, do you have to pay back your FAFSA financial aid?
In general, failing a class doesn’t mean you’ll have to pay back your FAFSA financial aid. However, if you don’t make Satisfactory Academic Progress (SAP), you could lose your future eligibility for financial aid. Your risk for losing eligibility for future financial aid might be greater if the class you failed is an important component of your major.
If you have leftover credits after financial aid is applied, do you have to pay it back at the end of the semester?
You won’t lose any money that may be left over (called a credit balance) after financial aid is applied to your tuition and other school expenses. The credit balance must be refunded to you within 14 days. That is, unless you direct the school to keep the credit balance and apply it to charges for the next semester.
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.
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.
