Apr
01
2025
What Happened During Tulip Mania?

What Happened During Tulip Mania?

By | Growing Wealth, invest, Investing | Comments Off on What Happened During Tulip Mania?

One of the most famous instances of an asset bubble was the “Tulip Mania” that erupted in Holland during the 17th century. It was the first recorded major financial bubble, during which demand for tulips exploded, and prices for the flowers followed suit.

This led some investors to speculatively purchase tulips, resulting in losses when prices fell back down. Despite Tulip Mania occurring centuries ago, it can still be used as a history lesson for current traders and investors.

What Was Tulip Mania?

Tulip Mania was a speculative frenzy that erupted in Holland during the 17th century. The Dutch were newly independent of Spain and building themselves into prosperous traders. The mid-1600s was a period of wealth for them, as they benefited from rare imports brought through the Dutch East India Company.

Interest in exotic items was at an all-time high, and collectors became fascinated with not just tulips, but “broken” tulips. These tulips came from bulbs and grew into striped or multicolored patterns. As demand grew, more companies began selling bulbs.

The most famous tales about Tulip Mania sound like something out of a book. People of all walks of life bought the flowers in a frenzy at sometimes extremely high prices. They hoped for significant returns and to escape their social classes, but they met financial disaster. Those investors fell into ruin when the tulip bubble burst in 1637 – similar to the dotcom bubble in more recent times – and some of the stories even detail tragic endings; people losing everything and drowning themselves in the canals. All because a tulip-incited mass hysteria that created a financial crisis.

But, is it really true?


💡 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.

What Really Happened During Tulip Mania?

The “mania” in the story of Tulip Mania comes from an 1841 account by a Scottish author named Charles MacKay. His Memoirs of Extraordinary Popular Delusions and the Madness of Crowds detailed a “tulipomania” where people poured years of salaries into the speculative tulip trade. From farmers, to nobles, to chimney-sweeps, he documented every class buying in. Then, the memoir described mayhem following the market collapse in 1637. Ultimately, MacKay created a dramatic tale that was more fiction than fact.

There was a Dutch tulip bulb market during the Dutch Golden Age. However, traders were limited to buyers with the finances to invest in luxury items. Typically, this group included merchants, artisans, and the upper class.

Additionally, the price increase was not consistent. Between December 1636 and February 1637, some highly sought-after bulbs experienced a price spike. Some of the most expensive went for 5,000 guilders, which equaled the value of a nice home in 1637. Or, there is evidence that the highest bid totaled out to 5,200 guilders. That matched 20 times the yearly salary of a skilled worker. But these prices were the exception, not the rule.

That leaves the final part of the story: the fallout.

Tulip Mania Bubble Burst

Tulip Mania is the classic and most well-known historical example of a financial bubble.

Traders bought into the bulbs with the intent to resell and earn a profit. However, the flowers’ held no inherent value. Their status as a luxury item determined their prices and pushed demand. In fact, demand grew so high that professional traders began bidding on the product on the Stock Exchange of Amsterdam. People even used margined derivative contracts to increase the number of tulips they could buy despite their financial limits.

But before spring even hit, the bubble burst. The mania fell away after the tulips lost their value when the supply of tulips increased due to warmer weather. With so many of the crops, bulb traders realized the product wasn’t as rare as they thought. An auction in Haarlem in February of 1637 seemed to solidify the thought when the auctioneers failed to sell any bulbs.

When the prices dropped, traders had to sell their holdings for a lower value. However, this led to a few broken relationships and lost reputations, not any tragic deaths.

So, there was no morbid end when the Tulip Mania bubble burst. MacKay reported that Holland’s national economy fell apart due to the volatile market crash, but those claims appear exaggerated. The bubble only impacted those who were involved in the Tulip trade, and most investors were in an easily salvageable position. They financially recovered relatively quickly. On the other hand, growers did struggle to replace the lost buyers when certain contracts fell through.

What Tulip Mania Reveals About Financial Markets

While the story is more straightforward than MacKay made many believe, it is still a valuable moment in economic history. It became a parable that explains the nature of bubbles and the crashes that occurred throughout the history of the stock market.

Part of its value as a lesson stems from its moment in time. Multiple bubbles followed Tulip Mania, including the railroad mania bubble during the 1840s, where commentators encouraged investors to buy into U.K. railway stocks or in the early 2000s when Americans began speculating in residential housing before that bubble burst.

The dynamics behind each of these events is similar to the dynamics of the tulip bubble. Speculators drive up the price of an asset beyond its intrinsic value until the bubble eventually busts and those who bought at the top of the market end up losing money in the market downturn.

The Takeaway

Tulip Mania is perhaps the penultimate example of a market bubble, which still resonates today, even though it occurred in Holland centuries ago. Bubbles can also occur in the pricing of individual securities, sectors, or the broader stock market, eventually leading to a crash in prices.

A stock market crash is an alarming time that can send many investors into a panic. They see the drop and move immediately to selling. However, panic selling in the face of market volatility can have disastrous effects on a portfolio. Either you sell when the market is struggling and earn lower returns as a result, or you miss out on the market rebound.

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).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.


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For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Apr
01
2025
How to Cash a Postal Money Order

How to Cash a Postal Money Order

By | Financial Independence, relay, Terminology | Comments Off on How to Cash a Postal Money Order

Anyone can use a money order to send or receive money. While money orders aren’t the most common tool, they’re usually simple to obtain and cash. To cash a money order at no charge, visit your local post office branch and present your money order at the window.

In this article, we outline where to cash postal money orders and what the process looks like.

Key Points

•   Money orders can be cashed at various locations, including banks, credit unions, post offices, and retail stores.

•   Some places may charge a fee to cash a money order, so it’s important to compare fees before choosing a location.

•   To cash a money order, you typically need to endorse it and provide identification.

•   It’s important to keep the receipt or a copy of the money order in case it gets lost or stolen.

•   If you don’t have a bank account, you can still cash a money order by using a check cashing service.

What Is a Postal Money Order?

A postal money order is a type of financial certificate issued on paper by the post office. Similar to a paper check, the document is worth the amount of money determined by the person or company that purchased it. While you can obtain a regular money order from almost any bank, only the United States Postal Service (USPS) issues postal money orders.

Unlike a check, a postal money order is prepaid by the party sending it, so it can’t bounce. Money orders also never expire. A receipt is provided to the purchaser in case the money order is lost, stolen, or damaged. As a result, you can use a postal money order to securely send a payment through the mail.

Another advantage of money orders is that they are difficult to counterfeit. You can make a payment of up to $1,000 with a single order.

To send a money order, you must pay for it ahead of time using cash, a debit card, or a traveler’s check. Although it is possible to buy a regular money order with a credit card, you cannot put postal money orders on a credit card.

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Recommended: What Is a Niche Bank?

How to Cash a Postal Money Order Step by Step

If you receive a postal money order, you can redeem its face value by cashing it. There is no advantage in keeping a postal money order long-term, since it doesn’t earn interest and cannot be used directly to make a purchase.

Here’s how to cash a money order at the post office for free:

1.    Bring the money order and a photo ID to a post office service counter.

2.    Sign the money order in view of the postal worker (do not sign it ahead of time).

3.    You will immediately receive the cash value of the money order.

Where to Cash a Postal Money Order

You can cash a postal money order in certain places outside the post office. Many banks will cash postal money orders, as long as you have an account there. Some grocery stores and retailers will cash money orders, too.

Because proof of ID is required, you cannot deposit money orders via a mobile banking app.

List of Places That Cash Money Orders

Here are some locations that may cash a postal money order:

•   Most banks. Check with your local branch.

•   Check-cashing retailer. Consumers without a bank account or nearby post office may cash money orders here for a fee.

•   International postal office. The post office offers special international money orders that can be cashed at banks and post offices in some other countries.

•   Rural mail carrier. Some mail carriers may cash money orders for rural customers if they have enough cash on hand.

•   Some supermarkets and major retailers. Search online for “places to cash a money order near me.”

Recommended: Alternative to Traditional Banks

How to Identify a Fake Postal Money Order

You’ll want to examine your money order before attempting to deposit it in order to ensure it’s authentic. Here are a few ways to spot a fraudulent postal money order:

•   Look closely at the paper. Valid postal money orders have special markings and designs to prevent fraud. Visit USPS.com to view a sample money order.

•   Review sum amount. If the dollar amount is faded, too large, or not printed twice on the paper, it could be fraudulent. All postal money orders must be under $1,000 and have the sum printed twice on the paper. International postal money orders cannot exceed $700, or $500 for El Salvador and Guyana.

If you think your postal money order is fake, contact the U.S. Postal Inspection Service at 1-877-876-2455.

Recommended: 7 Ways to Cash a Check Without a Bank Account

The Takeaway

Cashing a USPS money order is a straightforward process. Your local post office can cash a postal money order at no cost to you. You may also be able to cash a postal money order at a bank branch if you have an account there, or at your local supermarket.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Can you mobile deposit a USPS money order?

Unfortunately, you cannot use mobile deposit for USPS money orders. Instead, you must deposit it in person with a valid ID.

Where can I cash a money order for free?

You can cash a postal money order for free at your local post office. You may also be able to cash it at your local bank branch.

Can you cash a money order online?

Since you need proof of ID to deposit a postal money order, you usually can’t deposit it online.

About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.


Photo credit: iStock/Delpixart

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Apr
01
2025

Why Did My Credit Score Drop When My Credit Card Balance Decreased?

By | Credit, credit card | Comments Off on Why Did My Credit Score Drop When My Credit Card Balance Decreased?

Paying down your credit card debt is a huge win for your finances, but you might see your credit score go down even after you lower your balance. While this can be confusing, the drop is often due to other factors, like the types of credit you have and the length of your credit history.

Read on to learn why your credit score may have dropped after paying off debt and how you can boost it.

Why Your Credit Score May Drop When a Credit Card Balance Decreased

While you might expect your credit score to go up after paying off debt, there are a few reasons why it could dip instead. 

Worst case scenario: If someone uses your personal information to open a new credit account, or makes charges on your cards without your approval, your credit score may take a hit. The longer the fraud goes unnoticed, the harder it becomes to fix the issue.

More likely, closing your account after paying off a credit card balance can affect your credit score. This changes the overall picture of your credit usage and history, which might cause a small, temporary drop.

Remember that credit scores can fluctuate for many reasons, and a drop isn’t always a bad sign. You can keep track of your score with credit score monitoring.

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Credit Score Factors

Let’s dive deeper into the factors that can affect your credit score. We’re focusing on the FICO credit scoring model, which most lenders use to make their decisions.

Payment History

A history of on-time payments has the biggest impact on your credit score, making up 35% of it. If you’ve recently missed a payment or two, your credit score might be negatively affected. On the flip side, staying on top of due dates, whether with a money tracker app or a calendar, can help you keep your credit score healthy.

Credit Utilization

Paying off your credit card balance and then closing the account could cause your credit score to drop. That’s because it increases the percentage of credit you’re using compared to the total amount available — also known as credit utilization. Lenders typically want you to have a credit utilization ratio under 30%. If yours is higher than that, rest assured there are ways to lower your credit card utilization.

Length of Your Credit History

Length of credit history refers to the average amount of time your credit accounts have been open. In general, the longer your credit history, the better your credit score may be. Closing a credit card account, especially one you’ve had for a long time, can bring that average down, and you may see a drop in your credit score as a result. So think carefully before you decide to close an account.

Credit Mix

Paying off certain types of debt might also lower your credit score because it reduces the variety of your credit types. Lenders like to see that you can responsibly handle different kinds of debt, such as installment loans and mortgages. When you pay off a car loan or other type of debt, it can decrease the diversity of your credit mix, which could lead to a drop in your credit score.

If you paid off both your credit card debt and a loan simultaneously, this might explain the drop in your score. Also, if you closed the credit card account after repayment, your credit mix may be impacted.

New Credit Card Applications

When you apply for a new line of credit, like an auto loan or credit card, the issuer usually performs a hard inquiry on your credit report, which can temporarily lower your score. Lenders check your credit to see if you’re a responsible borrower. Even requesting a credit line increase on an existing card can trigger a hard inquiry.

A soft inquiry is different. It just means you or another company looked at your report, but it doesn’t impact your score. If you’ve recently applied for credit, that hard inquiry could be the reason for the dip. It can be helpful to learn more about soft credit inquiries vs. hard credit inquiries.

Recommended: 10 Strategies for Building Credit Over Time

How to Pay Off Debt and Help Your Credit Score

To pay off debt and help your credit score, here are a few steps to follow:

•   Create a budget. By tracking your income and expenses, you can understand where your money is going. This will help you find ways to save money and put more toward paying off debt. A spending app can help automate budgeting.

•   Prioritize debts. Depending on your situation, you may want to focus on paying off high-interest debts first, such as credit cards, while making minimum payments on lower-interest debts. Doing so could help you save money on interest in the long run.

•   Make regular payments. Consistently pay at least the minimum amount due on all your debts. Whenever possible, pay more than the minimum, which can help reduce your debt faster.

•   Consider debt consolidation. If you have multiple high-interest debts, you may want to consider consolidating them into a single loan with a lower interest rate. This can simplify your debt management efforts and potentially reduce overall interest costs.

•   Use credit responsibly. Aim to keep your credit utilization ratio below 30% by not maxing out your credit cards.

How Do I Keep My Credit Score From Dropping?

It can take a while to build up your credit, so you’ll want to take steps to protect it. Here are some tips to help you keep your credit score from dropping after you pay off debt:

•   Pay your bills on time. Sending bill payments on time is important because it’s such a big part of your credit score. If you need a hand, set up autopayments to make sure your lender or creditor gets your payment on or before the due date.

•   Think twice before closing an account. After you pay off a credit card, try not to close it unless you really have to. If you’re worried about spending, you can cut up the card. Keeping older accounts open helps maintain the length of your credit history, which is good for your score.

•   Avoid new credit applications. Every time you apply for new credit, it can result in a hard inquiry on your report, which might temporarily lower your score.Try to avoid opening new lines of credit unless you really need to.

•   Check your credit report. Regularly check your credit report for any errors or signs of fraud. (There are ways to check your credit score without paying.) If you spot something unusual, be sure to dispute any inaccuracies right away.

How Long Does It Take for Your Credit Score to Improve After Paying Off Debt?

Lenders usually update account activity with the three major credit bureaus — Experian, Equifax, and TransUnion — at the end of the billing cycle. This means it can take 30 to 45 days for any changes to impact your credit report.

It’s a good idea to check your credit report at least once a year. You can get a free report from AnnualCreditReport.com. Remember that checking your credit report and score won’t hurt your credit score.

Ways to Increase Your Credit Score After Paying Off a Loan

To help give your credit score a boost after paying off debt, stay on top of your other credit accounts by paying bills on time and using credit wisely. For example, if you have a credit card, use it for small purchases like gas or groceries, and pay off the balance each month. It proves to lenders that you can manage credit well.

Also try to keep the amount of credit you’re using low compared to your total credit limit. Remember, creditors usually like to see a ratio below 30%. This means using less than 30% of your available credit. Paying off smaller debts may help improve your overall debt-to-income ratio.

How to Get Credit Score Monitoring

Credit monitoring can help you keep an eye on your accounts and catch issues early. It tracks your accounts and alerts you to any unusual activity so you can address problems right away. 

Many financial companies offer free credit monitoring, so it’s a good idea to contact your bank or credit card to see if you qualify. If you’ve been part of a data breach, you might get credit monitoring for free. Otherwise, you can sign up for it yourself, typically for a monthly fee of $10 to $30. Alternatively, you can take a DIY approach and monitor your credit for free.

Recommended: Why Did My Credit Score Drop After a Dispute?

The Takeaway

After paying off credit card debt, it’s possible to see your credit score dip. While this drop is usually short-lived, it can be due to changes in your credit mix, history length, utilization ratio, or a combination. To boost your score, focus on responsible credit management. Consider strategies like setting up autopay to ensure you make timely payments, and avoid taking on more debt. These habits can help you maintain a strong credit score.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Why has my credit score gone down when nothing has changed?

Your credit score might change even if everything seems the same. Certain factors like report updates, identity theft, variations in credit usage, and new information from creditors can impact your score. By regularly reviewing your credit report, you can catch and address changes and errors.

Is a decrease in credit balance good?

It’s usually best to pay your credit card bill in full instead of carrying a balance, as carrying a balance doesn’t help your credit score. Aim to keep your balances below 30% of your total credit limit to maintain a healthy credit score.

Why is my credit score going down if I pay everything on time?

Even if you pay everything on time, your credit score might still go down because of things like using more of your available credit or applying for new credit. Closing old accounts or having a short credit history can impact your score, too.

About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.


Photo credit: iStock/milan2099

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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 .


Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Apr
01
2025

Who Actually Owns My Student Loans?

By | Going to College, Student Loans, student_loan | Comments Off on Who Actually Owns My Student Loans?

Your student loans are owned by the government or a financial institution like a bank, credit union, or online lender. Who owns your student loans depends on the type of loans you have.

Knowing which organization or entity owns your student loans is important for managing your payments — and for anyone who wishes to be an informed consumer. Here’s how to find out who owns your student loan debt.

Overview of Student Loan Ownership

Federal student loans are typically owned by the U.S. Department of Education (DOE), while private student loans are owned by the private lender who issued them.

However, both the DOE and private lenders may partner with a third party known as a loan servicer to manage your loans. The loan servicer handles billing and can also help you with repayment options, such as loan consolidation or income-driven repayment (IDR) plans for federal loans. Whether your loans are federal or private, your loan servicer is your resource for any questions or issues.

Student loan servicers can change, however. This can happen if your student loan is sold to another company, for instance. In this case, you should receive a notification by mail or email about who your new servicer is and where to send your payments. But even if you miss the notice, it’s still your responsibility to make sure your loan payments get to the new loan servicer by the due date.

If you choose to refinance your student loans, potentially for a more favorable interest rate or term, you will get a new lender and loan owner in the process.

Identifying Federal Loan Servicers

Your federal loan servicer is typically who you reach out to for anything related to your federal student loans. It’s important to know who they are and how to reach them.

How to Find Your Federal Loan Servicer

Once the DOE disburses your federal student loan, they will assign a loan servicer to manage it. The loan servicer will usually contact you directly. That way, when it’s time to start paying back student loans, you’ll know who to reach out to.

If you didn’t save their contact information, finding common student loan servicers is usually simple. Just log into your account dashboard at StudentAid.gov and go to the “My Loan Servicers” section. Or call the Federal Student Aid Information Center (FSAIC) at 800-433-3243.

The DOE sometimes moves student loans from one loan servicer to another. This transfer simply means a different company will be handling your loan and helping you manage it. For instance, you could talk to them about different student loan repayment options if you’re looking for another plan.

If your loan is transferred, the new loan servicer will typically inform you of the change by email or letter. Update your payment information with your bank or adjust the payment method for your monthly student loan bill to make sure your payments go through smoothly. Also, set up an account with the new servicer and double-check that your personal information is accurate so they can reach you if needed.

Identifying Private Loan Lenders

Determining who owns your private student loan can be a little more complicated. Here’s how to do it.

Checking Private Loan Ownership

There’s no one central website for private student loan servicers like there is for federal loans. To find out who owns your private student loans, you’ll need to individually contact each of your lenders.

Another option is to get your credit report from one of the three credit bureaus. Private lenders usually report loans, including student loans, to the credit bureaus, and the loan servicer should be listed on the report.

Why Loan Ownership Matters

Knowing who owns your student loan is critical for managing your student loan debt. Whether you’re still in college and not yet repaying your loans, or you’re paying off student loans early, your loan servicer is the one who handles the transactions and answers any questions you might have. They can also explain different repayment options and be a resource if you’re facing financial difficulties.

If you don’t know who your servicer is, you might miss important updates, payment deadlines, and opportunities to adjust your repayment plan.

The Takeaway

If you have federal student loans, the government owns your loans. With private loans, your loans are owned by a private lender. Both entities often use loan servicers to handle payments for your loan, so be sure to find out who your loan servicer is.

The owner of your loan may change over time. Student loans can be transferred or sold to other lenders. And if you decide to refinance your student loan — say, because you qualify for a lower interest rate or better term — you’ll get a new lender as part of that process.

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

Can student loans be sold to other lenders?

Yes, a lender can sell your student loans. They may do so to free up capital and make other loans. Typically, the new owner of the loan will notify you of the change of ownership. Be sure to update your payment information with the new lender.

How can I find out who services my loans?

If you have federal student loans, you can log in to your account dashboard at StudentAid.gov and click on the “My Servicers” section to see who your loan servicer is. For private student loans, contact your lender directly for the information or pull your credit report, which should have the loan servicer listed.

What if I don’t recognize my loan servicer?

If you come across a loan servicer you don’t recognize, it’s a good idea to make sure they’re legitimate. Check with your lender to find out if this is the servicer they’re working with. Don’t give out any personal or sensitive information to anyone you don’t know. Be alert for scammers offering to help you with payments or loan forgiveness. Report anything that feels off or questionable. You can file a complaint online with the Department of Education’s Federal Student Aid.

About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.


Photo credit: iStock/Pla2na

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2025
How Much Debt Does the U.S. Have and Who Owns It?

How Much Debt Does the United States Have and Who Owns It?

By | Financial Independence, Growing Wealth, invest, Investing | Comments Off on How Much Debt Does the United States Have and Who Owns It?

When consumers spend more than they make, they often find themselves in debt. The same is true for countries, and the United States is no exception. When the United States spends more than it earned through taxes and other revenue sources, it creates a deficit.

The United States borrows money, typically by issuing Treasury securities, such as treasury bills (T-Bills), notes (T-Notes) and bonds (T-Bonds), to cover that difference. Every year the United States cannot pay the deficit between revenue and expenses, the national debt grows.

Here’s everything you need to know about the national debt, how it impacts the American economy, and who owns US debt.

How Much Debt Does the US Have?

As of July 2023, the United States is $32.47 trillion in debt and that number continues to climb. Some economists prefer to look at national debt as a percentage of gross domestic product (GDP). At 118.5%, the current US debt level is higher than the country’s GDP.

Who Is the US in Debt to?

There are generally two categories of debt: intragovernmental holdings and debt from the public. The debt that the government owes itself is known as intragovernmental debt. In general, this debt is owed to other government agencies such as the Social Security Trust Fund.

Because the Social Security Trust Fund doesn’t use all its generated capital, it invests the excess funds into U.S. Treasuries. If the Social Security Trust Fund needs money, it can redeem the Treasuries. As of June 2023, intergovernmental debt hovers around $6.87 trillion, making the US government the largest single owner of US debt.

The public debt consists of debt owned by individuals, businesses, governments, and foreign countries. Foreign countries own roughly one-third of U.S. public debt, with Japan owning the largest chunk of American debt hovering around $1.1 trillion. US debt to China ranks second, with that country owning roughly $859 billion of American debt.

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What is The History of the National Debt?

Since the founding of the United States and the American revolution, debt has been a grim reality in America. When America needed funding for the Revolutionary War in 1776, it appointed a committee, which would later become the Treasury, to borrow capital from other countries such as France and the Netherlands. Thus, after the Revolutionary War in 1783, the United States had already accumulated roughly $43 million in debt.

To cover some of this debt obligation Alexander Hamilton, the first Secretary of the Treasury, rolled out federal bonds. The bonds were seemingly profitable and helped the government create credit. This bond system established an efficient way to make interest payments when the bonds matured and secure the government’s good faith state-side and internationally.

The debt load steadily grew for the next 45 years until President Andrew Jackson took office. He paid off the country’s entire $58 million debt in 1835. After his reign, however, debt began to accumulate again into the millions once again.

Flash forward to the American Civil war, which ended up costing about $5.2 billion. Because the war dragged on, the U.S. was strained to revamp the financial systems in place. To manage some of the debt at hand, the government instituted the Legal Tender Act of 1862 and the National Bank Act of 1863. Both initiatives helped lower the debt to $2.1 billion.

The government borrowed money again to fuel World War I, and then substantially more money to pay for public works projects and attempt to stem deflation during the Great Depression, and even more to pay for World War II, reaching $258 billion in 1945.

Since 1939, the United States has had a “debt ceiling,” which limits the total amount of debt that the federal government can accumulate. The Treasury can continue to borrow money to fund government operations, but the total debt cannot exceed the prescribed limit. However, Congress regularly raises the ceiling. The latest change came in June 2023, when President Biden signed a bill that suspended the limit until January 2025 in exchange for imposing some cuts on federal spending.

Since the debt ceiling was first introduced, American debt’s growth continued growing, with the pace accelerating in the 1980s. US debt tripled between 1980 and 1990. In 2008, quantitative easing during the Great Recession more than doubled the national debt from $2.1 trillion to $4.4 trillion.

More recently, the national debt has increased substantially, with Covid-related stimulus and relief programs adding nearly $2 trillion to the national debt over the next decade.

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Why The National Debt Matters to Americans

As the national debt continues to skyrocket, some policymakers worry about the sustainability of rising debt, and how it will impact the future of the nation. That’s because the higher the US debt, the more of the country’s overall budget must go toward debt payments, rather than on other expenses, such as infrastructure or social services.

Those worried about the increase in debt also believe that it could lead to lower private investments, since private borrowers may compete with the federal government to borrow funds, leading to potentially higher interest rates that can affect investments and lower confidence.

In addition, research shows that countries confronted with crises while in great debt have fewer options available to them to respond. Thus, the country takes more time to recover. The increased debt could put the United States in a difficult position to handle unexpected problems, such as a recession, and could change the amount of time it moves through business cycles.

Additionally, some worry that continued borrowing by the country could eventually cause lenders to begin to question the country’s credit standing. If investors could lose confidence in the US government’s ability to pay back its debt, interest rates could rise, increasing inflation or other investment risks. While such a shift may not take place in the immediate future, it could impact future generations.

The Takeaway

The national debt is the amount of money that the US government owes to creditors. It’s a number that’s been steadily increasing, which some investors and policymakers worry could have a negative impact on the country’s economic standing going forward.

Some economists believe that the growing national debt could lead to higher interest rates and lower stock returns, so it’s a trend that investors may want to factor into their portfolio-building strategy, especially over the long-term.

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About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.


Photo credit: iStock/Dan Comaniciu
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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