SoFi

After getting married, you’ll start to merge your life, your home, and possibly your finances with your partner. As you plan for the future, it’s helpful to consider the implications of student loans and marriage—which can affect your credit, your ability to get a home mortgage, and even the repayment of your student debt.

Consolidating your federal loans or refinancing student loans after marriage may be options to consider as you begin handling finances in your marriage and working together to reach your financial goals

Student Loans and Marriage

There are currently over 45 million borrowers in the U.S. and the total amount of student loan debt is $1.7 trillion. So the odds are high that either you or your partner may have student loans. As you begin planning for your financial future together, it’s helpful to look at how marriage can affect student loan payments.

Recommended: What is the Average Student Loan Debt?

What Happens to Student Loans When You Get Married?

If you haven’t already had a conversation about student loans and marriage before tying the knot, you and your partner should sit down and discuss your individual student loan debt: how much you have, whether you have federal or private student loans, as well as what your balances, payment status, and monthly payments are. It’s important to share this information since getting married may change your debt repayment plans.

If someone has federal student loans and is on an income-based repayment (IBR) plan when they get married, for example, their monthly payments may increase post-marriage as income-based repayment plans are determined by household income and size. Depending on how a couple chooses to file their taxes, the government may take a new spouse’s salary into account when determining what the borrower’s monthly payments should be.

Because federal student loan borrowers on an income-based repayment plan have to recertify each year, the current year’s income is taken into account which may be higher after marriage if both spouses work. If the borrower’s new spouse doesn’t earn income then they may actually see their monthly payment requirements drop as their household size went up, but their household income remained the same.

Household income also affects how much student loan interest a borrower can deduct on their federal taxes. It’s worth consulting an accountant if a newly married couple needs help figuring out where they stand financially post-marriage.

It’s also important to be aware of how marriage affects your credit score as how someone manages their student loan debt is a factor. Since spouses don’t share credit reports, marrying someone with bad credit won’t hurt your credit score. That said, when it comes time to apply for a loan together, a bad credit score can make getting approved harder—which is another reason it’s key to get on the same page about repaying any debt on time.

Recommended: Types of Federal Student Loans

Refinancing Student Loans After Marriage

Refinancing student loans gives borrowers the chance to take out a new student loan with ideally better interest rates and terms than their original student loan or loans. Some borrowers may choose to consolidate multiple student loans into one newly refinanced loan to streamline their debt repayment process.

The result? One convenient monthly payment to make with the same interest rate and the same loan servicer instead of multiple ones.

As tempting as it may be to combine debt with a spouse and work toward paying it off together, married couples typically cannot refinance their loans together and each spouse would need to refinance their student loans separately. But even though a couple can’t refinance their student loan debt together, they’ll still want to be aware of what’s going on with their partner’s student loans.

Recommended: Top 5 Tips for Refinancing Student Loans in 2022

How to Refinance Student Loans After Marriage

Refinancing student loans after marriage looks the same as it does before marriage and is pretty straightforward. The student loan borrower will take out a new loan, which is used to repay the original student loan.

Ideally, this results in a better interest rate which will help borrowers save money on interest payments, but this isn’t a guarantee. Before refinancing, it’s important that borrowers shop around to find the best rates possible as factors like their credit score and income can qualify them for different rates.

Borrowers have the option of refinancing both federal and private student loans, but it’s worth noting that refinancing a federal student loan into a private one removes access to valuable federal benefits like income-driven repayment plans and loan forgiveness for public service employees.

Refinancing vs. Consolidating Student Loans After Marriage

Borrowers can choose to refinance or consolidate their student loans before or after marriage.

If a borrower has multiple federal student loans, then they can choose to consolidate their different loans into one Direct Consolidation Loan. This type of loan only applies to federal student loans and is offered through the U.S. Department of Education.

This type of loan takes a weighted average of all of the loans consolidated to determine the new interest rate, so generally this is an option designed to simplify debt repayment, not to save money. If a borrower chooses to consolidate through a private lender, they will be issued new rates and terms, which may be more financially beneficial.

Consolidating through a private lender is a form of refinancing that allows borrowers to take out one new loan that covers all of their different sources of student loan debt. While some private lenders will only refinance private student loans, there are plenty of private lenders that refinance both private and federal loans. As mentioned earlier, refinancing a federal loan means losing access to federal protections and benefits.

Refinancing can be advantageous if the borrower is in a better financial place than they were when they originally took out private student loans. If they’ve improved their credit score, paid down debt, and taken other steps to improve their financial picture, they may qualify for a better interest rate that can save them a lot of money over the life of their loan.

Another option in refinancing student loans after marriage is co-signing a partner’s loan. Doing so may mean that you can leverage greater earning power and possibly better credit, but it also means both partners are responsible for the loan, and can put one partner at risk in the event of death or divorce.

Student Loan Refinancing With SoFi

SoFi refinances both federal and private student loans, which can help borrowers save because of our flexible terms and low fixed or variable rates. Borrowers won’t ever have to worry about any fees and can apply quickly online today.

Learn more about refinancing student loans with SoFi.

FAQ

What happens when you marry someone with student loan debt?

If someone’s new spouse has student loan debt, this indirectly affects them. While the debt won’t be under their name or affect their credit score when it comes time to apply for credit products with their spouse (such as a mortgage loan) their credit score and current sources of debt will likely be taken into account.

Is one spouse responsible for the other’s student loans?

No one spouse is directly responsible for their spouse’s student loans, but it’s important to work together to pay off student loan debt. Again, once it comes time to apply for a joint loan, any student loan debt can have an effect on eligibility.

Does getting married affect student loan repayment?

Getting married can affect student loan repayment if a borrower is on an income-based repayment plan for their federal student loans. This type of repayment plan takes household size and income into account when determining what the borrower’s monthly payment should be. If their spouse brings in an income they may find their monthly payments are higher, but if their spouse doesn’t have an income their payments may become smaller.

Photo credit: iStock/South_agency

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.

If you’re interested in a legal career, you may be wondering how to prepare during your undergraduate studies. There’s plenty to consider: What courses should you take? What experience will make you a strong law school applicant? And do you need a pre-law degree?

Students have multiple paths available to get into law school. A pre-law program is just one of many options for prospective law students to acquire the requisite knowledge and skills. Read on for our comprehensive guide, including pre-law majors, typical pre-law requirements, ways to finance law school, and more.

What Is Pre-Law?

So what is pre-law exactly? Pre-law refers to any coursework or program of study geared towards preparing aspiring law students.

Whereas pre-med encompasses a set list of prerequisite courses needed to get into medical schools, such as biology and chemistry, pre-law does not have a uniform structure, nor is it mandatory for admission to law school.

It’s possible to pursue pre-law majors at some colleges, while other schools lack specific pre-law programs. Generally speaking, students in pre-law have some flexibility in selecting their courses and majors.

Pre-law programs can also include professional development, networking events, academic advising, and informational resources to guide and support students interested in legal professions.

Can I Get a Pre-Law Degree?

Not every school with pre-law offers an official pre-law degree, but some do.

Since a bachelor’s degree is required to get into law school, obtaining a pre-law degree might seem like a logical choice for gaining knowledge of the legal system and preparing for law school. Studying for a pre-law degree can also help determine if the legal field is the right fit before paying for law school tuition, which costs $45,844 a year on average.

While not a pre-law degree per say, a number of colleges offer joint degree programs that allow students to combine their bachelor’s and law degrees. Sometimes called 3+3 programs, this path lets qualified students transition into law school after their junior year, thus saving on tuition and time towards receiving both diplomas.

To reiterate, a pre-law degree is not essential to getting into law school. Students can earn different degree types, such as a bachelor’s of arts or science, in a wide range of academic disciplines to prepare for legal education.

Pre-Law Requirements

Pre-law programs vary by institution. Students pursuing a pre-law major or minor may be required to receive approval from an academic advisor, study-specific coursework, and maintain a certain GPA to graduate.

If pre-law is not a degree-granting major at your school, there are likely less requirements to enroll. However, it’s not uncommon to have to take a prerequisite legal course or complete an internship as a pre-law student.

While there aren’t any formal pre-law requirements for admission to law school, there are other necessary steps and qualifications to apply. These typically include:

•  Having a bachelor’s degree (or being on track to completing one)

•  Meeting minimum GPA requirements, if applicable

•  Satisfactory Law School Admissions Test (LSAT) scores (varies by school)

•  A complete application, which may include a personal statement, essays, and recommendation letters

Pre-Law Courses

When choosing what courses to take, it’s important to consider the desired skills and attributes law schools look for. On the whole, it’s recommended that students choose coursework that develops their abilities in reading comprehension, critical thinking, analytical reasoning, logic, and written communication.

Many schools have established pre-law curriculum that students are required or advised to take based on the nature of the program. Typically, this includes a selection of courses across multiple disciplines, such as philosophy, political science, English, and other concentrations in the liberal arts. Taken together, pre-law courses aim to provide a breadth of knowledge and competencies.

If you have an idea of what type of law you want to practice after law school, taking electives or majoring in that subject area in combination with pre-law courses is a useful way to start preparing.

Schools with pre-law programs often offer advising services, which can be a helpful resource to devise an academic plan that puts you on track for your law school goals.

Pre-Law Majors

Pre-law majors often incorporate a mix of social science and humanities courses to develop the skills needed for the LSAT and a legal education.

Although a subset of schools offer a pre-law major, students can ultimately study a wide range of academic disciplines while on the pre-law track. In fact, the American Bar Association does not recommend any specific undergraduate major for students planning to attend law school.

Since students are evaluated heavily on their GPA, it’s a good idea to find a major that you’re genuinely interested in and can excel at. Tacking on a double-major, minor, or honors classes can further demonstrate motivation and commitment to admissions offices.

It may be helpful to consider the academic path other law students have taken. According to the Law School Admission Council (LSAC) report for 2020 to 2021 enrollment, these are the ten most popular pre-law majors:

1.   Political Science

2.   Psychology

3.   Criminal Justice

4.   English

5.   Economics

6.   History

7.   Other Arts & Humanities

8.   Philosophy

9.   Sociology

10.   Communications

Recommended: 20 of the Most Popular College Majors

Preparing for Law School

Getting into law school is competitive. According to the American Bar Association, only 69.6% of law school applicants were accepted to at least one law school in 2020.

For many students, studying for the LSAT is a point of stress and anxiety. Many pre-law programs advise students on getting ready for the LSAT and may offer preparatory classes.

If these resources aren’t available on campus, students can choose from online courses or study guides with practice tests to prepare well in advance. It’s worth noting that students may take the LSAT multiple times—three times in a single testing year; five times within the past five years.

When starting the application process, keep in mind that most law school applications carry a fee, usually in the range of $60 to $100. Factoring in law school rankings and how your GPA and LSAT scores compare to a school’s median statistics can help decide where it’s worth applying.

Application fee waivers may be offered to students with considerable financial need or strong qualifications. It’s possible to receive a waiver by meeting early application deadlines or simply requesting one, too.

Financing Law School

Earning a Juris Doctor degree, or a J.D., is an investment in your future. It’s also a major financial decision.

For the 2020-2021 academic year, the average private and public, out-of-state tuition cost $51,268 and $42,143, respectively. Meanwhile, in-state public tuition averaged $29,074 for the same year. Despite the steep sticker price, financing law school is possible by planning and researching your options in advance.

Scholarships and grants

Exploring law school scholarships and grants early on in your search is important, as these funds generally don’t have to be repaid. Law schools are the main source of scholarships, which are usually merit-based. However, other funding opportunities exist for students from underrepresented groups or who are studying a specific legal field.

Work-study programs

Law school is demanding, but some students manage to work part-time to help cover living expenses. Students with financial need may be eligible for work study—a federal financial aid program that provides part-time work, often in community service or a student’s field of study.

Federal or private student loans

Ultimately, many law students finance a portion of their education expenses with federal or private loans. And your school’s financial aid office is responsible for determining the type of loan and amount you qualify for, if any.

Law students can borrow up to $20,500 in federal Direct Unsubsidized Loans annually, but no more than $138,500 overall in subsidized and unsubsidized loans when aggregated with undergraduate loans.

If Direct Unsubsidized Loans are exhausted, students can take out a federal Grad Plus Loan up to the cost of attendance minus other financial aid. To qualify, students must satisfy federal student aid eligibility requirements, be enrolled at least half-time, and not have an adverse credit history.

Private student loans are another option, but without the benefits that come with federal loans, such as income-driven repayment plans or Public Service Loan Forgiveness. Yet, competitive interest rates with private loans could be advantageous for law students eyeing high-paying private-sector jobs.

The Takeaway

Students have plenty of choices in what they study to acquire the skills and knowledge necessary for legal education. Pre-law programs can be a great resource for aspiring lawyers, but completing one isn’t essential for getting into law school.

Getting accepted into law school and making it to graduation three years later are major accomplishments. Tackling law school loans after graduation may be less exciting, but it matters for your financial future.

Refinancing your existing student loans could help you secure a lower interest rate; some private lenders like SoFi offer deferment to qualified borrowers when they go back to school for an advanced degree.

If you’re considering refinancing your student loans, SoFi offers a competitive rate, flexible terms, and no fees.

Photo credit: iStock/Pixelimage

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.

What Is Vega in Options Trading?

Vega is one of the Greeks — along with delta, theta, and gamma. And the Greeks, itself, is a set of indicators that quantitative analysts and traders use to measure the effect of various factors on prices of options contracts. Traders can use the Greeks to hedge against risks involved in trading options. Each indicator in the Greeks helps analysts to understand the level of risk, volatility, price direction, value over time, and interest rate of a particular options contract.

As a unit of measure, vega tries to assess, theoretically, the amount that a security’s price will change with every percentage point that its price fluctuates. So vega reflects how sensitive a contract is to changes in the price of its underlying security. When an underlying asset of an options contract has significant and frequent price changes, then it has high volatility, which also makes the contract more expensive.

How Vega Works

Vega changes over time as the price of the underlying asset changes and the contract moves closer to its expiration date. Because vega is always changing, investors tend to track it on an ongoing basis while they are invested in an options contract.

When options still have time before they expire, the vega is said to be positive. But when an options contract nears its expiration date, then vega decreases and becomes negative. This is because premiums are higher for future options than they are for options that are close to expiring. When an option’s vega is higher than the amount of the bid-ask spread, the option has what is known as a competitive spread. If vega is lower than the bid-ask spread, then the spread is not competitive.

Vega is a derivative of implied volatility.

Implied Volatility

The term, implied volatility is simply an estimate of where the price of an underlying security may be now, was in the past, or will be going forward. In pricing options, implied volatility is mostly used to predict future price fluctuations. Traders sometimes use a sigma symbol (𝞂) to represent implied volatility.

Traders use options pricing models to calculate implied volatility. These models try to estimate the speed and amount that an underlying security’s price changes — its volatility. As the volatility of the underlying asset shifts, the vega also changes. Pricing models can estimate volatility for present, past, and future market conditions. But, as the calculation is just a theoretical prediction, so the actual future volatility of the security may differ.

Characteristics of Vega

•   Vega relates to the extrinsic value of an option, not its intrinsic value.

•   Vega is always positive when an investor purchases calls or puts.

•   It Is negative when writing options.

•   Vega is higher when there is more time until the option expires.

•   It’s lower when the option is close to expiring.

•   When the option is at the money, vega is highest.

•   When the option is in- or out-of-the-money, vega decreases. In other words, vega is lower when the market price of the underlying security is farther from the option strike price.

•   When implied volatility increases, the option premium increases.

•   When implied volatility decreases, the option premium decreases.

•   The effect vega has on options trading is based on various factors that affect the option’s price.

•   When gamma is high, vega is generally also high.

•   Vega shows an investor the amount that an option should theoretically change for every percentage its underlying security’s volatility changes.

•   Vega can also be calculated for an entire portfolio of options to understand how it is influenced by implied volatility.

What Does Vega Show?

Vega shows the theoretical amount that an option’s price could change with every 1% change in implied volatility of the underlying asset. It can also be used to show the amount that an option’s price might change based on the volatility of the underlying security — that is, how often and how much the security’s price could change.

Traders generally omit the percentage symbol when referring to vega, or volatility. And some analysts, too, display it without a percentage symbol or decimal point. In that case, a volatility of 16% would be displayed as “vol at 16.”

Vega Options Example

Let’s say stock XYZ has a market price of $50 per share in February. There is a call option with a March expiration date with a price of $52.50. The option has a bid price of $1.50 and an ask price of $1.55.

The option’s vega is 0.25, and it has an implied volatility of 30%. Because vega is higher than the bid-ask spread, this is known as a competitive spread. A competitive spread does not mean the trade will be profitable or that it is automatically a good trade to enter into, but it is a positive sign.

The implied volatility of the underlying security increases to 31%. This changes the option’s bid price to $1.75 and changes the ask price to $1.80. This is calculated as

Conversely, if the implied volatility goes down 5%, the bid price would decrease to $0.25 and the ask price decreases to $0.30.

How Can Traders Use Vega in Real-Life?

Vega tends to be less popular with investors than the other Greeks (Delta, Theta, and Gamma) mostly because it can be difficult to understand. But vega has a significant effect on options prices, so it is a very useful analytic tool.

Benefits of Vega

If investors take the time to understand implied volatility and its effect on options prices, they’ll find that vega can be a useful tool for making predictions about future options price movements. It also helps with understanding the risks of trading different types of options contracts. Looking at the implied volatility of options can even guide investors as they choose which options to buy and sell. Some traders even utilize changes in volatility as part of their investing plan — with strategies like the long straddle and short straddle. Vega plays a key role in using these options trading strategies.

Vega Neutral: Another Strategy

For traders who want to limit their risk in options trading, the vega neutral strategy helps them hedge against the implied volatility in the market of the underlying security. Traders use the vega neutral strategy by taking both long and short option positions on a number of options. By doing this, they create a balanced portfolio that has an average vega of around zero. The zero value means that their options portfolio will not be affected by changes in the implied volatility of the underlying security, thereby reducing the portfolio’s level of risk.

Start Trading Stocks With SoFi Invest

Vega, one of the Greeks, along with the concept of implied volatility relate to advanced trading techniques. Trading options is usually appropriate for experienced traders.

Options are popular with investors who want exposure to assets with lower overhead capital requirements. If you’re looking to begin trading options, an options trading platform like SoFi’s can help. Its intuitive design makes it user-friendly. Investors can trade options from the mobile app or web platform and access educational resources about options if needed.

Photo credit: iStock/gorodenkoff

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
SoFi Invest®