Aug
29
2023
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Guide to Refinancing Private Student Loans

By | Fresh Out of School, Student Loans, student_loan | No Comments

Private student loans are often used to bridge the gap between what a student receives in federal funding and the cost of attending college. While private loans can help students meet educational financial needs, they’re generally more expensive than federal loans and don’t come with federal benefits such as income-driven repayment plans or forgiveness.

But even without federal benefits, there are ways to make private loan repayment easier. If you refinance private student loans with more favorable terms than your existing loans — for example, at a lower interest rate — you can save money over the life of the loan. Here’s what to know about refinancing private student loans to decide if this option is right for you.

Key Points

•   Private student loans are generally more expensive than federal loans and lack associated benefits like income-driven repayment plans and forgiveness options.

•   Refinancing private student loans can lead to lower interest rates and better terms, potentially easing repayment and saving money over the loan’s life.

•   Individuals with a stable job, good credit score, and solid financial profile may qualify for favorable refinancing terms from various lenders.

•   Combining private and federal loans through refinancing may simplify payments but will result in the loss of federal protections and benefits.

•   Before refinancing, it’s crucial to assess overall finances, as improved credit scores and stable income can enhance chances of securing better loan terms.

Refinancing Private Student Loans

While the majority of student debt is made up of federal loans, about 8.8% is private, according to the Education Data Initiative. For students at public and not-for-profit schools, private loans can help students meet financial needs after other sources of federal aid (such as loans, grants, scholarships, or work-study programs) are exhausted. For students at for-profit schools, private loans may be the only source of funding available.

Private loans don’t come with federal student loan benefits (such as deferment, forbearance, forgiveness, or income-driven repayment plans) to make repayment easier. While some private lenders offer deferment or forbearance options, interest will typically still accrue during this period, increasing the overall balance of the loan.

When you refinance private student loans, you replace your existing loans with a new loan, ideally one with more favorable terms.

Recommended: Types of Federal Student Loans

Can I Refinance My Private Student Loans?

People often think they’re stuck with their existing loans, but you may be able to refinance private student loans to secure better terms. If you have a steady job, a good credit score, and a solid financial profile, you may qualify for a lower interest rate or better terms.

A new interest rate and loan term can mean a lower monthly payment – though you may pay more interest over the life of the loan if you refinance with an extended term. By contrast, a shorter term will likely raise your monthly payment, but you’ll pay off your loan sooner.


💡 Quick Tip: You can fund your education with a low-rate, no-fee private student loan that covers all school-certified costs.

Can I Refinance My Private Student Loans With My Federal Loans?

Yes, you may be able to refinance private student loans together with federal loans with a private lender, but the federal government does not consolidate or refinance private student loans.

If you’re paying on multiple federal and private loans, refinancing can simplify your payments because it consolidates all of your student loans into one loan. However, bundling your loans together means losing access to the federal loan benefits and protections mentioned earlier.

Keep in mind some federal loans might have lower interest rates than a private lender. And if you’re taking advantage of loan forgiveness programs or income-based repayment plans that come with federal loans, it may not make sense to refinance and lose access to those options. If you’re not planning to take advantage of federal loan benefits or protections, however, a private student loan refinance can make your repayment journey easier.

How to Refinance Private Student Loans

Wondering how to refinance private student loans? If you’re interested in pursuing a private student loan refinance, here’s how to get started:

Prepare Your Financial Information

To provide a quote, most lenders will need some personal financial information, such as your total student loan debt, income, cost of housing, and an estimate of your credit score.

Check Rates With Multiple Lenders

Private lenders set their own rates and terms, so it’s important to shop around. In addition to getting a rate estimate (which involves a soft credit check that shouldn’t affect your credit score), you’ll want to ask about any other fees (such as an origination fee), if there’s a prepayment penalty, and if they have any deferment or forbearance programs.

Choose a Lender and Apply

As you review the options, consider the amount of interest you’ll pay over the life of the loan and factor in the cost of any fees. Depending on how long the term length is, for example, the lowest interest rate might not translate to the lowest amount of total interest.

When you apply, you’ll need to supply documents that back up the financial information you shared for the initial rate check. Depending on your credit and financial history, applying with a cosigner may help you secure a better interest rate. Be sure to continue to make payments on your existing loans while you wait for your new loan to be approved.


💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

Can I Get My Private Student Loans Forgiven?

There are no private student loan forgiveness programs similar to the federal loan forgiveness programs. If you have federal loans, you might qualify for forgiveness after 120 qualifying monthly payments (or 10 years) under certain circumstances, such as working in public service.

You may also qualify for federal loan forgiveness after 20 or 25 years of making timely, qualifying, income-based payments. The only way private loans might be forgiven is in the case of death or disability, and even that is on a case-by-case basis.

If your private loan payments are draining your bank account, consider calling your lender to discuss your options instead of falling behind on payments. You may be able to negotiate new terms to make it easier to pay on time. Or as mentioned, you can consider refinancing private student loans. Refinancing might allow you to find better loan rates or terms than those of your existing loans.

What Should I Consider Before Refinancing?

If you’re thinking of refinancing, odds are you’re hoping to lower your interest rate, simplify your repayment process, and save money. In order to get a low rate that will make refinancing worth it, it’s a good idea to look at your overall finances before you apply.

Lenders make offers based on a variety of factors including (but not limited to) proof of a stable job, a healthy cash flow, a good credit score, and a reliable history of paying back previous debts. If you need to, take a few months to work on improving your credit score to increase your chances of getting a better interest rate.

If you’re planning on refinancing your federal loans with your private loans, make sure you won’t miss out on federal advantages down the road. For instance, if you plan to return to school full-time, you could be eligible to defer your federal loans while you’re back in school. Once you refinance your student loans, you’re no longer able to defer payment or have access to any other federal loan benefits.

Recommended: What Is Considered a Bad Credit Score?

Refinance My Private Student Loan

If you’re wondering: Should I refinance my private student loans? It can help to look at the interest rates on your loans and your monthly payment amount. If you can refinance private student loans with better terms than your existing loans and you won’t need access to federal benefits for any federal loans, refinancing might be a good option for you.

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 you refinance a student loan?

Yes, you can refinance private and federal student loans with a private lender. When you refinance, you replace your existing loans with a new loan, ideally one with more favorable terms. If you refinance federal loans, however, you will lose access to federal benefits and protections.

Can student loans be forgiven if refinanced?

No, if you refinance federal student loans, you’ll have a new private loan with new terms and no longer have access to federal benefits and protections, including forgiveness. Private lenders do not offer programs similar to the federal loan forgiveness programs.

Why would you refinance student loans?

Refinancing student loans allows you to replace your existing loans with a new loan with new terms. You may be able to save money if you refinance with a lower interest rate or if you shorten your term length to pay off your loan faster. Refinancing can also give you the opportunity to change the terms of your existing loan to remove a cosigner and simplify your repayment process by replacing multiple loans with a single loan.

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.

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

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Aug
29
2023
20 dollar bills rolled up

Investing an Emergency Fund

By | Growing Wealth, invest, Investing | No Comments

An emergency fund can help you cover sudden and unexpected expenses. If your company downsizes, or you get in a car accident that isn’t covered by insurance, having money set aside to help pay the bills could keep costs from spiraling out of control.

But how big of an emergency fund do you need and does it need to be in liquid assets like cash, or should you invest your emergency fund?

Read on to learn more about whether investing an emergency fund is a smart idea.

Should You Invest Your Emergency Fund?

The default answer, historically, has been no when it comes to investing an emergency fund, because of the potential risk and the likelihood that you won’t be able to access it when you need it. But, increasingly, investing your emergency fund is becoming a viable option — particularly if your situation makes you less reliant on cash at hand.

So, should you invest your emergency fund? There are a number of reasons you might want to consider doing so. For instance, the returns can add up and if you wait, you could be leaving money on the table.

Here are some of the pros and cons to investing an emergency fund:

The Pros of Investing an Emergency Fund

You Could Make a Higher Return on Your Money

The number-one reason to park your emergency fund in an investment account is the potential for a higher return on your money than in a savings account.

For instance, you could put your emergency fund into a money market account or high-yield bank account that will earn you a higher rate of interest (currently more than 4% APY) than a standard bank account.

You Can Still Access Your Funds Easily

There are a number of investment options, such as a money market account, or high-yield bank account ,or even a Roth IRA, that allow you to withdraw your money if you need it.

For instance, with a Roth IRA, you can withdraw contributions at any time without paying a penalty, unlike a traditional IRA that may impose a 10% penalty on early withdrawals.

The Cons of Investing an Emergency Fund

It Might Take You Longer to Get Your Money

You might have to go through extra steps to get your money. Even if you temporarily put an emergency expense on a credit card and then pull money out of a money market account to pay off the credit card when it’s due, that’s still less accessible than simply having the money in your bank account.

You Could Risk Losing Money

If you invest your money — whether it’s in a mutual fund or pick and choose your own stocks — it always carries some risk. The market can dip at any given point, which can be a problem if your investments dip at the same time you need to tap into them.

If you’re considering investing your emergency fund, then it can be helpful to understand your options and the basics of investing.

This chart gives you a side-by-side comparison of the pros and cons of investing an emergency fund.

Pros

 Cons
You could earn a higher return of your money by investing it. You risk losing your money if the stock market drops.
The money can be easily accessible if you invest in a money market account or high-yield savings account. It can take you longer to get your money and may involve an extra step or two.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

3 Options for Investing An Emergency Fund

Should I invest my emergency fund? This is a question you’ll need to consider carefully. Be sure to weigh the benefits and drawbacks.

Part of the decision to invest your emergency fund will be finding an appropriate account. There are a few options that could work, depending on your financial situation.

High-yield savings account

These accounts come with a higher APY — generally, more than 4% right now — than traditional bank accounts. You can easily access your money from an online high-yield savings account, just as with any other bank account.

Money Market Account

Money market accounts earn interest and are essentially a combination of a savings account and a checking account. They tend to be low risk and may allow you to access your money by writing a check or using a debit card.

Roth IRA

With a Roth IRA, you can contribute money (up to $6,500 in 2023) and withdraw your contributions (but not your earnings) without penalty. The contributions you make to an IRA are taxable.

And remember, the general rule of thumb when it comes to investing is, the higher the investment risk, the higher the potential for return — but a risky investment could be even riskier if you intend to use the money as an emergency fund.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

Investing With SoFi

If you don’t want to invest your entire emergency fund, you could consider saving a portion in a traditional savings account and investing another allotted amount. That way, you could rely on cash for immediate emergencies and have a backup of invested funds you can rely on in the event that something major, and more expensive, happens.

What’s most important is that you have a plan to deal with emergencies — because like it or not, eventually, you’ll likely have some unexpected event or cost that you need to cover.

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

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


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FAQ

Is it wise to invest your emergency fund?

Whether to invest your emergency fund or not is a personal decision that you should consider carefully, since investments can be risky. One thing to keep in mind: Your funds should be easily accessible so that you can tap into them quickly if an emergency happens. Think about possible investments that offer liquidity, such as high-yield bank accounts and money market funds.

How much of my emergency fund should I invest?

Experts advise having at least three to six months’ worth of expenses on hand where you can access them easily, such as in a bank account. Anything more than that you may want to consider investing. But investing is a personal choice and one you should consider carefully, and it will also depend on your specific financial situation.

What should an emergency fund not be used for?

It’s best to use an emergency fund for urgent or sudden expenses that are necessary, such as emergency car or home repairs. You should not use an emergency fund for frivolous expenses or things you simply want, like a fancy vacation or new clothes.

SoFi Invest®

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

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

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

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

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

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

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

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

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

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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Aug
29
2023
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What’s the Average Student Loan Interest Rate?

By | Fresh Out of School, Student Loans, student_loan | No Comments

Student loans, like any loans, have an interest rate (and, sometimes, other loan fees). While interest rate accrual on existing federal student loans was paused from March 2020 through August 2023 due to the Covid-19 forbearance, the 2023 debt ceiling bill officially ended the payment pause, requiring interest accrual to resume on Sept. 1 and payments to resume in October 2023. And of course, any new student loans — federal or private — will have an interest rate that impacts the total cost of the loan.

So what is the average student loan rate? While it would be difficult to nail down the average rate of all active student loans held by borrowers, we know the interest rates of new federal student loans, as well as the range of rates for private student loans.

What Is The Average Student Loan Interest Rate?

The interest rate on a student loan varies based on the type of student loan. Federal student loans issued after July 1, 2006, have a fixed interest rate. The rates on newly disbursed federal student loans are determined annually by fixed formulas specified in the Higher Education Act of 1965 (HEA).

These are the federal student loan interest rates for the 2023–24 school year:

•   5.50% for Direct Subsidized or Unsubsidized loans for undergraduates

•   7.05% for Direct Unsubsidized loans for graduate and professional students

•   8.05% for Direct PLUS loans for graduate students, professional students, and parents

All three of those rates have risen from the 2022-2023 school year, and the undergraduate rate has doubled since the 2020-2021 school year.

Federal Student Loan Rates by Borrower Type
Source: Studentaid.gov

This means that the average rate for the three main types of federal student loans is 6.87%:

Average Interest Rate for All Federal Student Loans
Source: Studentaid.gov

Private student loan interest rates vary by lender and each has its own criteria for which rates you qualify for. Private student loans can have either fixed interest rates that remain the same over the life of the loan or variable rates that can start lower than a fixed interest rate but then go up over time, based on market changes.

Private lenders may also offer different interest rates if you have a cosigner on your student loan. The interest rates on private student loans can vary anywhere from 4% to 17%, depending on the lender, the type of loan, and on individual financial factors including the borrower’s credit history.

Recommended: Types of Federal Student Loans

How Are Interest Rates Determined?

As mentioned previously, the interest rates on federal student loans are set annually by fixed formulas specified in the HEA. The rates are tied to the financial markets — federal law sets them based on the 10-year Treasury note and a statutory add-on percentage with a maximum rate cap.

Since July 2006, all federal student loans have fixed interest rates. Although federal student loans are serviced by private companies or nonprofits selected by the federal government, these loan servicers have no say in the federal interest rate offered.

For private student loans, the lenders set their own rates, though they often take cues from federal rates. Each lender has their own algorithm and credit standards. The rates quoted for student loans vary based on each applicant’s individual situation — though generally the better a potential borrower’s financial history is, the better rate they may be able to qualify for.

To learn more about private and federal student loans check out our student loan help center. If you’re looking to reduce your interest rate, student loan refinancing may be right for you.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

How Is Student Loan Interest Calculated?

After a three-year payment pause, the debt ceiling bill officially ended the Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1 and payments to resume in October 2023.

Interest on federal student loans typically accrues daily. To calculate the interest as it accrues, the following formula can be used:

Interest amount = (outstanding principal student loan balance × interest rate factor) × days since last payment

In other words, you will multiply your outstanding loan balance by the interest rate factor. Then, multiply that result by the days since you last made a payment.

To calculate that interest rate factor you can divide the interest rate by the number of days of the year (365). For example, let’s say you have an outstanding student loan balance of $10,000, an interest rate of 4.75%, and it’s been 30 days since your last payment. Here’s how to calculate your interest:

$10,000 x (4.75%/365) = $1.30 daily interest charge
$1.30 x 30 days = $39
Interest amount $39

Many private student loans will also accrue interest on a daily basis, however, the terms will ultimately be determined by the lender. Review the lending agreement to confirm.

Recommended: When Do Student Loans Start Accruing Interest?

What to Look for in a Student Loan Interest Rate

When you take out a federal student loan, you’ll receive a fixed interest rate. This means that you’ll pay a set amount for the term of the student loan. In addition, all of the terms, conditions, and benefits are determined by the government. Federal student loans also provide some additional perks that you may not find with private lenders like income-driven repayment (IDR) plans.

The Saving on a Valuable Education (SAVE) Plan is one of the IDR options to consider if you’re a federal student loan borrower. The SAVE Plan is the most affordable repayment plan for federal student loans, according to the U.S. Department of Education. Borrowers who are single and make less than $32,800 a year won’t have to make any payments under the SAVE Plan. (If you are a family of four and make less than $67,500 annually, you also won’t have to make payments.)

Private student loans can have higher interest rates and potentially fewer perks than federal student loans. You may want to take advantage of all federal student loans you qualify for before comparing private loan options.

Average Interest Rates for Student Loans FAQ

Here are some common questions about the average interest rates of student loans:

What Is a Good Fixed Interest Rate for Student Loans?

When it comes to cost, the lower the interest rate, the better. The lower the interest rate, the less a borrower will owe over the life of the loan, which could help individuals as they work on other financial goals. If you’re taking out federal loans, the student loan interest rate is set by federal law, so you don’t have a choice for what is and isn’t a reasonable interest rate.

When it comes to private student loans, it’s wise to shop around and compare your options to find the most suitable financing solution. Since every lender offers different terms, rates, and fees, getting quotes from multiple lenders may help you select the best option for your personal needs. Keep in mind that the rate you receive on a private student loan is largely dependent on your credit score and other factors, whereas federal student loan interest rates are based on HEA formulas and not your creditworthiness.

Also keep in mind that private student loans do not have the same borrower protections as federal student loans, including IDR plans or deferment options, and should be considered only after all federal aid options have been exhausted.

Is $30K In Student Loans Bad?

If you owe $30,000 in student debt, you’re right in line with the national average. More than 40 million consumers have outstanding student debt as of 2023, and the average borrower owes about $35K, according to TransUnion®.

Is a 4.75% Interest Rate Good?

With interest rates on private student loans ranging anywhere between 4% and 17%, and the three types of federal student loan rates averaging 6.87% for the 2023-2024 school year, a 4.75% interest rate in 2023 is lower than what most students can get on a new student loan.

How Can I Reduce the Interest Rates on my Student Loans?

The interest rate on federal student loans, while fixed annually for the life of the loan, does fluctuate over time. For example, the rates for Direct Subsidized and Unsubsidized loans for undergraduates doubled from 2.75% in 2020–21 to 5.50% in 2023–24.

To adjust the rate on an existing student loan, borrowers generally have two options. They can refinance or consolidate the loans with hopes of qualifying for a lower interest rate.

Refinancing a federal loan with a private lender eliminates them from federal borrower protections such as income-driven repayment plans or Public Service Loan Forgiveness. The federal government does offer a Direct Consolidation Loan, which allows borrowers to consolidate their federal loans into a single loan. This will maintain the federal borrower protections but won’t necessarily lower the interest rate. When federal loans are consolidated into a Direct Consolidation Loan, the new interest rate is a weighted average of your original federal student loans’ rates.

Refinancing student loans with a private lender may allow qualifying borrowers to secure a lower interest rate or preferable loan terms. Note that extending the repayment term will generally result in an increased cost over the life of the loan.

To see how refinancing could work for your student loans, take a look at the student loan refinance calculator.


💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

The Takeaway

The average student loan interest rate varies depending on the loan type. The interest rate for federal Direct Unsubsidized and Subsidized loans is set annually by federal law and fixed for the life of the loan. The interest rate on private student loans is determined by a variety of factors including the borrower’s credit history and may range anywhere from 4% to up to 17%.

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.

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 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.


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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.

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Stock Market Fluctuations Explained

By | Growing Wealth, invest, Investing | No Comments

The stock market can go up or down based on a number of different factors, including consumer confidence, worries about inflation, and supply and demand. As an investor, it’s important to understand market fluctuation and how it works, and to know how much fluctuation is normal.

Why do stocks fluctuate? Read on to learn more about market volatility and stock fluctuation.

4 Top Causes of Stock Market Fluctuations

The stock market fluctuation definition is when stock prices rise or fall. So what causes this? The stock market can move up and down due to a variety of factors, including:

Supply and Demand

The prices of stocks depend on supply and demand. Supply is how much of a good — in this case, a share of stock — is available for sale. Demand is how much consumers want to buy that stock. Prices rise when the supply of shares of stock for sale is not enough to meet investors’ demands. When investors demand for shares falls, so does the price of the shares.

Overall, the stock market fluctuates because investors are buying and selling stocks in such a way, and in such volume, that stock prices make a large move in one direction or another.

Inflation

Concerns about inflation may cause investors to become bearish and stop buying stocks, which may make the market go down. That’s because during periods of inflation, consumer spending tends to slow, and corporate profits may suffer. Inflation can inject uncertainty and volatility into the market.

Economic Indicators

Economic indicators are data that analysts use to help judge the health of the economy. These indicators can, in turn, affect stock market fluctuation. They typically include such things as the Consumer Price Index, unemployment numbers, interest rates, and home sales. If prices, interest rates, and unemployment rise, chances are good that there may be stock fluctuation.

Company Performance

How well a company is doing can affect the price of its stock and potentially cause market fluctuations. If the company is expanding its operations and reporting a profit, for instance, investors’ demand for the stock may rise, along with the price of the stock. Conversely, if there are concerns about the company’s financial health, or it reports a loss, demand for the stock may drop, and so generally will the price.

Pros and Cons of Market Fluctuations

There are benefits and drawbacks to market fluctuations. These are some of the advantages and disadvantages to consider when the market becomes volatile.

Market Fluctuations
Pros

 Cons
May be able to purchase stocks at lower prices Could lose money by selling stocks at a loss
Opportunity to diversify assets Risk of falling prey to financial scams may be greater

Pros of Market Fluctuations

•  Chance to purchase shares at lower prices. When stock prices go down, it may be a good opportunity for investors to buy shares for less. Investing in a down market could be beneficial.

•  Incentive to diversify your assets. When the market is volatile, it’s a prime time to look over your asset allocation and make any prudent changes. For instance, you may want to reduce some of your holdings in riskier assets and move them over to safer investments in case the market drops.

Cons of Market Fluctuations

•  Might end up selling stocks at a loss. Instead of panicking, selling your shares, and losing money, you may be better off waiting out the fluctuations if you can. When the market goes back up, you may be able to recoup what you paid for the stock.

•  There may be a greater risk of financial scams. During a time of market volatility you may receive offers that advertise risk-free returns on certain investments. Be alert to possible fraud, and don’t let your emotions get the better of you, or you could lose money.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

Volatility Means the Stock Market Is Working

Although it’s difficult to watch the value of your portfolio drop, stock market volatility is a normal part of stock market investing. In fact, volatility is natural, and it shows that the stock market is working as it should.

Here’s why: The more investors weigh in — by actively buying and selling stocks — the more accurate the prices of stocks will ultimately be. Essentially, it’s a weighing of information about the “correct” price of a stock from many different investors.

It’s also helpful to remember that volatility doesn’t just relate to rising stock prices — it also refers to plummeting stock prices. When the stock market makes a surge upward, that is also considered stock market fluctuation.

What Is a Normal Amount of Stock Market Fluctuation?

This is a notoriously hard question to answer because really, almost any amount of market fluctuation is possible.

The best guide for understanding what is normal (and what is not) is to look at what has happened in the past. While past performance is never a guarantee of future financial success, it’s helpful to look at the data.

The most commonly cited pool of data is the S&P 500. The S&P 500 can give a good historical gauge of stock market movement.

Since World War II — the “modern” stock market era, the S&P 500 has seen 12 drops in the stock market of over 20%.

Peak (Start)

 Return
May 29, 1946 -30%
August 2, 1956 -22%
December 12, 1961 -28%
February 9, 1966 -22%
November 29, 1968 -36%
January 11, 1973 -48%
November 28, 1980 -27%
August 25, 1987 -34%
July 16, 1990 -20%
March 27, 2000 -49%
October 9, 2007 -57%
February 19, 2020 33.93%

You’ll notice that a big drop in the stock market happens somewhat regularly. And smaller fluctuations of 5% or 10% down happen much more frequently than that.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

What Does Stock Market Volatility Mean to You As an Investor?

How you deal with volatility as an investor depends on your tolerance for risk. What to know about risk is that if you can’t afford losses, volatility could be a time of fear and uncertainty for you. But if you have a higher tolerance for risk, you may see volatility as a potential opportunity.

Risk Tolerance in Investing

Risk tolerance is the amount of risk you’re willing to take with investments. Volatility in the market could directly affect your risk tolerance. For instance, if you have a higher risk tolerance, you may be willing to risk money for the possibility of high returns. If you have a lower risk tolerance, you’ll likely be looking for safer investments with more of a guaranteed return.

Your age, your financial goals, and the amount of money you have impact your risk tolerance. If you’re saving for retirement, and nearing retirement age, your risk tolerance will be lower. In this case, you’ll want to practice risk management with safer investments. If you’re in your 20s or 30s, however, you may have higher risk tolerance because you have more years to recoup any money you may lose.

Investing With SoFi

Choosing the right investment strategy depends on your goals, risk tolerance, and your personal situation. Every investor needs to manage their portfolio in a way that fits their needs during periods of market volatility and as well during times of stability.

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

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

FAQ

Why does the stock market fluctuate?

The stock market fluctuates for a number of different reasons, but the biggest overall factor is supply and demand. Prices of stocks rise when the supply of shares for sale is not enough to meet investors’ demands. When investors’ demand for shares falls, so does the price of the shares. This causes volatility.

What is the average market fluctuation?

Markets fluctuate fairly frequently. The average fluctuation is about 15% during a year.

How long do market fluctuations last?

How long market fluctuations last depends on the reason for the fluctuations and how big the fluctuations are. Remember, it’s normal to have some periods of volatility in the stock market. Diversifying your portfolio may help you manage risk and stay on track with your investment goals during times of uncertainty.

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 Invest®

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SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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How Much Does It Cost to Build an Apartment Complex?

By | Home Ownership, mortgage | Comments Off on How Much Does It Cost to Build an Apartment Complex?

As with any construction project, the cost to build apartment complexes differs, based on many factors. The national average is around $12.5 million, but the range varies considerably based on the square footage, number of units, and type of apartment complex.

For anyone considering building apartments, it can be helpful to know what influences the cost early in the process.

Key Points

•   Building an apartment complex costs around $12.5 million on average, but this can vary significantly.

•   Costs per square foot for apartment construction range from $95 to $645.

•   The number of units can affect the overall cost, with each unit costing between $70,000 and $200,000.

•   Different types of apartment complexes, such as infill, low-rise, mid-rise, and high-rise, have varying costs.

•   Prefab or modular construction offers potential savings, with costs ranging from $150 to $400 per square foot.

What Determines the Cost of Building Apartments?

So, how much does it cost to build an apartment complex? Some design choices, like the number of stories, will increase the cost more than others. Here’s what you need to know about different cost factors to calculate the project budget and other things to consider if you’re thinking of building a house or apartment.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Location

Where you plan to build an apartment complex will impact the cost. Land prices vary across the U.S., with New Jersey ranking among the most expensive at $242,900 for one acre on average. On the lower end, Wyoming is the most affordable with an average cost per acre of $54,000.

Square Footage

The cost to build a townhouse is impacted by the size, which is measured in square feet. Generally speaking, the larger the size, the higher the cost. How much it costs to build apartments is subject to many cost factors, but the price range for an apartment complex falls between $95 and $645 per square foot. The average price comes in at around $398 a square foot.

Number of Units

The number of units in an apartment complex is another way to assess construction cost. The cost of a single unit spans from $70,000 to $200,000.

This wide cost range is due to other apartment characteristics, such as the square footage, finishings, and materials used. Whether you plan to design units as a condo or apartment may impact the type of amenities offered and overall design, which impacts the cost per unit.

Replicating the same floor plan across apartments is one strategy to reduce the total cost per unit.


💡 Quick Tip: Don’t overpay for your mortgage. Get your dream home or investment property and a great rate with SoFi Mortgage Loans.

Type

There are different types of apartment complexes, including infill, low-rise, mid-rise, and high-rise.

•   Infill: This type of apartment is constructed on land in a neighborhood that is already largely developed, which generally limits the size of the structure to a duplex or triplex apartment. Building an infill apartment costs between $95 and $205 per square foot on average.

•   Low-rise: This generally involves apartment complexes with four or fewer stories. Low-rise apartments may be built with wood and have an average construction cost of $180 to $275 per square foot.

•   Mid-rise: This includes apartments between five and 10 stories which involve more complex design elements, such as elevators, double-sided corridors, and use of concrete and steel in construction. The average price to build a mid-rise apartment averages $210 to $310 per square foot.

•   High-rise: This type of apartment has 11 or more stories and usually requires more permitting, a driven pile foundation, and use of concrete and steel. High-rise apartments range in cost from $270 to $675 per square foot.

Whether an apartment complex includes mixed uses, such as ground floor storefronts or a basement parking garage, will affect the construction cost.

Recommended: Different Types of Houses

Number of Stories

How much does it cost to build apartment complexes by story? In most cases, the taller the building, the greater the expense. Mid- and high-rise apartment buildings usually require pricier materials, such as concrete and steel. Meanwhile, low-rise apartments may be built with wood, which is comparatively less expensive. Labor costs may also increase for apartments with a higher number of stories.

Prefab Apartment Building Cost

Option for prefab or modular construction is a potential cost saving opportunity. The uniform nature of these apartments reduces design expenses, plus the materials are manufactured off-site, reducing labor costs and weather-related delays. Prefab apartment buildings run from $150 to $400 per square foot on average. This construction style can be applied across apartment types, too.



💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

Apartment Building Construction Cost Breakdown

There are many factors that impact the cost of building an apartment. Although every apartment complex is unique, you can get a rough estimate of the total project expenditure by breaking down the costs by category. Here’s what you can expect to pay for different elements of the project.

•   Architects: 8-10% of the total cost

•   Builder or general contractor: 25%

•   Structural engineer: 1.5%

•   Foundation: 9%

•   Floor structure: 12%

•   Flooring: 5%

•   Masonry walls: 9-10%

•   Wood walls: 6-10%

•   Roof: 10%

•   Plumbing: 12%

•   Windows and doors: 5%

•   Kitchen: 8%

•   Electrical: 10%

•   Interior features: 3-5%

•   Interior finish: 10%

“Really look at your budget and work your way backwards,” explains Brian Walsh, CFP® at SoFi, on planning for a mortgage.

Recommended: Tips for Buying a New Construction Home

Factors Affecting the Cost of Constructing an Apartment Building

There are many moving parts and cost categories that affect the construction cost of an apartment building. Besides the labor and materials expenses outlined above, it’s also important to consider soft costs and paying for building and zoning permits.

Soft costs can include fees for services like interior design, legal support, and interest and fees on a construction or home loan. When talking to lenders, it can be helpful to ask mortgage questions to identify the estimated closing costs and what fees apply. Using a mortgage calculator can help you get a sense of the financing that might be necessary for a home purchase.

Average Maintenance Cost for an Apartment Complex

A newly constructed apartment could have less maintenance costs for an initial period while equipment and building structures are in good condition. However, it’s recommended to set aside a portion of rental income each month to ensure you have sufficient funds for routine maintenance and emergency repairs.

Following the 1% rule, for example, involves budgeting one percent of the property value each year for maintenance costs. For a $2 million apartment building, this would amount to $20,000 a year for maintenance. Doing the maintenance yourself is one way to keep costs down, but this may not be feasible for larger apartment complexes.

If you plan to sell your apartments to individual owners, then maintenance could be handled through a homeowners association (HOA). As members of a HOA, apartment owners pay dues through monthly fees that support the cost of maintenance, which can vary depending on the extent of a complex’s amenities.

Recommended: How to Buy an Apartment

Cost of Owning an Apartment Complex

Besides maintenance, owning an apartment complex can involve costs associated with property taxes, amenities, insurance, and staff. If you finance the construction or work with investors, you may also need to make loan payments or divide profits between shareholders in the business.

Enhancement and Improvement Costs

Building a luxury apartment building or complex will likely entail greater enhancement and improvement costs. This may include high-end appliances, on-site parking, and dedicated outdoor space for each unit.

Luxury properties often have numerous communal amenities too, such as fitness centers, pools, and outdoor recreational areas. These upgrades bring the average cost of a luxury apartment to $550 to $650 per square foot.

A construction loan is an option to pay for the added enhancement and improvement costs. For a thorough review and tips on financing options, check out a home loan help center and compare different types of mortgages.

The Takeaway

How much does it cost to build an apartment complex? The total project cost will depend on a variety of factors, including the location, number of units, size, and design of the apartment but you can figure it is in the neighborhood of $398 per square foot. There are government-backed loans and private loan options for financing the cost to build an apartment complex.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much does an apartment complex cost?

The cost of an apartment complex varies considerably based on location, size, and other factors. With an average price of $398 per square foot, the estimated cost of a 10,000 square-foot apartment complex would be $3.98 million.

Do apartment buildings hold their value?

Apartment buildings that are well-maintained are likely to hold or increase their value over time.

How many units are in an apartment complex on average?

The number of units differs significantly depending on the size of the complex. Larger, high-rise buildings may have hundreds of units while an infill building built on a lot in an existing neighborhood might have only a few units.

Photo credit: iStock/AlbertPego

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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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.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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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