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Aug

2023

What to Do if Your Credit Card Chip Stops Working

By Jackie Lam | Credit, credit card, Family Finances | Comments Off

It’s your turn at the supermarket checkout. You insert your card into the reader, chip-side first, like you always do. And you get a “card declined” message.

A credit card malfunction can be a small embarrassment and disruption in your day-to-day life. But if your credit card chip stops working, don’t panic. There are several reasons why it might be malfunctioning, including wear and tear, dirt buildup, or an issue with your account.

Let’s dig into the basics of credit card chips, the different reasons a credit card chip might stop working, and what to do if it malfunctions.

💡 Quick Tip: If you have a good credit score, you can apply for a credit card from SoFi without a security deposit.

What Is a Credit Card Chip?

A credit card chip is a microchip that’s embedded in your credit card. The chip protects your data when you make an in-person payment. It uses a process called tokenization that encrypts your information, and generates a one-time code for each transaction.

Thanks to this technology, your credit card information is never received or transmitted by the merchant. This lowers the instances of credit card fraud when you use your card in a store or restaurant.

How a credit card chip works

This technology is also known as “card-and-PIN,” “card-and-signature,” or EMV (aka Europay, MasterCard, and Visa). The microchip that’s embedded in your card uses a process called tokenization. This is the same technology used in contactless credit cards and payments. In short, tokenization takes your sensitive card information and converts it into a unique token. This token protects your card info and account details.

The credit card chip holds encrypted data and transaction codes. These transaction codes are unique, one-time use, and always changing. As a result, it’s hard for counterfeit thieves to duplicate the data that’s stored on the chip.

Credit card chip types

Within the realm of credit cards, there are three main chip types:

Standard “smart cards:” If you want to make an in-person purchase or take out cash at an ATM, many “smart cards” with the EMV chip technology simply require you to insert or “dip” your card into the card terminal.

Chip-and-PIN cards: This type of credit credit chip offers the most security. To make a purchase or make a withdrawal from an ATM with a chip-and-PIN card, you’ll need to first “dip” your card into the card reader, then punch in your credit card PIN code.

Chip-and-signature cards: This type of chip card provides a bit more security than if you simply swiped your card, but it’s not as secure as the chip-and-PIN type card. As the name implies, to use your card, you insert your card into the reader, then provide a signature for the transaction to go through.

Chip-and-signature cards aren’t as secure as their chip-and-PIN counterparts because it’s easier for fraudsters to forge a signature than to decipher your 4-digit PIN.

5 Things That Can Cause a Credit Card Chip to Stop Working

Here are some reasons why your credit card stopped working, and how to avoid these hiccups from happening:

Grime buildup

Your card encounters dirt each time you insert or swipe in a machine, and grime will build up over time. This grime buildup could mean the terminal can’t read your card. To avoid this from happening, wipe down your card periodically.

Wear and tear

Over time, the chip can get scratched or damaged. While scratches to the plastic on your card won’t cause any issues, scratches or dings to the chip might cause your chip to stop working and the transaction won’t go through.

To prevent wear and tear, consider protecting your physical card with a protective sleeve holder. These are usually made of a thin yet durable material, like synthetic fibers.

Heat or water damage

If you accidentally spill coffee and your credit card gets doused in the hot liquid, or you leave your card in the hot car in the middle of summer, the chip on your card might get warped and go on the fritz.

To avoid this from happening, keep your card in your wallet when not in use. And be mindful of exposing it to extreme heat.

Issue with the card reader

Your card might not be the problem at all. Sometimes the issue might have to do with the card reader, also known as the terminal, which acts as the middle man between the retailer and the bank, and authorizes and processes your payment. If there’s a technical glitch with the terminal, your chip might not work.

In this case, try swiping your card instead of doing the chip-and-PIN route. Hopefully that will resolve the issue and your payment will go through.

Issue with your account

Sometimes when your chip stops working it’s because there’s an issue with your account. Common reasons include going over your credit limit, the billing info doesn’t match with your account, or you’re making purchases in locations where you don’t normally shop.

To steer clear of this potential issue, watch your credit limit. You can log on to your account or check your card balance on your card’s mobile app. If you’re using your card while on a business trip or vacation, set a vacation alert.

💡 Quick Tip: When using your credit card, make sure you’re spending within your means. Ideally, you won’t charge more to your card in any given month than you can afford to pay off that month.

What to Do if Your Credit Card Chip Stops Working

Here’s how to fix your credit card’s chip if it’s not working:

Clean the card

If your chip is malfunctioning because of dirt buildup, try to clean your card. Gently wipe it down with an antibacterial wipe, alcohol pad, or microfiber cloth. You can also gently wipe around the edges of your chip with a cotton swab.

Swipe instead

The magnetic stripe on your card also contains your account data. If the problem is with the checkout terminal, try swiping instead of dipping your card. There’s a chance that your transaction will go through without a hitch.

Get a replacement card

If the chip on your card regularly doesn’t work and no amount of cleaning fixes the problem, you might need to reach out to your credit card issuer and ask for a new one. You can do so by calling the number on the back of your card or on the issuer’s website or app. You can sometimes request a new card directly on the app or issuer’s website.

How long it will take for you to receive a replacement card depends on the credit card issuer, but you can expect it to take anywhere from one to seven business days. There might be a charge for a replacement card and a charge if you want shipment to be expedited.

The Takeaway

There are a handful of reasons why your credit card chip stopped working. By doing a bit of investigating, you can get to the root of the issue and troubleshoot accordingly. Most likely you’ll just need to wipe down the card, but sometimes you may need to request a new one.

Looking for a new credit card? Consider a rewards card that can make your money work for you. With the SoFi Credit Card, you earn cash-back rewards on all eligible purchases. You can then use those rewards for travel or to invest, save, or pay down eligible SoFi debt.

FAQ

What do you do if your credit card chip doesn’t work?

If your credit card chip isn’t working, don’t get frustrated. There’s usually a simple explanation why. It could be the result of normal wear-and-tear, heat or water damage, or grime buildup. Or it could be an issue with the card terminal or your account.

Try to clean your card to see if that helps. If you’re in the middle of a purchase, swipe your card instead of inserting it into the terminal. In some instances, you might need to replace your credit card.

What can ruin a chip in a credit card?

There are a few ways a credit card chip can get ruined: regular wear and tear, grime buildup, or extreme heat or water damage.

Can you still use your card if the chip is broken?

You can still use your card by swiping. However, swiping your card instead of going the “chip-and-PIN” or “chip-and-signature” route reduces its security.

Photo credit: iStock/Juanmonino

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

2023

Examining How Student Loan Deferment Works

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

With mass student loan forgiveness blocked by the Supreme Court, you may be curious about what other forgiveness or deferment options are available for students with federal — or private — student loans.

Federal loans do allow you to stop or reduce your payments in some circumstances, such as financial hardship, for up to three years — which is known as deferment. Deferment on private student loans varies by lender, and not all lenders offer it.

One thing you generally don’t want to do — simply stop making payments on your student loan. Whether your loans are federal or private, this puts you at risk of default, which can have a number of negative consequences.

Read on to learn more about student loan deferment, including what it is, how it works, its pros and cons, plus some alternative ways to get student debt relief.

Table of Contents

What Is Student Loan Deferment?
How Does Student Loan Deferment Work?
Why Defer Student Loans
Why Not Defer Student Loans
Types of Student Loan Deferment
Consequences of Defaulting on Federal Student Loans
Consequences of Defaulting on Private Student Loans
Who Is Eligible for Student Loan Deferment?
What If You Have Private Student Loans?
The Limits of Student Loan Deferment
Other Options for Reducing Federal Student Loan Payments
The Takeaway
Deferment FAQ

What Is Student Loan Deferment?

Student loan deferment allows qualified applicants to reduce or stop making payments on their loans for up to three years. If you have a subsidized federal loan, no interest accrues during the deferment period. If you have an unsubsidized federal loan, interest will accrue and will be added to the loan amount (or capitalized) at the end of the deferment period.

Deferments are available on federal loans including Direct Loans, FFEL Program loans, and Perkins Loans.

Private student loans may or may not offer deferment options to borrowers. If you have questions about your private student loan, you’ll want to check in with your lender directly.

How Does Student Loan Deferment Work?

If you have a federal student loan and are no longer in school at least half-time, you will need to apply to defer payments on your student loan. This usually involves submitting a request to your student loan servicer. You will also likely need to provide documentation to show that you meet the eligibility requirements for the deferment (more on eligibility requirements below).

If you have an unsubsidized federal student loan and are granted deferment, interest will continue to accrue during the deferral period. You will have the option to either pay the interest as it accrues or allow it to accrue and be capitalized (added to your loan principal balance) at the end of the deferment period.

Deferments are available on federal loans including Direct Loans, FFEL Program loans, and Perkins Loans.

If a private lender offers deferment, they will likely have their own forms and requirements.

Why Defer Student Loans

Applying for deferment may make sense if you are facing short-term difficulty paying your student loans, since a deferment can provide you with the opportunity you need to stay afloat financially. And, if you have a subsidized loan, deferment won’t make your loan any more expensive in the long run.

Deferring student loans also won’t directly impact your credit score.

Why Not Defer Student Loans

If you’re able to stay on top of your loan payments, then deferment likely doesn’t make sense. If you think that you may have long-term difficulty making your monthly loan payments, deferment may not be the best option either.

If you have an unsubsidized federal loan, interest will continue to accrue during deferment. At the end of the deferment period, this interest will be capitalized on the existing loan amount (or the principal loan value). Moving forward, interest will be calculated based on this new total. So essentially, you are accruing interest on top of interest, which can significantly increase the amount of interest owed over the life of the loan.

Pros and Cons of Student Loan Deferment

Student loan deferment can help borrowers who are struggling financially, but it may not be the right choice for everyone. Here are some pros and cons to consider when evaluating deferment options for federal student loans.

Pros	Cons
Borrowers are able to temporarily suspend or lower the monthly payments on their student loans.	On most federal student loans, interest continues to accrue. This may significantly increase the total cost of borrowing over the life of the loan.
Borrowers may qualify for deferment for periods of up to three years.	Because interest may continue to accrue during deferment, other options like income-driven repayment plans, may be more cost- effective in the long term.

Types of Student Loan Deferment

For federal student loans, there are a few different deferment options . Here are the details on some of the most common reasons borrowers apply for deferment.

In-School Deferment

Students who are enrolled at least half-time in an eligible college or career program may qualify for an in-school deferment. If you are enrolled in a qualifying program at an eligible school, this type of deferment is generally automatic. If you find the automatic in-school deferment doesn’t kick in when you are enrolled at least half-time in an eligible school, you can file an in-school deferment request form .

Unemployment Deferment

Those currently receiving unemployment benefits, or who are actively seeking and unable to find full-time work, may be able to qualify for unemployment deferment. Borrowers can receive this deferment for up to three years.

Economic Hardship Deferment

This type of deferment may be an option for those borrowers who are receiving merit-tested benefits like welfare, who work full time but earn less than 150% of the poverty guidelines for your state of residence and family size, or who are serving in the Peace Corps.

Economic hardship deferments may be awarded for a period of up to three years.

Military Deferment

Members of the U.S. military who are serving active duty may qualify for a military service deferment. After a period of active duty service, there is a grace period in which borrowers may also qualify for federal student loan deferment.

Cancer Treatment Deferment

Individuals who are undergoing treatment for cancer may qualify for deferment. There is also a grace period of six months following the end of treatment.

Other Types of Deferment

There are other situations and circumstances in which borrowers might be able to apply for deferment. Some of these include starting a graduate fellowship program, entering a rehabilitation program, or being a parent borrower with a Parent PLUS Loan whose child is enrolled in school at least half-time.

Consequences of Defaulting on Federal Student Loans

If you simply stop making payments as outlined in your loan’s contract, you risk defaulting on your student loan. Default timelines vary for different types of student loans.

Most federal student loans enter default when payments are roughly nine months, or 270 days, past due. Federal Perkins loans can default immediately if you don’t make any scheduled payment by its due date.

• Immediately owing the entire balance of the loan

• Losing eligibility for forbearance, deferment, or federal repayment plans

• Losing eligibility for federal student aid

• Damage to your credit score, inhibiting your ability to qualify for a car or home loan or credit cards in the future

• Withholding of federal benefits and tax refunds

• Garnishing of wages

• The loan holder taking you to court

• Inability to sell or purchase assets such as real estate

• Withholding of your academic transcript until loans are repaid

Consequences of Defaulting on Private Student Loans

The consequences for defaulting on private student loans will vary by lender but could include repercussions similar to federal student loans, and more, including:

• Seeking repayment from the cosigners of the loan (if there are any cosigners)

• Calls, letters, and notifications from debt collectors

• Additional collection charges on the balance of the loan

• Legal action from the lender, such as suing the borrower or their cosigner

To avoid these negative consequences, one option for borrowers struggling to pay federal student loans is deferment.

Who Is Eligible for Student Loan Deferment?

To be granted a deferment on federal loans, borrowers need to meet certain criteria.

You may be eligible if you’re:

• Enrolled at least part-time in college, graduate school, or a professional school

• Unable to find a full-time job or are experiencing economic hardship

• On active military duty serving in relation to war, military operation, or response to a national emergency

• In the 13-month period following active duty

• Enrolled in the Peace Corps

• Taking part in a graduate fellowship program

• Experiencing a medical hardship

• Enrolled in an approved rehabilitation program for the disabled

Borrowers who re-enroll in college or career school part-time may find that their federal student loans automatically go into in-school deferment with a notification from their student loan provider.

Loans may also keep accruing interest during deferment — depending on what kind of federal student loans the borrower holds. Borrowers are still responsible for paying interest if they have a:

• Direct Unsubsidized (Stafford) Loan

• Direct PLUS Loan

If you don’t pay the interest during the deferment period, the accrued amount is added to your loan principal, which increases what you owe in the end.

Recommended: Student Loan Deferment in Grad School

What if You Have Private Student Loans?

Private lenders aren’t required to offer deferment options, but some do. For example, some might allow you to temporarily stop making payments if you:

• Lose your job

• Experience financial hardship

• Go back to school

• Have been accepted into an internship, clerkship, fellowship, or residency program

• Face high medical expenses

Typically, even while a private student loan is in deferment, the balance will still accrue interest. This means that in the long term, the borrower will pay a larger balance overall, even after the respite of deferment.

In most cases, even with accrual of interest, deferment is preferable to defaulting. Borrowers with private loans could contact the lender to ask what options are available.

The Limits of Student Loan Deferment

Keep in mind that deferment is not a panacea. By definition, it’s temporary. Federal student loan borrowers will ultimately need to go back to making payments once they are no longer deferment-eligible. For example, a borrower’s deferral might end if they leave school, even if their ability to pay has not improved.

Federal loans can only be deferred due to unemployment or financial hardship for up to three years. With private loans, there may not be an option to defer at all, and if it is an option, the limit may be no more than a year.

Other Options for Reducing Federal Student Loan Payments

Besides student loan deferment, you have other choices if you can’t afford the total cost of your monthly payments. Here’s a look at some alternatives to deferment.

Income-Driven Repayments

For a longer-term solution, you may want to consider signing up for an income-driven repayment plan.

If you qualify, you may be able to reduce your monthly payment based on your income. Enrolling in an income-driven repayment plan won’t have a negative impact on your credit score or history. On certain income-driven repayment plans, student loan balances can be forgiven after 20 or 25 years, depending on the payment plan that the borrower is eligible for.

With an income-driven repayment plan, your monthly payment is based on your total discretionary income. That means if you change jobs, or see a significant increase in your paycheck, you’ll be expected to pay a higher monthly bill on your student loan payment.

Forbearance

Student loan forbearance is another way to suspend or lower your student loan payments temporarily during times of financial stress, typically for up to 12 months. Generally, forbearance is not as desirable as deferment, since you will be responsible for accrued interest when the forbearance period is over no matter what type of federal loan you have.

When comparing deferment vs. forbearance, you’ll want to keep in mind that there are two types of forbearance for federal student loan holders: general and mandatory.

General student loan forbearance is sometimes called discretionary forbearance. That means the servicer decides whether or not to grant your request. People can apply for general forbearance if they’re experiencing:

• Financial problems

• Medical expenses

• Employment changes

General forbearance is only available for certain student loan programs, and is only granted for up to 12 months at a time. At that point, you are able to reapply for forbearance if you’re still experiencing difficulty. General forbearance is available for:

• Direct Loans

• Federal Family Education Loan (FFEL) Program loans

• Perkins Loans

Mandatory forbearance means your servicer is required to grant it under certain circumstances. Reasons for mandatory forbearance include:

• Serving in a medical residency or dental internship

• The total you owe each month on your student loan is 20% or more of your gross income

• You’re working in a position for AmeriCorps

• You’re a teacher that qualifies for teacher student loan forgiveness

• You’re a National Guard member but don’t qualify for deferment

Similar to general forbearance, mandatory forbearance is granted for up to 12 month periods, and you can reapply after that time.

Another Option to Consider: Refinancing

Depending on your personal financial circumstances, another long-term solution could be student loan refinancing. This involves applying for a new loan with a private lender and using it to pay off your current student loans. Qualifying borrowers may be able to secure a lower interest rate or the option to lengthen their loan’s term and reduce monthly payments. Note that lengthening the repayment period may lower monthly payments but will generally result in paying more interest over the life of the loan.

Refinancing could be a good option for borrowers with strong credit and a solid income, among other factors. Unlike an income-driven repayment plan, your monthly payment wouldn’t change based on your income. If you aren’t able to qualify for student loan refinancing on your own, you may be able to apply for refinancing with a cosigner.

Either way, you’ll want to keep in mind that refinancing federal student loans with a private lender means you no longer have access to any federal borrower protections or payment plans. So, if you are taking advantage of things like income-driven payment plans or deferment, you likely don’t want to refinance. But for other borrowers, student loan refinancing might be a useful solution.

If you have more than one student loan, refinancing could also simplify your repayment process.

The Takeaway

If you take out a federal student loan and at some point need to pause or reduce your payments, you may be able to qualify for deferment, forbearance, or an income-driven repayment plan. Each option has its pros and cons.

If you’re considering a private student loan (or refinancing your federal loans), keep in mind that private loans don’t come with government-sponsored protections like forbearance and deferment don’t apply. However, private lenders may offer hardship and deferment programs of their own.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

Deferment FAQ

How long can you defer student loans for?

Depending on the type of deferment you are enrolled in, federal loans can be deferred for up to three years. Private student loans may not offer an option to defer payments, and if they do, the limit will be set by the individual lender.

Why would you defer student loans?

Deferment can be helpful if you are facing a temporary financial hurdle, because they allow you to pause or reduce your payments for a period of time.

Are there any reasons not to defer student loans?

Most loans will continue to accrue interest during periods of deferment. When the deferment is over, this accrued interest is then capitalized on the loan. This means it’s added to the existing value of the loan. Moving forward, interest is charged based on this new total. This can significantly impact the total amount of interest that a borrower has to pay over the life of a 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.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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Aug

2023

Importance of Junior Year of High School

By Brandi Lucey | Going to College, Student Loans, student_loan | Comments Off

College application deadlines have a tendency to come up fast. But the process of preparing for college typically begins much earlier than senior year.

Plenty of students prefer to get ready as early as their junior year of high school—in an effort to strengthen their eventual college applications (and make the process more manageable).

For those interested in college, some years of high school carry more weight — especially, the junior year. Colleges often look more closely at grades and achievements from students’ junior years when evaluating who to accept.

After all, that third year in high school is the last full academic calendar a college can view before students apply.

So, approaching junior year with a clear action plan may even give applicants a leg up on admission into their dream college. Compiling a junior year of high school checklist could help students to tackle this vital year with more drive, confidence, and focus.

Here’s an overview of why junior year of high school is so key and some strategies for staying focused while preparing to apply for college.

Why Junior Year Is Important

Junior year of high school can be especially impactful for strengthening a student’s college application. It’s the last school year that universities can look at in full before applications are due during senior year.

As a result, many admissions committees pay particularly close attention to grades and extracurricular activities from the junior year of high school.

The third year of high school can feel overwhelmingly for a few reasons:

•   Class difficulty levels are often higher than earlier years.
•   Students can begin studying now for the SAT and ACT. (It’s possible to take these exams in the spring of junior year, affording juniors a chance to retake them during the fall of senior year.)
•   Upper-class students can take on numerous extracurriculars and a part-time job.

To help make junior year a lighter lift, it can be a good idea to enter into it with a checklist in hand. This can help students see more success when college acceptance letters are sent out the next year. What follows are some helpful things students may want to keep in mind to make more out of this critical year.

💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

Getting Involved in Extracurriculars

To strengthen their college applications, many juniors opt to get more involved with organizations or activities they care deeply about. Being involved in extracurriculars doesn’t have to feel like a chore.

Extracurriculars that might stand out on a college application range from clubs to student council, from athletic endeavors to volunteering. There’s no one-size-fits-all way for students to be engaged in school or in their communities.

Many high schools host a variety of clubs that students can join. Juniors could choose one or two they’re really passionate about, allowing these extracurricular activities to serve as a break from hitting the books (all while still fleshing out their college application profile).

Staying Focused

Another potential way to increase focus is to keep a planner. It seems simple, but in today’s technology-driven age, it’s easy to forget how valuable writing big dates or goals down can be.

With seven dates available to take the SAT, and seven or more different dates available to take the ACT, it’s not hard for busy students to lose track of when to study for and schedule their college admission tests.

Once a test date has been chosen, students can mark it down in their printed planner. It’s then possible for a high school junior to work backwards, planning out practice tests and pencilling in study sessions during the build-up to the testing date.

The simple act of writing things down can make them easier to remember, so some researchers suggest jotting down key dates first in a physical planner before then adding them to a digital device or calendar.

Recommended: ACT vs. SAT: Which Do Colleges Prefer?

Making a Junior Year Checklist

In addition to writing down important dates, some students may benefit from making a personalized junior year checklist. Some tasks that could be included on such a list are:

•   Studying for major tests, like the SAT or ACT
•   Joining extracurricular clubs or organizations
•   Researching different colleges and universities
•   Getting familiar with the format of college applications

Once a checklist is drafted, students might then make to-do lists under each sub-category. The planner could be used in tandem to help students stay on top of these goals and deadlines.

Designating a Study Space

Creating a dedicated space for studying can also improve a student’s focus during a jam-packed school year. Many high schoolers opt to designate a comfy space at home, where they may then concentrate on their studies. It’s even possible to give this study space a personal touch — decking it out with school supplies, keeping it clutter-free, and decorating it with inspirational photos or personal items (like a magnet from one’s dream college).

Creating a dedicated study space, some claim, could both make recalling information easier and studying more effective.

Remembering to Reward Accomplishments

Busy high school juniors might want to remember to reward major accomplishments during this high-stakes year. Once important dates and tasks are mapped out (and scheduled), students could make another list of potential fun rewards to enjoy, once an outlined goal is met. Aced those finals? Binge on some light TV. Finished the SAT practice exam? Download that new game everyone’s been playing.

It may also be helpful to recall that an overly hectic junior year can increase students’ feelings of stress, possibly making it harder to accomplish big goals. Burnout is likely easier to avoid when students carve time out for regular breaks.

Strengthening that College Application

There’s a multitude of ways for juniors to strengthen their eventual college applications. Choosing which tasks to focus on can be the hard part.

Some juniors add volunteering to their schedules this year. Certain volunteer opportunities have age restrictions, which can make them easier for upperclass students to apply for. Similar to the earlier at-school clubs, many juniors opt to volunteer with non-profit organizations or institutions they’re passionate about.

To possibly stand out more on the college application, it may also be helpful for juniors to find a volunteer opportunity in the field they’re hoping to pursue as a career some day.

For instance, a student interested in medicine might seek out opportunities in a local hospital (so they could learn firsthand about what working in that environment and evidence their commitment to a given field of study.)

Recommended: College Planning Guide for Parents

Getting a First Job

Junior year could also be a good time for students to get their first part-time job. Many states allow young people to begin working once they’re 16 years old. If a student can find a job that’s easy to get (and doesn’t distract from academics), work experience can be one more experience to highlight on a college application down the road. Holding a part-time job at a young age might demonstrate skills, such as time-management and personal responsibility.

Moreover, there may also be unique opportunities available to upperclass students at their individual schools. It’s common for special electives or programs to open up to older students — things like, working on the school yearbook, interning for credit, or volunteering on or off site.

Recommended: Am I Eligible for Work-Study?

Financing College

Earning admission is just one piece of the going-to-college puzzle. Once accepted, many high schoolers have to wrestle with how to pay for college. For parents, saving up for a child’s college years is something they may want to start while their student is much younger.

What are some options for financing college? Some ways to pay for college include need-based grants, merit or affinity scholarships, federal student loans, and private student loans.

Some grants, such as Federal Pell Grants, are disbursed by the U.S. government to those who qualify. Grants, unlike loans, do not typically have to be repaid by the student. Scholarships are frequently merit-based, meaning they’re often awarded based on a student’s academic, athletic, or community-based accomplishments.

Many high schools and colleges publish lists of financial aid resources available to eligible undergraduates. These lists are one starting place to begin searching for potential scholarships or grants.

So, it may be worthwhile to check with a guidance counselor or on a college’s official financial aid web page (to see what resources have already been compiled).

💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

The Takeaway

Junior year can play a vital role in preparing students to vie for college admission. There’s a lot to keep track of this year — from juggling academics alongside extracurriculars to figuring out how, eventually, to pay for college (once accepted).

Loans are another common way to help pay for college. There are both federal and private student loans. Federal loans are offered by the U.S. government to those who qualify. It’s important to note that federal loans can come with certain baked-in benefits (such as forbearance or income-driven repayment options) not always guaranteed by private lenders.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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Aug

2023

Should You Hire an MBA Application Consultant?

By Ashley Kilroy | Student Loans, student_loan | Comments Off

Getting into a top tier MBA program can be competitive. The top 10 programs have an average acceptance rate of less than 18%. But the elite of the elite accept even fewer applicants. The acceptance rate at Stanford Graduate School of Business, one of the most challenging schools to get into, is just 6.9%.

With such low acceptance rates, any boost to an application can be advantageous to an MBA (or “B School”) candidate. To elevate an MBA application, some candidates choose to seek the assistance of an MBA Application Consultant.

MBA Application Consultants help candidates fine-tune their application with the hopes of improving their chances of acceptance. If you’re considering applying for a top MBA school, here’s helpful information about the value an MBA Application Consultant could bring to the admission process.

What Is an MBA Application Consultant?

Since getting into an elite school can be a monumental task, some candidates may need additional support. An MBA Admissions Consultant, also known as a B School Consultant, can offer candidates an advantage in the demanding world of the MBA admissions process. These consultants tend to be highly skilled communicators and have extensive knowledge about the MBA admissions process.

MBA Application Consultants provide services including program selection, essay brainstorming, essay review, resume review, interview preparation, and more.

Candidates can choose to work with MBA Application Consultants on an hourly basis or select a package approach to navigate the entire application process.

💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

Benefits of Working with a MBA Consultants

There are certain circumstances where an MBA applicant may benefit from working with an application consultant. Most of the benefits surround highlighting the work that schools want to see and bringing the applicant’s personality to life.

A good MBA Admissions Consultant will go above and beyond suggesting and reviewing an application — they will help the applicant understand what they bring to the table.

In addition to helping an applicant brainstorm essay content, here are a few other ways they can add value to the application process.

Expressing Authenticity and Vulnerability in Application

When writing a strong essay, general recommendations suggest expressing authenticity through humor or vulnerability to let your personality shine through. Colleges, even business schools, often look to an applicant’s essay to get a deeper sense of who they are, what they value most, and any actions they’ve taken towards their beliefs.

While it’s unlikely you can get into an MBA program based on a stand-out essay alone, a strong piece of writing will be another valuable piece of your total application.

If writing is not your strong suit, an MBA Admission Advisor could help you overcome this hurdle and help schools see your personality.

Editing Short-Answer Essays

Currently, the MBA application trend is gearing toward more of a short essay format with restrictive word limits. For example, Columbia Business School has a 500 word limit on essays.

To help applicants meet these essay requirements, MBA Admissions Consultants can effectively edit down their writings. Many MBA candidates do not have college experience or training in advanced expository writing or editing. With this in mind, they may need the help of an admission consultant with advanced editing skills to meet the restrictive word count.

Addressing Communication Challenges

Those who haven’t taken a lot of coursework in writing, such as STEM (science, technical, engineering, or mathematics) students, may benefit from essay assistance. While STEM professionals may have higher GMAT scores, they may struggle to write a strong essay.

These challenges might be intensified for international applicants who have low English competency. Working with a consultant can help this group of candidates steer clear of any essay defects that could potentially disqualify them.

Recommended: Tips on How to Pay for MBA School

How Much Do MBA Admission Consultants Cost?

Cost is a significant consideration when deciding whether or not to hire an MBA Admission Advisor. One-on-one MBA application coaching can run around $195 per hour. For a three-school full package deal, you might pay as much as $16,000.

Although these costs can seem astronomical, you may want to consider the potential pay-off: The average starting salary for MBA graduates was $115,000 in 2022 (that’s 53% higher than the average starting salary for people who only have a bachelor’s degree).

Should You Consider Hiring an MBA Admission Consultant?

Here are several examples of groups of applicants that might benefit the most from an application consultants guidance.

• For applicants who want to apply at one of the most popular business schools, like the University of Pennsylvania’s Wharton School or the Harvard Business School, a consultant’s help may be valuable. Even if an applicant has a 3.9 GPA, a 750 GMAT score, and five years of experience working at one of the schools’ prestigious employers, such as McKinsey, competition can still be intense.

• Candidates who want to enroll at one of the top MBA programs such as Carnegie Mellon University’s Tepper School of Business or the Kelley School of Business at Indiana University, the aid of a consultant is useful.

• Candidates that have communication challenges but want to apply to a top 25 school, may need the assistance of a consultant. A consultant can help with their essay and interview performance.

For MBA candidates who only need useful resources and information to put together a concrete application for a top 50 school, a consultant might not be worth the cost. Some candidates might do just as well on their own or using an online application consulting platform (such as ApplicantLab ), which can cost considerably less.

On the other hand, candidates who want guidance, support, and help with their skills set may get value working with an MBA Admissions consultant.

Selecting the Right MBA Admissions Consultant

Before comparing different MBA Application Consultants, it’s a good idea to first develop an idea of your needs and likelihood of acceptance. Maybe you need to focus on strategy and essay writing. In this case, you might want to make those areas the top priority when searching for a consultant.

When considering consultants, it’s important to have a clear understanding of the services they offer. For example, if a professional offers to write an essay for you, you may want to steer clear, since this isn’t an offering a consultant should provide. If the consultant is a member of an association, such as the Association of International Graduate Admissions Consultants (AIGAC), it shows that the consultant must uphold a professional standard.

It can also be wise to ask friends, family, and colleagues for referrals when beginning a search. They may have some experience working with an MBA Admissions Advisor or relevant firms.

💡 Quick Tip: Master’s degree or graduate certificate? Private or federal student loans can smooth the path to either goal.

Financing Your MBA Program

Regardless of whether you decide to work with an MBA Application Consultant or not, you may need some help paying for your business education expenses. Some business schools offer generous fellowship awards, which are similar to scholarships, since this is money that doesn’t need to be repaid. Other MBA funding options include: federal and state grants, private scholarships, federal loans, and private MBA student loans.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

Aug

2023

How To Calculate Marginal Propensity to Save

Guide to Marginal Propensity to Save (MPS)

By Ashley Kilroy | Budgeting & Goals, Financial Independence, money | Comments Off

The marginal propensity to save (MPS) is an economic concept that says when a person’s income rises, the MPS will determine the amount of money that is saved vs. spent on goods and services. This is an element in Keynesian Economic Theory, and it can have an important impact. The MPS can enable economists to figure out how to spend either government dollars or private funding.

But does MPS impact the average individual’s savings account? It can be a useful notion, and in this article you will learn:

• What is marginal propensity to save (MPS)?

• Why does MPS matter?

• What does MPS mean to the average person?

The Keynesian Economic Theory, Explained

Economist John Maynard Keynes published The General Theory of Employment, Interest, and Money, or simply as The General Theory, in 1936. This text changed economic thought from that point on and is known as one of the classic economic publications. In the book, Keynes tried to explain economic fluctuations, especially the ones seen in the Great Depression of the 1930s.

Essentially, The General Theory was built on the idea that as a result of inadequate demand for goods and services, recessions and depressions could occur. Keynes’ theory was not just for economists—it was intended for policymakers worldwide. Keynes advocated for an increase in government spending, which would boost the production of goods and services to minimize unemployment rates and enhance economic activity. In general, this theory went against the traditional economic policy of laissez-faire, which requires minimal government involvement.

There are three main elements of this theory. These elements include:

• Aggregate demand: This is the demand influenced by the public and private sectors. The level of demand in the private sector may impact macroeconomic conditions. For instance, a lull in spending may bring an economy into a recession. At this point, the government can intervene with monetary stimulus.

• Prices: Wages, for example, are often slow to respond to supply and demand changes. This may result in an excess or shortage of labor supply.

• Changes in demand: Any change in aggregate demand results in the most considerable impact on economic production and employment. The theory states that consumer and government spending, investments, and exports increase output. Therefore, even a change to one of these factors and the output will change.

The Keynesian Multiplier was created as a result of the change in aggregate demand. The Keynesian Multiplier states, “The economy’s output is a multiple of the increase or decrease in spending. If the fiscal multiplier is greater than 1, then a $1 increase in spending will increase the total output by a value greater than $1.”

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Calculating Marginal Propensity to Save

The Keynesian Multiplier value relies on the marginal propensity to save (MPS) and the marginal propensity to consume (MPC). Here’s how you can calculate the marginal propensity to save.

Marginal Propensity to Save Formula

When people receive additional income, the MPS is the change in the savings amount. If their income increases, the MPS measures the amount of income they choose to save instead of spending it on goods and services.

That said, this is how to calculate MPS: MPS = change in savings / change in income.

For example, let’s say someone received a $1,000 raise. Of that $1000 increase in income, they decide to spend $300 on new clothes, $200 on a fancy dinner out, and save the remaining $500, so the MPS is 0.5.

(1000 – 300 – 200) / 500 = 0.5

Marginal Propensity to Consume

Conversely, the MPC is the change in the spending, or consuming, amount. If someone’s income increases, the MPC measures the amount of income they choose to spend on goods and services instead of savings.

With this in mind, MPC is calculated as MPC = change in consumption / change in income.

By using the example above, the MPC would be 500 / 1000 = 0.5.

According to Keynesian economic theory, when production increases, the level of income rises too, triggering an increase in spending.

Marginal Propensity to Save Example

As mentioned above, the marginal propensity to save can be illustrated by someone getting a raise. If you receive a $5,000 raise and decide to spend $2,500 on a vacation and save the other half.

The MPS would be change in savings / change in income, or $2,500 / $5,000, or 0.5.

Top 3 Factors That Influence Saving

Knowing how to find MPS and MPC may seem pretty straightforward. However, both calculations only account for the excess of disposable income; the calculations don’t account for other factors that may influence a consumer’s consumption functions. If one of these non-income factors shifts, the entire consumption function may shift.

Here are some of the non-income factors that may influence a consumer’s consumption function.

1. Wealth

Wealth and income are two different variables in economics. For example, suppose Javier has a job earning $60,000 per year. If his aunt Ines passes away and leaves him $200,000 as an inheritance, his income is still $60,000 per year, but his wealth has increased.

Similarly, if Javier owns a piece of art that increases in value or his investment portfolio grows, his wealth has also gone up. Just because his wealth increases doesn’t mean his income does as well.

Therefore, an increase in wealth may increase consumption despite income levels staying the same. However, both the consumption and savings function may shift upwards as well because of the newfound wealth. The same is true in the opposite situation. If wealth decreases, the consumption and savings functions may decrease as well.

2. Expectations

In some cases, consumers may adjust their spending habits based on the expectation of future income coming their way. Expectations change the shift in consumption and savings functions because there is no change in actual income, just how it’s being spent.

For example, suppose Naomi assumes her income is going to increase soon. She may consume more now because of her expectation that her income is about to grow. This may highlight an upward shift in the consumption function without an increase in income.

On the other hand, if Naomi were pessimistic about her future income, such as the fear of losing her job, she may decrease her consumption without dropping her income. This scenario may also shift the consumption factor.

Debt

Consumers may also adjust their consumption and savings if they’re in debt. It’s observed that in economies where consumer debt rises, savings go up while consumption goes down. There is a level of debt when consumers typically feel uncomfortable spending more. Even if their income remains the same, if too much debt plagues their pocketbooks, they will start to save more and spend less so they can pay off their debt.

Conversely, if there are low levels of debt, consumers tend to spend more and save less.

Recommended: What is the Average Savings by Age?

Why Marginal Propensity to Save Matters

Using the data from MPS and MPC helps businesses, governments, and foreign policymakers determine how funds are allocated. For example, economists can assess this data to determine increases in government spending or investment spending, influencing savings numbers.

As for consumers, using the marginal propensity to save formula can help them make adjustments to their own spending habits. If their MPC is higher than their MPS, adjustments to consumption may need to be made.

How to Start Saving Money

While the way consumers spend helps the government and economists determine the best way to increase government spending, the way you choose to spend your money can help you set up a solid financial future. Carefully considering all of your spending options may get you on a path toward financial security. Being motivated to save money can have long-term benefits.

So if a windfall comes your way, you may want to consider carefully choosing how to spend those funds. While it’s tempting to use the money on a shopping spree, putting it in some type of savings account may be a better financial decision. After all, saving your extra disposable income can help build an emergency fund, avoid taking on debt, and accumulate a nest egg for your retirement.

Here are a few steps for getting started, even when it feels hard to save money:

Identifying Your Savings Goals

Do you have short-term goals like accumulating an emergency fund to pay for unexpected expenses? Or perhaps you want to save for a family vacation? Maybe you have a medium-term goal, such as paying for a wedding reception or a new kitchen renovation. Or would you like to save for retirement as a long-term goal? No matter your goals, you’ll want to have a clear idea of how much cash you need and by when.

First, decide on a goal date — when you want to have the money saved by. Then, divide the goal amount by the time frame, in months, to determine how much cash you need to stash away each month. Finally, decide where to keep the funds.

• If your goal is short-term, you may want to consider putting your cash in a high-interest savings account or money market account. Either type of account is relatively low risk and is likely to be FDIC or NCUA insured, depending on the financial institution.

• If the goals are more long-term, retirement accounts or brokerage accounts are worth considering since they may help your money grow.

Recommended: Take the guesswork out of saving for emergencies with our user-friendly emergency fund calculator.

Creating a Budget

It’s hard to track your money if you don’t know where it’s going. Creating and sticking to a budget is a great way to monitor your spending habits so you can stay on track.

• To start, take note of your income and expenses for a month or two.

• Next, create a monthly budget that reflects the average spending amounts for fixed expenses such as your mortgage and variable expenses such as eating out or clothes shopping. Also note money that goes towards savings.

• If you determine you’re spending more than you earn, you may want to look for ways to cut back on your expenses, such as canceling subscriptions you don’t use. Or you could bring in more earnings by starting a side hustle or selling items that are still useful but that you don’t need.

Using a tool like SoFi or another digital tool makes it easy to track and categorize your expenses. It also helps you find ways to save and lets you monitor your progress toward your goals.

Recommended: Struggling to create a balanced budget? Try our 50/30/20 budget calculator for a simple solution.

Opening a Savings Account

When you receive an increase in your income, setting up automatic contributions to your savings or retirement accounts allows you to set aside extra money by automating your savings instead of having to manually transfer money each month. Look for an account with higher than average interest rate, typically found at online vs. traditional banks.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Can MPS be greater than 1?

The marginal propensity to save (MPS) cannot be greater than one since it is a change in savings, and that difference cannot be greater than one, nor less than zero.

How do you calculate the marginal propensity to save?

To calculate the MPS, or the marginal propensity to save, use the formula of change in savings divided by change in income.

What is the difference between average and marginal propensity to save?

The average propensity to save is defined as the ratio of total savings to total income. However, when talking about the marginal propensity to save, or the MPS, that is the ratio of change in savings to a change in income. The latter reflects a shift.

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