After getting approved for a student loan, there is one more step that must be completed before your funds are disbursed: the loan certification process. This step is designed to protect you as a borrower.
Keep reading to find out more about student loan certification, how long it takes, and the process for federal and private student loans.
What Is Student Loan Certification?
Student loan certification is a mandatory step before loan funds can be sent to your school. Your school will verify enrollment details, such as your expected graduation date, your year in the program, and the loan amount.
For private student loans, a Private Education Loan Applicant Self-Certification form is required. This highlights borrower-protection language, informs you of your ability to submit a Free Application for Federal Student Aid (FAFSA®), and explains how a private loan might affect your other financial aid awards. The self-certification step also provides your lender with your enrollment details and financial aid received.
Student loan lenders require a certification before disbursement under the Higher Education Act of 1965 and the Truth in Lending Act.
Certification ensures that the lender and your school have done their due diligence to inform you about federal financial aid options, confirm that you meet academic enrollment requirements for the loan, and disclose the difference between your school’s cost of attendance (COA) and the financial assistance you’ve received for that period.
For federal aid, your school is responsible for determining the type of student aid you’re eligible for, including federal student loans. If your school finds that you’re eligible for federal loans, it will record its certification of your eligibility into the Common Origination and Disbursement system. This system tracks your loan data throughout your academic career.
The loan certification process for private lenders has a different intent. Your lender can request a completed Self-Certification form from you, which includes a section for your institution to fill out. Alternatively, your lender can communicate directly with your school for its certification sign-off.
What Is the Process of Student Loan Certification?
After a lender approves your loan application and you accept the loan and its terms, the student loan certification process is automatically initiated. As a student borrower, you may not need to do anything. However, make sure to follow the process, via any emails or notifications from your lender or school, to make sure everything runs smoothly and no additional information is needed from you.
Here is the process of student loan certification:
1. Lender Sends Loan Details to the School
The lender forwards your loan information to your school for certification. This includes details you’ve submitted during your application, like your personal information, enrollment information, and the loan amount requested.
2. School Reviews Loan Details
During this step, your school will certify that your enrollment details are correct, the estimated COA for the enrollment period, and how much aid you are receiving during the period.
Private student loan amounts can’t exceed a student’s COA, minus existing financial aid. If your loan details are correct and the amount is within the unfunded COA gap, the school can certify your loan with no changes.
Alternatively, the school can certify your loan with changes, either to reduce the loan amount or correct your enrollment information, if needed. It can also deny the loan certification, which might happen if it can’t verify that you’re enrolled or you already have sufficient financial aid to cover your COA.
Your lender will notify you when your student loan certification is complete. At this time, it will provide you and your student loan cosigner, if applicable, with the final loan disclosure.
If your loan amount was lowered by your school, this is where you’ll see the new amount outlined in the updated disclosure agreement.
4. “Right-to-Cancel” Waiting Period
After the borrower has signed the final loan disclosure, lenders are not allowed to disburse funds right away. Federal law requires a waiting period of three business days after the lender sends you the final disclosure.
This is another layer of borrower protection that gives you time to cancel the loan, if desired, with no penalty.
5. Lender Disburses Loan Funds
After the waiting period expires, the lender can send certified student loan disbursements directly to your school, on the date requested by your institution.
How long school certification takes for a loan varies by school. Generally, it can take up to five weeks for schools to complete student loan certification, but sometimes it’s longer.
Additionally, loan certification is often done in the weeks before the start of classes. Enrollment status can change at the last minute, as when a student drops out or reduces their course load. The timing helps schools process certifications based on the most current information.
Can Student Borrowers Hurry Along the Certification Process?
It’s true that the loan certification process can be lengthy, but there’s not much that can be done to hasten it. The best that student borrowers can do is to stay on top of emails and account notifications from their lender, informing them of status updates and next steps.
What Happens if a School Doesn’t Certify That You Are a Student?
If your school doesn’t certify your enrollment status, your lender can’t legally disburse the loan funds to your school. At best, this results in payment delays as you sort things out with your financial aid office. At worst, it halts disbursement entirely, if your school can’t certify that you are, in fact, an enrolled student.
What to Do if It Is the School’s Error
If you believe a mistake has been made on your student loan certification, contact your financial aid department immediately. Find out what the school needs from you to certify your enrollment and loan.
Additionally, ask what will happen to your enrolled courses while you figure out a resolution. The last thing you want is to get dropped from your classes.
What to Do if It Is the Student’s Error
Student loan certification might be in limbo because of an oversight on your part. This can come up, for example, if you forget to enroll in classes.
If you’re in this situation, reach out to your school’s admissions and records department or your degree program’s department for guidance about what you need to do. Make sure to note that you are waiting on private student loan certification needed for disbursement.
The Takeaway
The loan certification process can feel like another hurdle to overcome in financing your education. However, it’s a step that’s meant to protect student borrowers and keep you aware of your rights.
The process and intent of certification are different for private student loans and federal student loans. If you do not get certified, don’t panic. Discuss the issue with your school to find out if the error is yours or the school’s, and take immediate steps to resolve it.
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.
What is the certification process for student loans?
The certification process for student loans involves the college verifying a student’s enrollment status, academic progress, and loan eligibility. The school confirms the student’s loan amount aligns with federal or institutional limits and tuition costs. Once certified, the lender disburses funds directly to the school to cover education expenses.
How long does it take to get a student loan certified?
It typically takes a few days to several weeks for a student loan to be certified, depending on the school’s processing time and the lender’s requirements. Factors such as enrollment verification, financial aid status, and the school’s workload can influence the certification timeline, potentially causing delays.
What is self-certification for a student loan?
Self-certification for a student loan is often required for private student loans to ensure borrowers understand their financial responsibility and to prevent borrowing more than necessary for educational expenses.
Photo credit: iStock/Ridofranz
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
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Navigating the cost of law school can be daunting, but scholarships offer a valuable way to reduce financial burdens and make your legal education more affordable. Whether you’re a prospective law student or currently enrolled, understanding the variety of scholarships available is crucial to securing funding for your studies.
Keep reading to learn the types of law school scholarships available, tips for finding law school scholarships, and strategies for crafting compelling applications to increase your chances of success.
The Average Cost of Law School
The Law School Admission Council (LSAC) reports that the average annual cost of a public, out-of-state law school in 2023 was $43,590, or $30,554 for in-state students. For private law schools, the average in 2023 was $55,963. And according to Education Data Initiative, the average total cost of law school is over $230,000.
Because students aren’t yet racking up those billable attorney hours, it can be helpful to research law school scholarship opportunities before applying.
Types of Law School Scholarships
Per the numbers mentioned above, there might be a fair amount of sticker shock for those who haven’t yet applied for graduate school and are only thinking of someday going the lawyer route. Fortunately, there are a range of options for aspiring attorneys seeking to fund law school.
Full-Ride Tuition Law School Scholarships
In some cases, there are full-ride tuition scholarships and need-based grants out there. Full-rides, of course, are not available at all law schools. If a law school doesn’t explicitly advertise or highlight information regarding full-ride opportunities, interested students can contact the school to ask.
Students deciding whether to apply to law school may want to familiarize themselves with the language universities adopt to explain these scholarships. In some cases, specific scholarships are designated for particular students. Full-ride law school scholarships can be highly competitive — with some schools offering as few as two to four per enrollment year. One potential tip for the search for scholarships is to target law schools with more tuition help.
General Law School Scholarships
There are many options for law school hopefuls to find potential scholarships. The nonprofit organization Law School Admission Council (LSAC) has compiled a list of law school scholarships available to applicants. It could be well worth your time to go through the list and make note of the scholarships you’d qualify for.
Many law schools themselves offer competitive scholarships to attract stronger candidates, as well. It might also be helpful to check if a school also offers in-state residents specific tuition reductions or grants.
Law School Scholarships from Law Firms
Similarly, some law firms offer scholarships to law school students. Applying is typically a straightforward process, with many firms requiring a short essay, transcripts, and sometimes references to be considered. One such law firm scholarship is offered by The Dominguez Firm, which offers $5,000 and $2,500 annually to selected student applicants.
On top of this, there’s the rising trend of law firms helping new hires to repay a portion of their student debt once onboarded.
Diversity Law School Scholarships
Some scholarships are awarded to students with diverse backgrounds. One example of this is the Legal Opportunity Scholarship Fund offered by the American Bar Association. This scholarship is awarded to law students from a racial or ethnically diverse background.
There are dedicated resources like Fastweb and SoFi’s scholarship search tool to help prospective students find scholarships for which they may qualify. Fastweb is an online resource to help students find scholarships, financial aid, and even part-time jobs in support of college degrees.
The American Bar Association’s law student division also has a running list (along with deadlines) of law student awards and scholarships. Additionally, the Law School Admission Council offers a list of diversity scholarships available to students from diverse racial and ethnic backgrounds.
Doing all this research and the math around law school scholarships could put applicants in a more informed position when evaluating which program to attend — and, potentially, help them to identify schools more likely to be interested in their application.
A reality of today’s admissions process for law school is negotiating scholarships. Some schools have a strict policy against negotiating, but others fully expect their initial offer to be countered. That’s why it can help to save acceptance letters and anything in writing from schools that offer admission.
Suggestions for Negotiating Law School Scholarship Offers
Offer letters could be shared with competing schools, asking if they’re able to match another university’s aid. It might be uncomfortable asking for more tuition assistance upfront, but a little discomfort now could help applicants shoulder less law school debt later on.
Doing research on law schools (and figuring out the likely cost of living expenses at each institution) could help applicants to determine which scores or grades to aim for in an effort to make law school more affordable for them. Tabulating expenses (and having records on hand) may also demonstrate to universities that the amounts being negotiated are based on well-documented expenses.
Students wanting to apply to law school should consider the differences between federal and private student loans. Federal loans come with certain benefits not guaranteed by private ones (such as forbearance or income-driven repayment), and should be used first before seeking private student loans.
Private student loans can also help applicants cover the expense of graduate school. They typically offer competitive rates and terms, but you need to have a solid credit score to qualify.
It’s important to note that private student loans don’t offer the same benefits and protections afforded to federal student loan borrowers, like Public Service Loan Forgiveness (PSLF). If a law school applicant is interested eventually in becoming a public defender or pursuing non-profit legal work, forgiveness and forbearance perks may play a role in their decision.
The Takeaway
Students looking to offset law school costs with scholarships can look to their law school, scholarship databases, local law firms, and other organizations for resources. Consider contacting the financial aid office at your law school if you are looking for scholarship resources. If students interested in law school find themselves coming up short on funds for the JD after scholarships and federal aid, additional options may be available.
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.
FAQ
What LSAT score will get me a scholarship?
One general rule of thumb is that students who have a LSAT score (and sometimes GPA) above the median for a certain school could qualify for a scholarship. Chances of qualifying are even greater if your score falls in the 75th percentile for the school.
What is a good scholarship for law school?
Any scholarship for law school is a good scholarship. Scholarships typically don’t need to be repaid and can help reduce a student’s debt burden. Students looking for law school scholarships can apply for institutional aid and aid through other sources like nonprofit organizations.
Do top law schools give scholarships?
While some top law schools do not offer scholarships, many law schools do offer law school scholarships to students. For example, in the 2023-2024 class at Yale, 71% of students qualified for some form of financial aid and 62% qualified for an institutional law school scholarship. Check directly with the schools you are interested in to see if they offer scholarships to students.
Photo credit: iStock/artisteer SoFi Private Student Loans Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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.
A college education is an investment in the future. But as with any investment, it’s important to consider what you’ll get in return — your ROI — to determine if the cost is worth it. And so college students and their parents are weighing the cost of college against future earning potential, as well as intangibles like friendships, network building, and soft skills.
This guide explores the “return on education” for bachelor’s degrees, and offers insights into how to maximize the value of your college education.
Key Points
• Satisfactory Academic Progress (SAP) refers to the minimum academic requirements that must be met to maintain eligibility for financial aid in college.
• Each institution establishes its own SAP policy, typically requiring a minimum GPA of 2.0 and completion of 67% of attempted credits.
• Students who fail to meet SAP standards may face a financial aid warning, and continued non-compliance can lead to loss of federal assistance.
• An appeal process exists for students who encounter extenuating circumstances affecting their academic performance, such as illness or family emergencies.
• Maintaining SAP is crucial to avoid financial burdens, as students may need to pay tuition and expenses out-of-pocket without federal aid.
Average Cost of a Degree
Choosing the right college is a multifaceted decision. Considerations include where the school is located, whether it has programs that meet your interests, what student culture is like, and of course price.
The price tag for college can be jaw dropping. The average cost of college for an in-state student attending a four-year university is $27,146 per year (including living expenses). Students that attend private, nonprofit universities spend an average of $58,628 per year living on campus.
💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.
Return on Investment by Education Level
You can determine your ROI by education level by looking at the ratio of the cost of your degree to your expected income once you graduate. Your return on education is much like a traditional ROI calculation, which looks at the ratio between net profit and cost from investing resources.
In this case, time and money are the resources you’re investing, and your future income is the profit. The ROI for your education will depend largely on how much you spend on your schooling, what type of job you get after school, and to a certain extent what you major in.
Associate degrees can typically be completed in one to two years and often at a community college, which can make them more affordable than four-year degrees. According to data from the Education Data Initiative, the ROI for an associate degree is 363.5% after 20 years.
Bachelor’s Degree Return on Investment
Bachelor’s degrees typically take students four years to complete. According to Education Data Initiative, the ROI for a bachelor’s degree is 38.1% after 20 years. Keep in mind, though, that this estimated return on investment can vary greatly based on the major you pursue. For example, computer science degrees offer an ROI of 716.6%.
Master’s Degree Return on Investment
A master’s degree can be completed after a student receives their bachelor’s degree. This degree allows the student to specialize in a specific area of interest, such as those who pursue a Master in Business Administration, or MBA. The ROI for a master’s degree is 90.1% after 20 years, according to Education Data Initiative.
Doctoral Degree Return on Investment
A doctoral degree is generally the most advanced degree one can get in a particular field. Doctorates can take up to eight years to complete, though the exact timing will vary depending on factors like the program type, structure, and research being completed by the doctoral candidate. The estimated ROI for doctorate degrees is 84.0% after 20 years, according to Education Data Initiative.
Professional Degree Return on Investment
Professional degrees are advanced degrees that prepare a student to work in a particular field, such as law or pharmacy. After 20 years, the ROI for a professional degree is 60.4%, according to Education Data Initiative.
Highest Earning Degrees
The return on education will vary depending on the degree program you choose. For example, a student with a computer science degree may earn more than an English major. There are exceptions, but it’s a good idea to understand the norm for particular fields. These are some of the highest-earning degree programs.
Associate Degree
As mentioned, an associate degree takes about two years to complete and can often be finished at a community college for significantly less than it may cost to get a four-year degree. Associate degrees often allow students to specialize in a specific trade or field, and in some cases, this specialization can lead to a high-earning career.
One of the top-earning post-associate degrees is air traffic controllers. According to the Bureau of Labor Statistics (BLS), air traffic controllers earn a median income of $137,380.
Dental hygienists, MRI technicians, and funeral service managers all earn an average salary of $70,000 or higher, making them top associate degrees based on earning potential, as well.
Bachelor’s Degree
According to Best Colleges, some of the bachelor’s degrees with the highest earning potential include chemical engineering, computer engineering, computer science, finance, and business analytics.
For example, in 2023, chemical engineers earned a median salary of $112,100. Financial analysts earned a median salary of $99,890 per year, according to the BLS.
Certifications
Some people may consider adding a certification to their resume in order to boost their earning potential. Professional organizations often award certifications for specific skill sets. Some top earning and in-demand certifications include those for project management and data engineering.
The ROI can vary quite a bit based on the type of bachelor degree pursued. As mentioned, computer science degrees have some of the best ROI for bachelor’s degrees — about 716.6% over 40 years, according to Education Data Initiative. Take a look below at a list of majors and their estimated ROI after 40 years, according to Education Data Initiative:
• Business finance — 710.2%
• Business accounting — 547.2%
• Electrical engineering — 517.8%
• Biology — 225.0%
• Communications — 209.3%
• Architecture — 188.6%
• Fine Art — 70.5%
Consider What Can’t Be Measured by Money
Yes, going to college or pursuing other higher education opportunities can be expensive. But in addition to the cost and potential boost in earning potential, there are a variety of intangible benefits that can’t be measured by a dollar. For example, college students living on campus are gaining a newfound independence and developing life skills they’ll carry with them.
Plus, many colleges have strong alumni networks that can help when a student is looking for a job post-grad. Students have the chance to not only get to know themselves better, but in the process they may make lifelong friends.
One way to improve ROI is to lower the amount of money you are paying for school. This could be particularly useful if you already know you want to pursue a career in a relatively low paying field.
Scholarships
You can help offset the cost of tuition by looking for scholarship programs that help pay your tuition and other college expenses. Many schools offer need-based financial aid to families who might otherwise struggle to pay tuition costs. In some cases, you could even get a full ride.
You can find scholarships by looking at your school’s financial aid website, connecting with your guidance counselor, or reviewing databases or online scholarship search tools.
In some cases, you may be able to apply for unclaimed scholarships to help supplement the aid you have already received.
Grants
Students may qualify for grants directly from their school or through federal financial aid. Grants typically do not require repayment, so they can be an incredibly helpful addition to a student’s financial toolkit when it comes to paying for college. Pell Grants are one type of grant awarded by the federal government to students who demonstrate exceptional financial need.
Pell Grants are available to undergraduate students. In order to maintain eligibility for a Pell Grant, undergrads will also be required to meet satisfactory academic progress requirements.
Student Loan Forgiveness Programs
If you need to take out student loans to help pay for college, keep an eye on your terms and interest rates to help keep costs down. If you take out federal loans and plan to work for certain non-profits or government organizations, you may be eligible for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. After making 10 years’ worth of qualifying monthly payments, the remaining balance of your loan may be forgiven through this program.
Private Student Loans
Private student loans don’t qualify for federal benefits like PSLF, but they can be helpful tools for students who have exhausted their federal financial aid.
If you are interested in paying for college or another higher education degree with a private student loan, take the time to shop around and review interest rates, terms, and other fees or benefits offered by lenders.
Employer Support After Graduation
Finally, some employers may also help you pay back your student loans as part of a benefits package. Consider working for an employer who offers these benefits.
College students can estimate the return on their educational investment by looking at how much they’ll pay for their degree and comparing it to their lifetime earnings. Though important, the money you’ll eventually earn isn’t the only thing you should consider when choosing a college. Getting a bachelor’s degree can help you acquire skills and expand your horizons in ways that aren’t directly related to your degree or job prospects.
When you decide on the right school for you, take the time to consider all your options — including scholarships, grants, federal and private student loans, post-graduation repayment programs, and other sources of public and private funding — to help you achieve your education and career goals.
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.
FAQ
What is the average return on investment for a college degree?
The average return on investment (ROI) for a college degree varies by field, but generally, bachelor’s degree holders earn significantly more over their lifetime than those with only a high school diploma. On average, the ROI for a college degree ranges from 9% to 10%, but can be higher depending on the major and institution.
Which degree has the highest return on investment?
Degrees in fields like engineering, computer science, and technology typically have the highest return on investment (ROI). These degrees often lead to high-paying jobs with strong job security and growth prospects, resulting in a significant lifetime earning advantage compared to the cost of education, making them highly valuable investments.
Is a bachelor’s degree a good investment?
A bachelor’s degree is generally a good investment as it can lead to higher lifetime earnings, greater job stability, and more career opportunities compared to having only a high school diploma. However, the return on investment depends on the chosen field, the cost of education, and individual career goals and outcomes.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
Many people harbor hopes and dreams for how they will live, achieve professional success, start a family, travel, and more. Whether that means launching a nonprofit by age 30, having three kids, sailing around the world, or all of the above, reaching those goals takes planning and focus.
The same is true of your finances. Money helps fund your aspirations, and it needs care and tending. Solid financial planning can help you realize those dreams, from having your child graduate college debt-free to being able to retire early.
So here’s your guide to setting smart money goals and achieving them, step by simple step.
Check out our Money Management Guide.
This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.
What Are Financial Goals?
Financial goals are the aspirations you have for how you will bring in income, spend it, and save it. These can be short-term dreams, like financing a vacation to Tulum next winter, or longer-term ones, such as retiring by age 50.
Identifying these goals and then creating a roadmap to achieve them is what smart financial management typically boils down to.
Short-Term Financial Goals
Short-term goals are usually defined as things you want to achieve with your personal finances within anywhere from a few months to a couple of years.
Examples of short-term financial goals could be anything from starting an emergency fund to finding a budget that works for you to saving up for a new mobile phone.
Long-Term Financial Goals
When you pull back and think big-picture about money management, you have likely entered the realm of long-term financial goal setting. These are goals that can take several years or even decades to achieve.
Examples of long-term goals would be saving enough money to buy a house, putting your kids through college, or retiring comfortably.
What Are S.M.A.R.T. Goals?
When you are thinking about your financial goals and doing some research, you may come upon the acronym S.M.A.R.T. Think of this as a guideline to help you set and achieve your money aspirations. Here’s what it stands for:
• S for Specific: Instead of your goal being “to be financially comfortable,” try to be more precise. Perhaps your goal would be to have no debt except your mortgage and a certain amount in your retirement fund.
• M for Measurable: It can be wise to assign real numbers to your goals. For instance, to save $200K in your kids’ college funds is a measurable aspiration. Just saying, “to pay for college” can be too vague to work toward.
• A for Achievable: Setting unrealistic expectations can lead to frustration and disappointment. Think about your lifestyle, income potential, cost of living, and other key factors, and set reasonable goals.
• R for Realistic: Similarly, plan steps to achieve your goals realistically. Don’t expect to cut your expenses to the rock bottom or ignore the impact of inflation over time.
• T for Time-based: Give yourself specific goals and due dates, such as “Save $500 a month until I have $5,000 in my emergency fund 10 months from now.”
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
How to Set Financial Goals
Next, consider the specific steps of setting financial goals. Break it down as follows:
1. Assessing Your Finances
Figuring out exactly what your current finances look like is a vital step. Sure, you probably know when you get paid, but have you checked how much is going toward your retirement savings fund every pay period or — gulp — exactly how much you’re spending on food delivery? Keeping a close eye on your finances might help you set smarter money goals.
It might seem easy to ignore the finer details of our finances in favor of blissful ignorance, but failing to know where you and your money stand might harm your financial health down the line.
So if you haven’t looked at where your money is going in a while, taking a look at how much money you’re bringing in, how much you’re spending, and how much you’re saving might help you set more meaningful money goals.
• Check out your bank statements, credit card statements, and even online banking records to help you determine where your money is going every month.
• Write down big numbers like credit card, personal loan, or student loan debt. This can help you plan for payoff.
• Consider using tech tools to help you wrangle your finances. There are plenty of apps you can download, and online banking might be able to help you too. Typically, banks offer apps where users can easily access details about their spending and balances. Your credit card bill or app can also often provide a graphic representation of where your dollars fly off to each month.
2. Figuring Out What Is Most Important to You
Once you have a snapshot of your overall financial situation, it can be worthwhile to spend some time reflecting on your money goals: what is really important to you.
While there are many things a person ideally should be saving for, like a down payment on a house or retirement fund, your financial goals might not be the same as your sibling’s or your coworker’s.
Just like your parents always told you: You’re unique. And so is the process of setting financial goals. What might they look like?
• You might want to pay off student debt as fast as possible in order to free up more cash every month.
• You might be working toward public service loan forgiveness and not be as focused on quickly paying off student loans.
• Perhaps your financial goal is to save up an emergency fund or take a vacation in six months.
• You might want to retire and move to another country by the time you’re 55.
It’s likely that your goals will be a mix of short-term and long-term aspirations, as described above.
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3. Establishing a Fun Budget
Okay, but what if you just want to go clothes shopping once a month without feeling guilty or take that Budapest vacation you’ve been dreaming about?
Make it work! Setting a financial goal is all about having your money serve you. Here are some pointers:
• Planning out your discretionary spending might not only help keep your finances on track but can also help you inject an extra fun quotient into your life. That’s a win-win.
• When a budget is too harsh and punitive, you might wind up making impulse buys or otherwise overspending. If you know you have some cash stashed for mood-lifting purposes, you can hopefully avoid that scenario.
But whether you’re focused on saving up for a down payment on a house or a trip to Disneyland, you won’t get there without a plan. Making a budget will get you focused and help you take control of your finances.
4. Staying On Track
Once you’ve decided on a money goal or two, it’s time to put a plan into action. Your plan will vary depending on whether you’re tackling a long-haul climb out of credit card debt or saving an emergency fund. A bit of advice:
• Managing your money isn’t a “set it and forget it” proposition. Life happens. You may get a raise one month, and then have a (surprise!) major dental bill the next. It’s important to check in with your money regularly.
• Adapt your budget when things shift. Everything from getting a nice bonus to having a baby can be a good reason to check in with your money goals and recalibrate.
• Whatever your financial goals, there are tools that can help you along on your financial journey. Having the right banking partner can play a crucial role. Look for a bank that can help you set up automatic deductions from your checking account on payday to savings toward your financial goals. And find a bank that doesn’t charge you all kinds of fees; after all, they’re enjoying the privilege of using the money you’ve deposited!
6 Examples of Financial Goals to Consider
If you’re looking for help brainstorming how to manage your money aims, here are some popular financial goal examples to consider:
1. Build an Emergency Fund
Whether you’re easily covering your monthly expenses or grabbing change from the bottom of your bag to buy a coffee, many people are living paycheck to paycheck. But what if that paycheck disappeared or if you had a large, unexpected expense? Enter the emergency fund.
Recent history has taught us a lot about how emergencies can arise. Stashing away an emergency fund might help you comfortably weather a pandemic, a “company-wide restructuring” that eliminates your position, or an unexpected illness that cuts into your freelance earnings.
Consider a long-term financial goal of setting aside about three to six months’ worth of expenses to help you weather any rough financial waters that may lie ahead.
💡 How much should you have in an emergency fund? Use SoFi’s emergency fund calculator to help find out.
2. Track Your Spending
As mentioned above, keeping track of your expenses is important. Sometimes, spending that starts as an occasional thing (that TGIF latte) becomes a regular expense that drags down your budget.
Or you might find that you are dealing with lifestyle creep, which occurs when you earn more but your spending rises too, keeping you at the same level of wealth.
If you track your expenses, you can see how your money is tracking. You might decide to cut back on streaming services or realize that now that you’ve paid off your credit card debt, you could put more toward retirement.
3. Pay Down Credit Card Debt
High-interest credit card debt can feel like a treadmill: You keep putting in more and more effort, seemingly without getting closer to the finish line. Many of us struggle with it. The average balance that consumers carry as of the start of 2023 was over $7,000, and the average interest rate as of mid-2023 topped an eye-watering 24%.
With numbers like that, it can take a very, very long time to pay off what one owes, especially if you only make the minimum payment. What’s more, if your balance is more than 30% of your card’s credit limit, your credit-utilization ratio may not look too attractive to the credit reporting agencies (Equifax, Experian, TransUnion), and your credit score may skid south. In fact, some say that it’s financially healthiest to use only 10% or less of the credit your card extends to you.
It’s no wonder that for many of us, setting a financial goal involves the words “pay off my credit card.” Indeed, making a plan to pay down debt instead of focusing on those minimum monthly payments could help you dramatically improve your finances. Your credit card statement will tell you how much to pay to get rid of debt in three years; that can be a helpful guideline.
If you need other options, consider:
• A balance-transfer credit card, which offers low or no interest for a period of time (typically 6 to 18 months), may also be useful.
• A personal loan, which may offer a lower interest rate. You can use that to pay off the credit card debt and then have a lower amount due to pay off the loan.
• You might also consider a debt management plan or meeting with a nonprofit debt counseling agency if you feel you need additional help.
When you get out from under the burden of this kind of debt, other doors (like to a home you own) may open. It can give your budget just the kind of breathing room you crave.
4. Pay Off Student Loans
Paying off student loans is another move that can help you reach your financial goals. Doing so frees up funds in your budget for other uses. Some ideas:
• Make extra payments toward the principal when possible. That might mean a little more every month or applying a windfall like a tax refund.
• Refinance a student loan. This could potentially lower your rate and help you pay off your debt sooner.
• Pay biweekly instead of monthly. This means you make an extra payment each year, again helping shorten the timeline to becoming free of student loan debt.
• Enroll in autopay. Federal student loan servicers and many private lenders will lower your interest rate a bit if you opt into automatic payments. While it won’t make a huge dent in what you owe, every little bit can help.
5. Contribute to Your Retirement Fund
Most of us know we should be saving for retirement, but that financial goal can be easier said than done when there are so many competing places to put our money.
The good news is that when you set up a retirement account and start saving, even small amounts can grow over time, which makes saving for your golden years a great financial goal. Contributing regularly — whether through your employer’s plan or an IRA — is worthwhile, especially when inflation is high.
Many experts say that a smart financial goal is to be saving 10% to 15% of your pre-tax paycheck for your retirement. One smart move: If your employer offers a company match of dollars put toward retirement, put in at least the minimum required to snag it. So if your company says you must contribute 6% of your salary to get a 50% match, that means if you put in 6%, they will add 3% to your savings. Don’t leave that money on the table!
6. Save More Money
Another way to hit your financial goals, big and small, is to save more money. Here are a few techniques:
• Automate your savings. Set up seamless recurring deductions from checking to savings for just after payday. Doing so means you don’t have to remember to allocate the funds. And you won’t see the money sitting in checking, tempting you to go shopping with it.
• Challenge yourself each month to give up an expense. For instance, don’t buy any pricey coffees for one month and put aside the savings. Next month, no movies. The following, no takeout lunches. You can do it!
• See about bundling insurance premiums or paying annually vs. monthly to save money.
• Negotiate bills. See if your credit card provider will lower your rate, for starters.
How to Adjust Your Financial Goals if Your Circumstances Change
Sometimes, life throws you curveballs. You don’t get the raise you were hoping for. A family member has a medical issue that requires more money to manage than you expected. Or you move to a new town with a higher cost of living.
In these situations, you may need to ramp down some of your financial goals. Perhaps you can’t have that emergency fund fully saved by the end of this year. You could lower how much you put away and reconcile yourself to the fact that you won’t meet your goal as soon as you would have liked.
This is just another reason why checking in with your money and adjusting your budget often is important.
And don’t forget the bright side: If you get a major salary bump or a windfall, you can use that to crush your goals that much sooner. Staying flexible can be vital, regardless of which way your finances are trending.
Setting smart financial goals is an important step in managing your money and achieving your life goals.
By taking such steps as evaluating your financial situation, creating a budget, and setting smart benchmarks, you can be on track to check off your aspirations. Whether that means saving for summer vacations, eliminating credit card debt, or retiring early, taking control of your money can be a very good feeling. And finding the right banking partner can help make the process even easier.
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.
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FAQ
What is a good financial goal?
Financial goals need to reflect what’s important to you, but for most people, they are a mix of short-term aspirations (like having an emergency fund and minimizing credit-card debt) and long-term plans, like retirement savings.
How do you stick to a financial goal?
Sticking to a financial goal can be easier if you set up automatic deductions that transfer money from checking (where you might be tempted to spend it) to savings. Also, getting familiar with your finances, developing a plan, and regularly checking your progress are good moves.
What are some money management tips?
It’s a good idea to assess your finances and make short- and long-term goals. Then, allocate a percent of your earnings and set up automatic deductions to your savings; pay down high-interest debt (like credit cards); establish an emergency fund; and start saving for retirement. Even if it’s just a small amount, it will grow!
SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).
Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.
Deposits that are not from an employer, payroll, or benefits provider 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.
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SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.
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Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
For many of us, a car is the second-biggest purchase we’ll make, next to a home. The average price a buyer paid for a new car in June 2024 was $48,644, according to Kelley Blue Book. But sticker price isn’t the only thing to consider when budgeting for new wheels. There’s also insurance, maintenance, gas, and depreciation.
Depreciation may not be front of mind for many car buyers. But in fact it’s a major factor in determining how to finance a new car. We’ll explain why, review different loan options, and recommend steps you can take to help you get a great deal.
• A car is often the second-largest purchase next to a home, with new cars averaging $48,644 as of June 2024.
• Depreciation significantly impacts the financial strategy for purchasing a new car, with most vehicles losing about 60% of their value within five years.
• Various financing options are available for car buyers, including loans from banks, dealerships, or private lenders, each offering different terms and rates.
• Researching car values, negotiating trade-ins, and understanding loan terms are crucial steps before visiting a dealership.
• Prequalification for car loans can provide leverage in negotiations and help buyers understand their purchasing power.
How To Assess the Value of a Car
You may already know what you want in a new car: the gas mileage, capacity, features. Just as important, you know what you can afford. Or do you? Before heading to a dealership, you’ll want to extensively research the cars you’re interested in.
Once you have an idea of the makes and models you want to test drive, there are a number of services that can offer a baseline estimate for the car’s worth. Edmunds offers a True Market Value (TMV®) guide; Kelley Blue Book provides suggested price ranges based on things like year, model, condition, and mileage (particularly useful for used cars). The National Automobile Dealers Association’s guide focuses on dealers’ sticker prices, and Consumer Reports provides detailed reviews and reports about specific cars.
None of these resources will necessarily tell you the exact price you’ll get, but they can give you some context. It may be helpful to look at listed prices for similar cars in your area. You can even call around for price quotes from dealerships and private sellers, so you’re better equipped by the time you walk onto the car lot.
A car’s value changes almost from the moment you purchase it: This is called depreciation. The first year is generally the biggest hit, with cars losing around 20% or more of their original value. The loss goes on from there. New cars lose roughly 60% of their purchase price over the first five years of ownership.
Some models depreciate more than others. For instance, cars typically depreciate faster than trucks, and midsize cars depreciate more quickly than smaller cars. It’s smart to research the projected depreciation on the makes and models you’re interested in. Lower depreciation could become a deciding factor when all else is equal.
One of the biggest car-related costs is the loan itself. Car loans can come either from a traditional bank, online lender, or through a dealership. Here are a few car financing options:
Car Loan
Car loans can be offered directly from a bank, credit union, or online lender, or can be arranged through the car dealer. The average loan rate for a new car for borrowers with good credit is 7.24%, as of July 2024. If you have excellent credit, you may qualify for a lower rate; if you have fair or bad credit, you may pay more. Learn how to check out your credit score for free.
Car loans are “secured” by the car, which means that the car is used as collateral on the loan. Until it’s paid off in full, you don’t own the car outright. So if you default, the lender can seize the car. The qualification process for a car loan can be more difficult than getting an unsecured personal loan, since banks must verify the collateral (think: more paperwork).
Dealer-Arranged Financing
When getting a loan through the dealership, the dealer typically collects your information and offers financing via a finance company owned by the car manufacturer, the dealership, or a third party. Car dealerships are good at helping customers get a car loan quickly, sometimes even without great credit. You may be able to sign a loan and drive off in your new car the same day.
Auto Loan from a Private Lender
Banks, on the other hand, may offer more competitive interest rates or more favorable terms when applying with them directly. However, the application process can be more involved and take longer. Usually, borrowers getting financing from a bank or credit union will get preapproved for a car loan prior to heading to the dealer.
Personal Loan
Another option is to skip car loans entirely and take out an unsecured personal loan. Common uses for personal loans include home repairs, debt consolidation, and other large purchases. On the flip side, a car loan can only be used to pay for a car.
Usually, buying a car with a personal loan is not the best course of action. But there are rare circumstances where it may make sense, such as if you plan on restoring an old car as a passion project. Cars in need of repair can be difficult to finance with a traditional auto loan.
For most car buyers, however, interest rates on any type of personal loan are typically higher than on car loans. Another thing to consider is the repayment period. In general, car loans extend over seven years, whereas a personal loan is typically repaid in three to five years.
Getting your personal loan approved can take time, but prequalification is available. Many people get prequalified before going into the dealership, so they have an idea of how much buying power they have.
Strategies for Getting a Car Loan
As you look for a car loan that meets your needs, here are some strategies that can help.
Do Some Research
Before heading to the dealer, shop around for loans to see the interest rates and terms you may qualify for. Lenders review factors like a borrower’s credit score and financial history to inform their borrowing decisions. So part of your research will go into understanding your credit.
A larger down payment can save you money on your loan. Down payments reduce the amount you have to borrow, which reduces what you spend on interest over time. Trading in a vehicle of substantial value accomplishes the same thing, while reducing the down payment you need to put up.
A higher down payment is helpful for another reason: It can help you avoid a situation down the road where, due to depreciation, the balance of your loan is greater than the value of your car. This is variously called negative equity, being underwater, or an upside-down loan. To avoid this situation, run the numbers to make sure your down payment (or trade-in) is high enough to offset the expected depreciation on your vehicle.
That said, negative equity isn’t usually a bad thing. It only becomes a problem if your car is stolen or totaled, and the payout from your insurance company isn’t enough to pay off your loan balance. (Gap insurance is designed to cover your remaining debt.) Some drivers are comfortable with being upside-down for a short period, while others prefer not to take a chance.
Consider Getting Prequalified for a Loan
Getting prequalified for a car loan helps the borrower understand what kind of car payment they can afford. Prequalification can also be used as a tool in negotiations with the dealer. In some cases, the dealer may be willing to offer a more competitive financing option.
Just keep in mind that prequalification isn’t a done deal: The loan offer is still subject to change.
The Takeaway
For many people, buying a car outright with cash isn’t an option. With an auto loan, the car acts as collateral to secure the loan. A higher down payment can save you money on interest over the life of the loan. It can also help you avoid “negative equity” down the road — where the value of the car is less than the balance of your loan. However, this is only a problem if your car is stolen or totaled, and your insurance company’s payout doesn’t cover your loan obligation. In some circumstances, it’s possible to use an unsecured personal loan to purchase a car, such as when you’re looking for a vintage car to fix up as a passion project.
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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.
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.
