woman budgeting looking in wallet mobile

What to Do When Money is Tight

When the unexpected happens and money is tight, it’s normal to worry about how you’re going to make ends meet.

But whether you’re going through a short-term budget crunch or dealing with more challenging financial issues, there are ways to feel more in control of your financial situation–and make the money you have go farther.

The key to coping when money is tight is to take a close look at your current budget, find expenses you may be able to pare back or eliminate, and potentially find some new income streams.

Here are some smart spending and saving strategies to try when you’re tight on money.

Getting Honest With Your Budget

When most of your income already goes to essentials, you may wonder if there is really enough money left over for a spending plan.

But taking a close look at your monthly spending can be especially key when money is tight because the less money available, the more important it is to keep those dollars under control.

To get a full picture of your spending, you may want to actually track your spending (every cash/debit/credit card transaction and every bill you pay) for a month or so.

You can do this by carrying around a notebook or saving all of your receipts. There are also a number of phone apps that can make the process of tracking your daily spending easy.

Once you have a sense of average monthly spending, it’s a good idea to compare this to what’s coming in. You can look at your bank statements for the past few months to get an idea of much after-tax income you are taking in on average per month.

Comparing what is coming in vs. going out may be anxiety-provoking, but knowing exactly where you stand when money is tight can be a critical first step toward easing the strain.

Uncovering Places to Save

Once you have a good sense of your monthly spending, you may want to group expenses into categories, and then list them in order of priority, starting with the essentials and going down to the “nice to haves.”

Once you’ve established which expenses are the most important, you can start looking for places to cut some of your unnecessary spending. Cutbacks may not feel fun, but they can be extremely beneficial when money is tight.

For example, if you are spending a lot on restaurants and take-out, you might consider cooking at home a few more nights a week.

Or, if you’re overspending on clothing, it might make sense to institute a short-term spending freeze on new clothes, or a freeze on spending money at a certain store for a period of time.

If you mostly watch streaming services, you might consider ditching that pricy cable subscription. If you love buying the latest best-sellers, It might be a good time to renew your library card.

You may also find you’re paying for memberships and subscriptions you no longer need or want. These are line items you may be able to scratch from the expense list completely.

Negotiating with Service Providers

Another way to save money when your budget is tight is to see if you can reduce some of your monthly “fixed” expenses.

Some of those recurring bills (like cable, internet, cell phone, car insurance) may not actually be set in stone.

It can take little research—and nerve—but you may be able to negotiate for a lower rate from many of your providers, especially if you’re dealing with a company that’s in a competitive market.

Before you call or email a business or provider, it can help to know exactly how much you’re paying for a service, what you’re getting for your money, and how much the competition is charging for the same or similar service.

It’s also a good idea to make sure you are communicating with someone who actually has the power to lower your rate and, if not, ask to speak with someone who does.

You may also want to let providers know that if they can’t do better, you may decide to switch to another company.

Cutting Back on Bigger Expenses

If money is especially tight right now, it can also be a good idea to take a look at the big items in your overall budget.

For example, is your car payment too high? If so, perhaps you could lease a less expensive car, or buy a used vehicle to cut monthly payments.

If rent is eating up too much of your income, you might want to look into finding a cheaper place to live that’s still nice, taking in a roommate, or moving in with friends.

These options may be the last steps you take as you look for ways to reduce expenses, but they really can help you save a sizable amount of money every month. The lower you keep these costs, the easier it will be to live well within a tight budget.

Knocking Down Debt

Having too much debt can make money feel especially tight, and it can also hurt your chances of achieving financial security down the line.

That’s because when you’re spending a lot of money on interest each month, it can be harder to pay all of your other expenses on time, not to mention grow your savings.

Reducing debt may seem like a tall mountain to climb when money is tight, but choosing the right debt reduction strategy may be able to help you chip away and slowly improve your financial situation.

Since credit card debt typically costs the most in interest, you might consider tackling these debts first, and then move on to the debt with the next-highest interest rate, and so on.

Another approach is to pay the minimum toward all your accounts, and then pay any extra you can afford toward the debt with the smallest balance. When that debt is wiped out, you can move on to the next smallest balance, and so on.

If you can qualify for a lower interest rate, another option might be to take out a personal loan that consolidates all those high-interest debts into one more manageable payment.

Starting an Emergency Fund

It might sound crazy–if not impossible–to put money into savings when you’re tight on money.

But here’s why you may want to make putting a little bit away into an emergency fund each month a priority: If you’re living on a tight budget, just one unexpected expense—like your car breaking down or a visit to an urgent care clinic—could put you over the financial edge.

If you start putting just a small amount aside each month into an emergency fund, it won’t be long before you have a decent financial cushion that could prevent you from having to run up high interest credit debt the next time something unexpected rolls around.

Good places to start–and grow–your emergency fund include: a high-interest savings account, a cash management account, or an online savings account.

These options typically offer higher interest than a standard savings account, but keep the money liquid so you can access it if and when you need it.

Spending Only Cash for Everyday Expenses

There’s something about plastic that can make it feel like you are not really spending money.

While it might not be practical to pay your rent or utility bills in cash, switching to cash (and leaving the credit cards at home) for other expenses can be a great idea when money is tight.

The reason is that using cash places a harder limit on your spending and helps you become more aware of your choices. When you can literally see your money going somewhere, you may find yourself becoming much more intentional in the way you spend it.

Groceries and entertainment can be great categories for going cash-only. Cash can also be a good option for clothing and the (occasional) restaurant meal.

Another benefit of cash is that it’s more difficult to get into debt since you can’t spend cash you don’t have.

Starting a Side Gig

Once you’ve done some basic budgeting, it may be clear that additional income could help ease things while money is tight.

Sometimes all it takes is some extra time and energy to earn some extra cash, whether it’s selling things you no longer want or need (and decluttering at the same time), taking on a side hustle, or using your talents to pick up some freelance work.

Some ideas for generating extra income include:

•   Selling things on eBay, Craigslist, or Facebook Marketplace
•   Having a garage sale
•   Creating an Etsy store and selling homemade goods
•   Driving for a rideshare or food delivery service
•   Giving music lessons
•   Renting out a room on Airbnb
•   Walking dogs
•   Cleaning houses
•   Babysitting
•   Handling social media for small businesses
•   Selling writing, photography, or videography services to clients

The Takeaway

If money is feeling tight right now, it’s easy to feel worried and out of control.

But you may be able to regain a sense of control by taking a deep breath, sitting down, and really crunching the numbers. This entails looking at your monthly take-home pay, as well as your average monthly spending, and seeing how it all lines up.

Once you have a sense of the numbers, you can take steps to reduce unnecessary spending, negotiate to lower monthly bills, chip away at expensive debt, and even start building a financial cushion.

It might not happen overnight, but these steps can help ease money stress and put you on the road to a more secure financial future.

Looking for a simple way to manage your spending and saving while money is tight? Consider opening a SoFi Money® cash management account.

With SoFi Money, you can easily see your weekly spending on your dashboard in the app, which can help you stay on top of how much you are spending, and make sure you are on track with your budget.

Signing up for SoFi Money can also help you save on fees, since SoFi Money doesn’t have any account fees, monthly fees, or many other common fees. Plus, withdrawing cash is fee-free at 55,000+ ATMs worldwide.

Check out everything SoFi Money has to offer today!

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.


Read more

When Can I Retire? This Formula Will Help You Know

When it comes to retirement savings, there are a number of factors to consider: Social Security, inflation, and health care costs. But ultimately all these concerns boil down to one question: How much do you need to save to retire?

Thankfully, there’s a formula for calculating these costs, which might help you plan for the future. But first, decide at what age you want to retire and then see how that decision affects your finances.

When Can You Get Full Social Security Benefits?

At what age does the government allow people to retire with full Social Security benefits? And at what age can people start withdrawing from their retirement accounts without facing penalties? For Social Security, the rules are based on your birth year.

The Social Security Administration has a retirement age calculator . For example, people born between 1943 and 1954 could retire with full Social Security benefits at age 66.

Meanwhile, those born in 1955 could retire at age 66 and two months, and those born in 1956 could retire at age 66 and four months. Those born in or after 1960 can retire at age 67 to receive full benefits.

Social Security Early Retirement

A recipient will be penalized if they retire before full retirement age. The earlier a person retires, the less they’ll receive in Social Security.

Let’s use John Doe as an example and say he was born in 1960, so full retirement age is 67. If he retires at age 66, he’ll receive 93.3% of Social Security benefits; age 66 will get John 86.7%. If he retires on his 62nd birthday–the earliest he can receive Social Security–he’ll only receive 70% of earnings.

Here’s a retirement planner table for those born in 1960, which shows how one’s benefits will be reduced.

Social Security Late Retirement

If a person wants to keep working until after full retirement age, they could earn greater monthly benefits.

For example, if the magic retirement number is 66 years but retirement is pushed back to 66 and one month, then Social Security benefits rise to 100.7% per month. So if your monthly benefit was supposed to be $1,000, but you wait until 66 years and one month, then your monthly allotment would increase to $1,007.

If retirement is pushed back to age 70, earnings go up to 132% of monthly benefits. But no need to calculate further: Social Security benefits stop increasing once a person reaches age 70. Here is a SSA table on delayed retirement .

When Can You Withdraw From Retirement Accounts?

Now let’s look at retirement accounts. Each type of account has different rules about when money can be taken out.

If a Roth IRA account has existed for at least five years, withdrawals from the account are usually okay after age 59½ without consequences. Taking out money earlier or withdrawing money from a Roth IRA that’s been open for fewer than five years could result in paying penalties and/or taxes.

There is a little wiggle room. Retirement withdrawal rules do have exceptions for issues like disability or educational expenses, and there is an option to withdraw money early and pay taxes or penalties.

If a person is at least 59½ and has a Roth IRA that is less than five years old, taxes will need to be paid upon withdrawal but not penalties. Taxes or penalties might not need to be paid at age 59½ and if the Roth IRA has been open for five years or more.

People with a traditional IRA can make withdrawals from ages 59½ to 72 without being penalized. The government will charge a 10% penalty on withdrawals before age 59.5, and depending on location, a state penalty tax might also be charged.

People with 401(k)s can typically retire by age 55 and make withdrawals without receiving a penalty. People with either a traditional IRA or 401(k) must start making withdrawals by age 72 or face a hefty penalty.

How Much to Save for Retirement? Here’s the Formula

Everyone’s situation is different, so it might make perfect sense for one person to retire at age 62 and another at 55. However, waiting until full retirement age or even age 70 not only gives Social Security more time to accrue—it gives a potential retiree more time to accumulate savings in a nest egg.

So is working till the age 70 absolutely necessary to earn enough money to live off of after retirement, or will there be enough in savings by age 67 or 68? This is where the question “How much do you need to save to retire?” comes in.

Fidelity’s research shows that if a 30-year retirement is planned and annual spending is expected to be 4% to 5% of savings, adjusting for inflation, there is about a 90% chance of not running out of money.

The exact percentage can depend on the age of retirement and life expectancy. That number changes if a person retires at age 60 and plans a 35-year retirement—about 4.3% could be withdrawn per year to retain that 90% likelihood of financial security.

To break it down, $1 million in savings is a fair number to get through the retirement years.

How Much Money Is Needed Each Year to Live On?

The rule of thumb was once 80% of current income. But that assumes the mortgage is paid off and taxes will be lower. Many people will still have mortgages.

Since a large part of a retirement income comes from withdrawals from retirement plans that give taxable income, the tax rate might not go down much. Plus, many people might want to travel or spend money on hobbies in the early years of retirement, and many might need expensive health care as they live into their 90s and beyond. That means more than a current income might be necessary.

A retiree may be living off money from both Social Security and a retirement account. If Social Security is an option, and if it’s still around at retirement, that could reduce the amount that needs to be withdrawn from a retirement account each year.

Here’s the Retirement Savings Formula: Start with current income, subtract estimated Social Security benefits, and divide by 0.04. That’s the target number in today’s dollars.

The Takeaway

Nobody knows what the future holds—tax rates, inflation, health care reform, and Social Security are all outside our control. But the amount saved and invested is not.

With SoFi Invest®, you can track investments and choose exactly how active you are in the process. You can follow stocks online or sign up for automated investing. SoFi financial advisors are available to answer investing questions and help you plan for the future.

Check out SoFi Invest today.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
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.

Read more
turquoise crib in nursery

How Much Does it Cost to Adopt a Child?

Growing your family is a huge decision, and adopting a child will change your life forever. And while making the decision to open up your home and your heart to a new child seems like a natural next step for you and your family, the process can actually be pretty complicated—and costly.

There are a few different adoption methods and each comes with its own unique costs and fees. Read on for a breakdown of some expenses you might run into in the adoption process.

Cost of Adoption from Foster Care

Adopting a child from foster care tends to be less expensive than other options. According to a 2017 survey from Adoptive Families , the average cost of a foster care adoption was about $3,000.

Home Study

One of the most important costs to account for is the home study, which is when the prospective parents’ home is screened such that the adoption agency can get a sense of their day-to-day life. While the cost of a home study might be included in the overall adoption fee from an agency, the fees can range from a few hundred dollars to several thousand dollars.

Foster care adoptions will also generally have a home study where a social worker observes the interaction between the potential adoptive parents and the child. In some cases, there may be state or federal programs to offset

Tax Credits for Foster Care Adoptions

The good news is there are also plenty of government resources for foster care adoptions—The Children’s Bureau, part of the U.S. Department of Health and Human Services (HHS), has a wealth of resources available discussing the ins and outs of adoption.

The Children’s Bureau further explains that thanks to amendments to the Social Security Act in 1994 , families adopting children from foster care could qualify for federal assistance depending on the child’s eligibility. This assistance includes :

•   A one-time, non-recurring reimbursement for adoption transaction costs
•   Recurring monthly maintenance payments for the child’s care (Not to exceed what the state would have paid to keep the child in foster care)

Families contending with medical expenses for the birth mother or child, attorney’s fees, or those who need extra travel for visits before placement might experience higher expenses than average with a foster care adoption.

Children adopted through foster care may also be eligible for health insurance coverage under Medicaid, and other medical assistance to cover some or all of the child’s needs like special education or therapy.

Planning for Private Agency Adoption

Private adoption costs in the U.S. can vary from state to state. According to the Children’s Bureau, the cost of a private, agency-assisted adoption can range anywhere from $20,000 to $45,000 on average .

Agency Fees

Court Documentation Fees

U.S. domestic adoptions must also be finalized in a court. Court documentation fees can be in the range of $500 to $2,000 , in addition to the cost of legal representation for the adoptive parents, which can range from $1,500 to $4,000 . Depending on the state, these fees may or may not be covered as part of an agency’s overall pricing.

Independent Adoption Costs

Some families choose to adopt a child without the assistance of an adoption agency and instead work directly through an attorney. It might seem like a cost-saving measure at first, but pricing can still vary. Expenses might be low if you match with a birth parent through word of mouth, or if the birth mother’s expenses are minimal.

However, these adoption costs can still range from around $15,000 to $40,000 . This typically includes most of the same costs of any other domestic adoption, including the home study, the birth mom’s medical expenses, and legal and court fees for the adoptive parents and birth parents.

Expenses for Intercountry Adoption

Adoption fees will differ depending on which country you plan to adopt a child from. Intercountry adoption costs tend to be higher than a U.S.-based adoption because there is usually foreign travel and immigration processing to factor into the equation, in addition to other higher court costs, mandatory adoption education, and other documentation. The U.S. government says the average cost can range from $20,000 to $50,000 for a foreign adoption.

Costs can depend on the organization managing the adoption as well: whether it’s the government, private agency, orphanage, non-profit organization, private attorney, or some combination of the above. Some intercountry adoptions are finalized in the child’s home country, while others must be finalized in the United States. Finalizing an adoption in U.S. court can come with extra costs, but also provides additional legal protections and documentation.

Other costs to adopt a child from another country can include :

• Escort fees for when/if parents can’t travel to accompany the child to the U.S.
• Medical care and treatment for the child
• Translation fees
• Foreign attorney or foreign agency fees
• Passport and visa processing
• Counseling and support after placement

Financing the Cost of Adoption

So, with costs ranging from at least a few thousand dollars to up to $50,000 or more, financing an adoption may require some planning. Financially preparing for a child typically means looking into all associated costs, including raising your new child and tackling your own debt.

Some employers may offer financial and other support to help with the adoption process. According to the Dave Thomas Foundation for Adoption , the average policy offers a reimbursement of around $10,000.

Additionally, companies with 50 or more employees are required by federal law to grant parental leave to employees who have adopted a child. Mothers and fathers are eligible for up to 12 weeks of unpaid leave after the birth or adoption of a new child.

To offset some of the high costs of adoption, there are currently also federal adoption tax credits . The actual amount depends on family income, tax year, and employer adoption benefits, so it’s a good idea to talk to your tax attorney if you’re interested.

Grants and loans also exist to help with the cost of adoption and can help with any type of legal adoption, whether a foster care adoption, private agency, or overseas adoption. Most grants and loans have their own eligibility criteria based on things like marital status, income level, or even specifics like religion.

You can also consider taking out a private loan from a lender like SoFi to cover the adoption costs. If you qualify for a personal loan, you can use it for whatever qualifying personal financial need arises. Or perhaps you want to pay down your credit card debt, or build a new bedroom before the baby arrives, which a personal loan can help with as well.

The Takeaway

The cost of adopting a child can vary widely, from a few thousand dollars to $50,000. Foster care adoptions tend to be less expensive than private agency or intercountry adoptions. There are state or federal tax credits that may help offset the cost of adoption. Other resources to pay for an adoption include grants and loans.

Use our personal loan calculator to see how an unsecured personal loan with SoFi could help you prepare for the anticipated costs of adopting a child.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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.


Read more
woman in home office

College Planning Checklist for Parents

College planning is an exciting time for you and your child. But, as exciting as it may be, there is a lot of preparation involved.

So, whether your child is entering into their freshman year of high school or a few months away from graduation, there is no better time to start planning than the present.

From figuring out your financials to helping your child prepare for admission exams, this post will provide you with a college planning checklist for parents to streamline your child’s transition from grade school to college.

Starting a Savings Plan

Paying for college is expensive. According to The College Board , the cost of a public four-year school in 2009-2010 was $8,420 per year for tuition and fees. Currently, a public four-year school costs $10,440 in tuition and fees. That’s a 123% increase over the last decade, just for tuition and fees.

As prices continue to soar, it’s easy to become worried about how your child will pay for college or that they will have to take out a crushing amount of student loans in order to pay for the college of their dreams.

With this reality top-of-mind, it’s wise to start saving for your child’s college tuition and fees. But, while many parents may have the best intention of helping their children pay for their college expenses, they often fail to prepare.

So, even if your child is just now entering high school, you can still start saving and preparing for college costs. It’s never too late to start setting money aside for your children’s education.

Paying Close Attention to Grades and Curriculum

According to a 2019 report from the National Association for College Admission Counseling , students’ academic achievements, which include grades, strength of curriculum, and admission test scores, constitute the most important factors in the admission decision.

Since grades and curriculum are crucial to getting an acceptance letter, you may want to keep close tabs on your student’s grades and study habits. From helping with studying to supporting homework expectations, getting involved with your kid’s coursework may help them perform better in school.

You may also want to encourage them to take Advanced Placement® courses. Since AP® courses allow you to tackle college-level material while your child is still in high school, your student may get ahead by taking some.

Also, if your student passes the AP® exam at the end of the class, they could be rewarded with college credits. Racking up college credits could save you time and money in the future.

For example, if your child takes AP® English in high school, they might be able to skip freshman-level English once they get to the college or university of their choice.

There are fees associated with taking AP® exams. Fee reductions may be available for qualified applicants.

Encouraging Involvement with the Community

According to the same report from the National Association for College Admission Counseling , colleges are seeing more applications than ever. Between the Fall 2017 and Fall 2018 admission cycles, the number of applications from first-time freshmen increased 6%and international student applications increased by 7%.

With the increase of competition, your child must stand out. While the top factors in admission decisions were academics, the next most important factors included a student’s demonstrated interest and extracurricular activities.

That said, encouraging your child to get involved in the community could potentially help them write a solid college application or it may even help them decide what they want to do with the rest of their lives.

For example, if your child loves to run, they may want to try out for the track team to round up their classes or volunteer as a track coach for a youth team. Or, if they prefer journalism instead of sports, they may want to try writing for the school newspaper.

Not only will getting involved help with their college application but it will help sharpen their skills. So, don’t be afraid to encourage them to explore their passions and get involved with the community. Even better, you could get involved with them.

Planning for the SAT and ACT

Another key component to receiving acceptance letters from colleges and universities is having acceptable SAT® and ACT® scores. Some schools require the Scholastic Aptitude Test® known as the SAT®, while others may require the American College Testing®, known as the ACT®. Some schools will accept either one, but it’s a good idea to check the preference of the schools your child will apply to.

To help your child prepare you can encourage them to sign up for an after-school prep class or practice at home by using online resources such as Khan Academy’s free SAT practice program in partnership with The College Board©.

Another option is to have your child take an SAT® and ACT® preparation course from Prep Expert. As an ed-tech company, Prep Expert specializes in online SAT® and ACT® test preparation and offers full-length live online courses, prerecorded video courses, private tutoring, and more.

Researching Schools

One of the most important components of college planning for your child is helping them decide which university or college is the right fit. Fortunately, there are plenty of options available to help you find a school that will fit your child’s education and experience needs.

To get started in the decision-making process you may first want to help your child decide what degree they would like to achieve. If they know they want to be an engineer, you may want to focus on schools with good engineering programs.

Even if you may think their degree is too niche, there is often a program that will support it. Whether they want to study astrobiology or comic art , there is often a program for your child. However, if they are unsure of a major, they may want help finding a school with more program options available.

It’s also wise to consider factors such as location and the type of college experience your child wants to have. For example, if they want to go to a school close to home and commute to save money, that desire will limit the search parameters.

Remember, while you may be the voice of reason, the ultimate decision is up to your child—the student. Simply help them evaluate all of the key factors in making an informed decision.

Scheduling College Visits

According to the University of California’s American Freshman Survey published in 2019, 51.7% of respondents said college visits were highly important in deciding which college to go to.

With this in mind, you may want to help your child plan a college visit well in advance of making a decision. The College Board recommends scheduling your visits during your child’s junior year in the spring if you have already researched schools.

For seniors, it may be best to schedule visits in the fall through the winter months. This may help seniors narrow down their options.

Since you want your child to get a feel of the college experience, you’ll want to make sure classes are in session. Therefore, it’s also wise to avoid visits during holidays or break weeks.

Investigating Financial Aid Options

Even if you have saved for your child’s education, you may want or need to explore other financial aid options which could include your child taking on some of the cost.

Completing a Free Application for Federal Student Aid (FAFSA®) is one of the first recommended steps to applying for student financial aid, whether that is in the form of grants, scholarships, federal loans, or work study. Filing opens on October 1 each year and the deadline to complete the form is June 30 of each year.

It’s recommended to complete the form as soon as possible because there are differing deadlines to be aware of, including for individual colleges as well as federal and state deadlines. The sooner you submit your FAFSA, the better your chances of receiving aid will be.

Colleges and universities will use the information reported on the FAFSA® to determine how much aid a student is eligible for. Even if your child has not applied to a school yet, they can list that school on the FAFSA®, so encourage them to include their dream school as well as those they consider safety schools.

A Student Aid Report (SAR), which is a summary of information provided on the FAFSA®, will be sent within three weeks—sometimes sooner. Corrections to the FAFSA®, if needed, can be made after reviewing this report. The SAR contains information about a student’s Expected Family Contribution (EFC) . It is recommended that the report be kept for your records.

The schools listed on the FAFSA® will have access to the information within a few days of when the form is submitted. If your student is approved for financial aid, they will receive financial aid award letters from each school they applied and were accepted to. These letters will include information such as the cost of attendance (COA) , EFC, grants, scholarships, loans, and other financial aid that your child might be eligible for.

Comparing each financial aid award letter can help you and your child determine the financial obligation of attending each school. It is recommended to exhaust all federal aid options before considering a private loan. But if you are looking for supplemental funding for your child’s education, private student loans may be an option.

Private student loans and parent loans at SoFi have no origination fees, no late fees, and no insufficient fund fees. The application process is entirely online and flexible repayment options are available.

If deciding between schools is still a struggle, try using a resource like Edmit to compare the cost of attendance, estimate financial aid needs, and learn more about merit aid or scholarships available.

SoFi members receive complimentary access to Edmit Plus for data-driven facts and figures to help you and your child decide which school is the right choice.

Learn more about private student loans and parent loans offered by SoFi.

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 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. SoFi Lending Corp. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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


Read more
woman on a tablet mobile

How Are Student Loans Disbursed?

A college education almost always costs more than families initially think it will, when everything is accounted for, so most students take out loans. The loan money is sent to the attending college, placed in the student’s account, and applied to various costs.

Fortunately, there are plenty of options available. But students are often left with questions like How are federal student loans disbursed? How are private student loans disbursed?

Stay tuned for clarification and guidance on federal and private student loans.

The Lowdown on Student Loans

Student loans are designed to help college students absorb the many costs of postsecondary education.

The average price of tuition and fees for the 2020-21 school year was $10,600 for an in-state student at a public college and nearly $37,700 for a private college student. The total annual cost of attendance ranged from nearly $27,000 at public colleges (in-state rate) to $55,000 at private colleges on average.

So borrowing becomes the normal route. Student loans are most often used to cover:

•   Tuition and fees
•   Housing
•   Meals
•   Transportation
•   Books and supplies
•   Computers

Loan amounts can be excessive and give students the idea that they have a surplus of cash to spend. A rule of thumb suggests that only required materials and needs can be paid for with a loan.

For example, student loans may cover a campus meal plan but not food purchased from local fast-food joints. Bus fare or ride-share fees may be covered but not the purchase of a new car.

When in doubt about whether an item can be purchased with student loan funding or not, it’s best to speak directly to the loan provider or college financial aid department.

Got leftover money? Before going on a shopping spree, remember that that’s borrowed money and will have to be repaid, with interest.

Federal and Private Student Loans

There are two main types of student loans: federal loans and private loans. Federal loans are provided by, you guessed it, the U.S. government, while private loans are issued by financial institutions. Each type of loan has advantages and potential caveats students should be aware of.

Financial advisors almost always recommend exploring federal options first. Applications are quickly processed, and these types of loans tend to have lower interest rates than private options. Interest rates are almost always fixed, meaning students won’t have to worry about fluctuating payments.

Another advantage is that students don’t typically have to begin making payments on federal loans until after graduation or dropping below half-time enrollment, according to the Federal Student Aid office. (Holders of parent PLUS loans for undergraduates are expected to begin making payments after the loan is fully disbursed, unless the parent requests deferment.)

Federal financial aid programs also offer more flexible repayment plans based on income, may be subsidized, and offer loan forgiveness to qualified students, the Federal Student Aid office notes.

But the benefits of federal loans don’t mean private student loan options shouldn’t be considered. For some students, like those who are denied federal funding, those for whom federal loans come up short, and those who are approved but never receive their full loan amount , private loans can be a financial lifesaver.

With a bit of grit and a co-signer with a healthy credit score, students can obtain private loans with low and fixed interest rates comparable to federal loans.

One common downside of private loans is that repayment tends to start immediately. But in some cases, private loans can offer larger sums of money upfront, allowing students to pay for nearly every expense with one loan and make only one payment a month.

Types of Student Loans

So now that you know that there are two main types of student loans, federal and private, it’s important to know the variations of each type. These include:

Direct Subsidized Federal Loan

Also known as a Stafford Loan, this option is often touted as the best type of federal loan available to applicants. That’s because a loan applicant will receive a subsidy upon graduation matching the amount of interest the loan has accrued.

In other words, a Direct Subsidized Loan will always be paid back at its original amount, despite years of accruing interest. Because it’s hard to match the benefit of an interest-free loan, it’s recommended to always accept these types of loans if approved.

Direct Unsubsidized Federal Loan

Unlike the subsidized version, a Direct Unsubsidized Loan will accrue interest, which will be included in the final repayment amount.

Before accepting this type of loan, explore and calculate interest rates and the potential accrued interest to have a better understanding of potential future payments.

Direct PLUS Loan

This type of federal loan is only available to graduate students or parents of undergraduates. The interest rate is higher than subsidized and unsubsidized federal loans, and a credit check is required.

This type of loan can’t be refinanced, so applicants will need a great credit score to avoid an inflated interest rate. The good news is that the interest rate is always fixed.

Direct Consolidated Loan

For students with several federal loans, it’s possible to consolidate them into one account with one monthly payment with a Direct Consolidated Loan. There is no fee to apply for this kind of loan, but all accrued interest will be rolled into the total principal balance. This leads to faster-accruing interest for students who can pay only the monthly minimum.

While it’s certainly more convenient to consolidate multiple loans, consider the additional length of the loan and additional interest paid over time before committing.

Private Student Loan

It’s no secret that interest rates vary widely with private loans. But students may find that the overall amount they qualify for is often higher than federal loan limits allow. There are also loan fees to consider, but not all lenders apply these.

Federal loans often have more protections for students, but they rarely cover all of the costs that come with a college education, which is why many students find themselves with a combination of federal and private loans.

How and When Are Student Loans Disbursed?

Whether a student chooses to accept multiple federal loans, a private loan, or a combination of the two, the money is often distributed the same way. The loan amount is sent directly to the attending school, where it is kept in the student’s account and then applied to covered costs, including tuition, fees, room and board.

When there is leftover money in a student’s account, the excess is paid directly to the student to be used for additional expenses. These payouts tend to take place once per term and vary by school. If students receive leftover funding, they can use it as they see fit or even begin to pay back the loan early.

Keep in mind that all universities have their own policies on loans and disbursement. Questions about how a specific school handles student loans should be directed to the financial aid office.

Overage funds tend to be awarded to the holder of the loan. If a student’s parents hold a loan with overage, they’re more likely to receive the leftover money.

Also, disbursements may be held for 30 days after the first day of enrollment, especially if the student is a freshman and first-time borrower, according to the Federal Student Aid office.

Entrance counseling may be required before taking out federal loans or receiving leftover money.

Final Tips

Student loans are often a necessary step in the college journey. The world of loans can be intimidating at first, but it’s not impossible to learn how to navigate the financial waters of a postsecondary education. These final tips may help.

•  Compare all options. It’s better to have too many loan options and turn some down than face uncertainty about how to pay for everything.
•  Apply early to ensure that there’s time to make corrections if necessary. There are rules and requirements unique to all types of loans.
•  Avoid overborrowing. Try to calculate overall expenses and keep loan amounts as close as possible to the estimate. Being approved for a large loan doesn’t mean the total amount has to be accepted.
•  Get a part-time job, if necessary, to alleviate the stress that loan payments can add.

Curious about private student loans? Consider applying for a private loan with SoFi. With an all-online application, no fees, flexible repayment plans, and possible rate discounts for SoFi members, SoFi can smooth the path to a college degree.

Oh, and SoFi makes it easy to add a co-signer to an application.

Learn more about private student loans with SoFi today.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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 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.

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.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.


Read more
TLS 1.2 Encrypted
Equal Housing Lender