Paying for Pharmacy School Need to Knows

A Doctor of Pharmacy (Pharm.D.) degree is a four-year, licensed professional degree that teaches students how to fill prescription medications and how to educate patients about using prescriptions safely. Pharmacy school can be expensive, adding up to nearly $200,000 dollars on the high end.

With that price tag, it’s not a surprise that pharmacy students may have to rely on a few different sources of financing to pay for school, sometimes using a combination of savings, grants, scholarships, and student loans. This article will review the pharmacy school costs, the amount pharmacists can make, and nine tips for paying for pharmacy school.

How Much Does Pharmacy School Typically Cost?

The cost of pharmacy school can vary depending on where you enroll, the location, and the extent to which public dollars support the university you plan to attend. As mentioned, the complete cost of pharmacy school can add up to $200,000. The cost can swing higher for students who opt for an out-of-state institution. The American Association of Colleges of Pharmacy (AACP) lists the tuition and fees for pharmacy school l for the 2021-2022 academic year on its website, which can help you compare costs at the pharmacy schools you may be considering.

For example, the first school on the list, Auburn University, costs $22,392 for in-state pharmacy students and $42,552 for out-of-state students. Mandatory fees cost $404 for 33 credit hours for students in their first year. However, in the fourth year, it costs $26,733 for in-state students and $56,973 for out-of-state students, with $197 for mandatory fees for 46 credit hours.

It’s worthwhile to compare the costs of various institutions before you make a decision. However, remember that financial aid can potentially bring the costs down further, so don’t rely completely on the published tuition prices. A conversation with the financial aid office at each school may give you a more in-depth analysis of how much it will actually cost, taking your personal situation into account.

Is Pharmacy School Worth It?

For the right individual, pharmacy school can be worth it. The costs of pharmacy school may seem daunting, but the professional perks, ability to become a part of a healthcare team, job opportunities, and career stability can mean that pharmacy school is the right option for many individuals. The high salary of pharmacists may also make pharmacy school worth it.

How Much Can Pharmacists Make?

The 2020 median pay for pharmacists was $128,710 per year, or $61.88 per hour, according to the Bureau of Labor Statistics (BLS). It’s worth knowing that the job outlook for pharmacists will decline -2% from 2020 through 2030. However, that shouldn’t stop you from pursuing a pharmacy degree if it’s your true interest.

9 Tips for Paying for Pharmacy School

Think of paying for pharmacy school as a pie. There are many ways to pay for pharmacy school by dividing that pie. For example, various pieces of the pie might make up scholarships, grants, loans, and money out of your own pocket. No matter how you slice the pie, every dollar you contribute is an investment into your career and your future. We’ll discuss scholarships, including university, pharmacy, and private scholarships as well as grants in the next section.

Scholarships

Scholarships are funds that you don’t have to pay back. You can get scholarships as a pharmacy student from a number of different sources, including from the university that you plan to attend as well as through designated pharmacy scholarships and private scholarships.

It’s worth considering other interests beyond pharmacy. Scholarships may be awarded based on heritage, location, or even hobbies or special skills. Maybe you have talents in another area that qualify you for additional scholarships.

University Scholarships

Pharmacy colleges and schools traditionally offer direct financial assistance to pharmacy students through various sources, including alumni associations and local chapters of pharmaceutical organizations and fraternities.

Consider setting a meeting with the financial aid office at the university you plan to attend to learn more about specific scholarships from each pharmacy school you’re interested in attending.

Pharmacy Scholarships

Local and state pharmaceutical associations, practicing pharmacists, drug manufacturers, and wholesalers may offer pharmacy scholarships to promising pharmacists as well.

For example, 10 pharmacy students annually can receive a $5,000 Walmart Health Equity Scholarship. Students must be accepted or enrolled in the professional curriculum at a U.S. college or school of pharmacy, and show evidence of leadership skills, academic success, and must have a preference to serve rural or medically underserved patients.

Here’s another example: Five underrepresented minority students can receive the CVS Health Minority Scholarship for Pharmacy Students annually. Students must be African American, Hispanic or Latino, American Indian, Native Hawaiian, and/or Pacific Islander students, as well as U.S. citizens or permanent residents. Each successful candidate will receive a single $7,000 scholarship.

Private Scholarships

Private scholarships come from companies, service groups and organizations, foundations, and individuals. For example, Tylenol offers a scholarship for students pursuing careers in healthcare, including pharmacy. There may also be scholarships available from local or regional organizations.

2. Grants

Like scholarships, you do not have to repay the money you receive from grants. Grants, which are typically based on need, can also be awarded based on merit. Filling the Free Application for Federal Student Aid (FAFSA®) automatically considers you for federal grants based on need. You may also become eligible for state grants. Your college or university can give you more information about the types of grants you’re eligible for through your pharmacy program.

3. Federal Student Loans

You may be wondering how to pay for pharmacy school without loans. It’s possible to do it through a combination of scholarships, grants, and savings, though many people take advantage of federal student loans from the federal government through the U.S. Department of Education. Federal student loans have fixed interest rates and benefits such as income-driven repayment plans. Just like obtaining an auto loan or a mortgage, you must pay back loans with interest.

Federal student loans are a type of federal financial aid, and to apply, you must file the FAFSA. Learn more about the requirements for this application in SoFi’s comprehensive guide to the FAFSA.

You can qualify for two types of federal student loans for pharmacy school: Direct PLUS Loans and Direct Unsubsidized Loans.

Direct PLUS Loans

Pharmacy students can take advantage of Direct PLUS Loans, also called graduate PLUS loans or direct grad PLUS loans, to help finance graduate and professional school. The Graduate PLUS Loan comes from the U.S. Department of Education for graduate or professional students. In order to get one, your school must participate in the Direct Loan Program.

The Direct PLUS Loan is not need-based, which means you can get it no matter your income level. You can borrow up to the full cost of attendance and can use the money to pay for tuition, room and board, and fees. Your school will subtract other financial aid you receive (such as scholarships, grants, and fellowships) from the full cost of attendance and award you the difference with a Direct PLUS Loan.

The interest rate is 6.28% for Direct PLUS Loans first disbursed on or after July 1, 2021 and before July 1, 2022.

Direct Unsubsidized Loans

Similar to student loans for undergraduates, you can tap into Direct Unsubsidized Loans. You can borrow up to $20,500 per year with the Direct Unsubsidized Loan, and the interest rate is 5.28% if disbursed between July 1, 2021 and July 1, 2022. “Unsubsidized” means that the government doesn’t pay the interest while you’re in school and during the grace period.

It’s generally a good idea to first consider opting for the Direct Unsubsidized Loan, over a Graduate PLUS Loan. Why opt for the Direct Unsubsidized loan first?

You’ll pay more in interest for the Direct PLUS Loan (6.28% interest rate).

4. Private Student Loans

Private student loans do not come from the federal government. They can come from a bank, credit union, or another financial institution and can be used to help finance college or career school. The amount you can borrow depends on the costs of your degree, but also depends on personal financial factors (such as your credit score and income).

You may have gotten advice that suggested exhausting all of your federal grant and loan options before you consider private loans because interest rates are usually higher compared to federal student loans. Additionally, private student loans don’t qualify for the same borrower protections as federal student loans, like income-driven repayment plans or deferment options. However, private student loans can be an option to consider if you need additional funding to cover your pharmacy school expenses.

Recommended: Things to know before applying for private student loans

5. PSLF Programs

The Public Service Loan Forgiveness (PSLF) Program is a federal student loan forgiveness program. More specifically, you may qualify to have the remaining balance on your Direct Loans forgiven after you have made 120 qualifying monthly payments under a qualifying repayment plan. You must work full-time for a qualifying employer in order to qualify and your employer must be a qualifying organization such as a federal, state, local, or tribal government organization or other nonprofit organization.

You must have Direct Loans or consolidate other types of federal student loans into a Direct Loan, repay loans under an income-driven repayment plan, as well as make 120 qualifying payments toward your student loans. The requirements for PSLF can be quite strict, so be sure to read the requirements closely.

For more information about PSLF programs and to learn more about your eligibility, contact your loan servicer, which is the entity that services your loan.

6. Pharmacy Internships

Pharmacy internships can be instrumental in your budding career as a pharmacist in helping you understand how pharmacies operate, learning the ins and outs of customer service, helping you dive into inventory management, and learning the professional skills necessary to become a pharmacist. You may also learn more from pharmacist professionals about leading a pharmacy team and help you bring tangible professional experience back to the classroom.

You may also want to look into pharmacy fellowships, which provide financial support in an external or internal capacity (in or out of the university environment). Assistantships also provide financial support in an academic department through teaching, research, or administrative responsibilities.

7. Work Part Time

You may want to consider working a part-time job in conjunction with pharmacy school. For example, if you attend school from 8am to 4pm, you may want to seek a part-time job after hours.

However, it’s important to consider your time constraints and whether you can succeed in your coursework. Consider your ability to manage your time before you take on a part-time job. However, for the right student, taking on a job can help pay for college tuition and give you an additional source of income. Networking opportunities and skill development can come from a part-time job, even if it doesn’t relate to pharmacy.

8. Borrow From Family

Do you have a family member who really wants to give you money for your education? You may seriously consider borrowing from your parents or a sister or brother (or whoever else wants to lend you money).

Just remember that it could strain family relationships if you fail to pay back the loan. It’s a good idea to have a plan in place to repay your relative(s) as well as create boundaries, so both parties feel good about the arrangement.

9. HRSA Loans

The Health Resources and Services Administration (HRSA), an agency of the U.S. Department of Health and Human Services, improves health care for geographically isolated and vulnerable individuals.

The Department of Health and Human Services (HHS), through the HRSA, also offers several loans for health services students. For example, Health Professions Student Loans are available to individuals who study pharmacy (as well as dentistry, optometry, podiatry, or veterinary medicine). Pharmacy students who show financial need may also be able to tap into Loans for Disadvantaged Students (LDS). Health professions student loans have fixed interest rates of 5%, lower than both Direct Unsubsidized Loans and PLUS loans. They also allow 12 months of grace periods, while most other loans only offer six months of grace periods. In addition, health professions loans are subsidized, which means you don’t pay interest on the loan while you’re in school, nor do you pay additional loan fees.

However, they come with a few downsides: Not all schools participate, and there are no set borrowing limits. You also can’t tap into income-driven repayment plans or PSLF.

Private Student Loans for Pharmacy School

If you’re looking for options to cover the remainder of your pharmacy school costs, consider private student loans with SoFi.

SoFi offers competitive rates, flexible repayment options, zero origination fees, late fees, or insufficient funds fees. You can check your interest rate in a few minutes.

Let SoFi help you with the details of paying for pharmacy school.

FAQ

Can you use FAFSA for pharmacy school?

Absolutely! It’s generally a smart idea to file the FAFSA for pharmacy school, no matter your financial situation. The FAFSA can give you access to a range of financial aid options, including scholarships (your school will consider your eligibility based on the FAFSA results), grants, loans, and work-study. You want to be able to put together the best financial aid options for your needs, and the best way to do that involves filing the FAFSA.

Does CVS or Walgreens pay for pharmacy school?

CVS and Walgreens both offer pharmacy scholarships, like the ones we listed above, the https://www.aacp.org/resource/walmart-health-equity-scholarship-pharmacy-students
Walmart Health Equity Scholarship and the CVS Health Minority Scholarship for Pharmacy Students . If you work for either company, you may also qualify through each company’s employee tuition reimbursement program. Check with the human resources department at each company for more details.

How much can pharmacists make after graduating?

The 2020 median pay for pharmacists was $128,710 per year, or $61.88 per hour, according to the Bureau of Labor Statistics (BLS). The job outlook for pharmacists will decline -2% from 2020 through 2030.


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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.

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

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

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Guide to Letters of Credit

Guide to Letters of Credit

A letter of credit is a business-to-business document guaranteeing that the provider of goods or services to a buyer will receive payment. As part of a sales agreement, a seller may require the buyer to deliver a letter of credit before a deal takes place.

More specifically, letters of credit are often vital in international trade where the two parties involved are not yet familiar with one another. Letters of credit facilitate new trade and prompt payments.

Read on to learn more, including:

•   What a letter of credit is

•   How a letter of credit works

•   What the different types of letters of credit are

•   The pros and cons of letters of credit

•   How to get a letter of credit.

What Is a Letter of Credit in Banking?

Here’s what a letter of credit in banking is: It’s a document that a bank issues to a seller that guarantees payment from their customer for an order or service. The bank where the buyer’s business account is held usually assumes responsibility for the payment for the goods. However, the conditions laid out in the letter of credit must be fulfilled. The bank or financial institution charges the buyer a fee for guaranteeing the payment and issuing the letter.

Letters of credit are common in international trade situations because various factors can affect cross-border transactions. It’s not necessarily a matter of the buyer having a bad credit score. Rather, the deal may involve different legal frameworks, a lack of familiarity between the parties involved, and geographic distance.

How a Letter of Credit Works

When used properly, letters of credit can work to minimize credit risk and smooth international trade. A vendor selling products or services overseas may want assurance that a buyer of their products or services will pay. Perhaps the buyer is new to them or just a new business, period.

So how does a letter of credit work? It serves as a guarantee from a bank that it will pay the vendor once the requirements are met. The letter lays out the conditions of payment, such as the amount, the timing of the payment, and the delivery specifications. The letter can help the business placing the order build their credit, too.

The bank charges the buyer a fee for issuing a letter of credit (often around 0.75% to 1.5% of the amount of the deal), but it also does the due diligence to assure creditworthiness. The bank requires collateral or security from the buyer for the payment guarantee. In essence, the bank acts as a third party facilitating the deal.

Recommended: Why is Having a Good Credit Score Important?

Types of Letters of Credit

The following are four types of letters of credit.

•   Commercial Letter of Credit: The issuing bank pays the seller directly. For a stand-by letter of credit, the bank only pays the seller if the buyer cannot transfer funds.

•   Revolving Letter of Credit: The bank guarantees payment for a number of transactions within a set period.

•   Traveler’s Letter of Credit: Travelers can make withdrawals in a foreign country. The issuing bank guarantees to honor any withdrawals.

•   Confirmed Letter of Credit: A seller using a confirmed letter of credit involves a secondary bank, typically the seller’s bank. They guarantee payment if the first bank fails to pay.

You may also hear an irrevocable letter of credit mentioned; this is a letter of credit that can’t be changed or canceled unless all parties agree.

There is also a stand-by letter of credit which may be used when deal requirements are not initially met; see below for more details.

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Letter of Credit Example

Here’s an example of a letter of credit: Wells Fargo provides commercial letters of credit and stand-by letters of credit within two weeks. The funds are secured through deposits at Wells Fargo, and the terms are renewable. These documents can help reassure parties doing business internationally, with new-to-them businesses or clients who have recently started a business.

The Money Behind a Letter of Credit

When it comes to letters of credit, you may wonder, Where do the payment funds for a letter of credit originate? The party paying for the goods or services typically deposits funds in advance to the bank that issues the letter of credit to cover the payment. Alternatively, the amount might be frozen in the payer’s account or the payer might borrow from the bank using a line of credit.

When Does Payment Happen?

Payment usually occurs when the seller has completed all the stipulations in the letter of credit. For example, the seller might have to deliver the goods to a specific address or onto a ship for transportation in the case of international trade. In the latter case, shipping documents would serve as proof that the requirements for payment have been fulfilled. They might trigger the payment transaction.

What to Watch Out for

Here are some common mistakes sellers may make when relying on a letter of credit for payment.

•   Failing to check all of the requirements in the letter of credit.

•   Failing to understand the documents required for the deal.

•   Failing to confirm whether the time limits for delivery and payment are reasonable.

•   Failing to meet the time limits.

•   Failing to get the necessary proof of delivery documents to the bank.

Letters of Credit Terminology

Here are some terms and phrases to know if you may be using letters of credit.

•   Advising bank: This is the bank that informs the seller that the letter of credit has been completed. The advising bank is also called the notifying bank.

•   Applicant: The party or the acquirer of products or services who applies for the letter of credit from the bank.

•   Beneficiary: The party, or seller, who will receive payment. The seller usually requests a letter of credit to guarantee payment.

•   Confirming bank: The bank that guarantees the payment of the required funds to the seller. If a third party is involved, the confirming bank is the bank most familiar to the seller.

•   Freight forwarder: A shipping company that provides the transportation documents to the seller.

•   Intermediary: These are companies that link buyers and sellers and may use letters of credit to ensure transactions are executed.

•   Issuing bank: The bank that issues the letter of credit.

•   Negotiating bank: If a third party is involved, the negotiating bank works with the beneficiary and the other banks involved. They likely determine the letter of credit requirements to complete the transaction.

•   Shipper: The transportation company that ships goods.

•   Stand-by letter of credit: A subsequent letter of credit that’s used when a deal requirement has not been met. For example, if payment does not occur within the specified timeframe, a stand-by letter of credit would then be used to help guarantee that the deal goes through.

Pros and Cons of Letters of Credit

A letter of credit provides security for both parties involved in a trade, but it can also add costs and time to business transactions.

Pros

Cons

•   Reduces the risk that payment will not be made for goods or services, thereby providing security

•   Allows for additional requirements to be built into a letter of credit, such as quality control and delivery stipulations

•   Provides transaction security for both the buyer and the seller

•   Forges new trade relationships

•   Incurs bank fees for the letter of credit, which increases the cost of doing business

•   Adds time by preparing a letter of credit; transactions can be delayed

•   May require a separate letter of credit for each transaction

•   Demands that the buyer usually provide collateral to the bank

How to Get a Letter of Credit

Getting a letter of credit typically requires a few steps. It’s wise to get the necessary paperwork together first. Various documents will usually be listed as requirements for a trade, such as a shipping bill of lading, a commercial invoice, insurance documents, a certificate of origin, and a certificate of inspection.

Here are the steps typically taken to obtain a letter of credit.

1.    The buyer and seller come to agreement on the sale terms and the use of a letter of credit.

2.    The buyer contacts their bank where they have a checking account and requests a letter of credit and provides necessary documents.

3.    The issuing bank prepares the letter based on the terms of the sales agreement and sends it to the confirming bank or advising bank, which is typically in the seller’s home country.

4.    The confirming bank verifies the terms and forwards the letter to the seller.

5.    The goods can then be shipped, and the exporter sends documentation to the advising or confirming bank.

6.    Document verification and settlement of payment can then occur.

When to Use a Letter of Credit

A letter of credit is beneficial for sellers entering into a new trade relationship or an international trade relationship. It can provide assurance that the seller will receive payment because the issuing bank guarantees payment once the requirements have been met. Sellers may also use the guarantee of payment to borrow capital to fulfill the buyer’s order.

The Takeaway

A letter of credit is usually requested by an exporter or seller to minimize credit risk. The buyer of the goods or services applies to a bank and requests a letter of credit based on the sales agreement. This document helps guarantee that payment will be made. It can provide priceless peace of mind when conducting international trade or doing business with a new customer.

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FAQ

How much does a letter of credit cost?

A typical fee for a letter of credit is typically 0.75% percent to 1.5% of the amount of the deal, but the rate will vary depending on the country and other variables.

How do you apply for a letter of credit?

Once the terms of a trade are agreed upon between the buyer and the seller, a buyer contacts their bank to request a letter of credit. They then gather the required documentation and fill out an application with that bank.

Why do you need a letter of credit?

The parties involved in a trade typically use a letter of credit to minimize risk. For the seller, a letter of credit can guarantee payment for goods once certain requirements have been met and the buyer confirms their creditworthiness as a trade partner.


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

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What NFT Music Is, How It Works, & Why It Matters

Guide to Music NFTs: What They Are and How They Work

You may be familiar with digital artworks that have been turned into non-fungible tokens (NFTs) and sold to collectors. Now NFT music, or music NFTs, are emerging as the hot new crypto collectible.

What does NFT mean, and why have these virtual products taken the world by storm? An NFT is basically a piece of intellectual property that has been minted into a non-reproducible digital asset that is logged on a blockchain.

NFTs, and NFT music, are also part of a broader technological shift toward digital products and lifestyles that reflect the emergence of Web 3.0, also known as Web3, a blockchain based evolution of Web 2.0.

We’ll explain what music NFTs are, how they work, and more, below.

What Are Music NFTs?

Music NFTs are digital assets that grant holders the ownership rights to music clips. Like other NFTs, which grant their holders ownership to images or digital artwork, NFT music does so with audio recordings. By minting music NFTs (read more if you’re asking yourself “what is NFT minting?”), musicians and artists are able to provide original digital assets to interested investors, while adding to their own revenue streams.

This is critical given that the music industry has been undergoing a massive transformation since the days of Napster, with streaming services and copyright issues compromising legacy systems. Artists have sought to find ways to leverage technology for their own benefit. And NFTs, based on blockchain technology, have emerged as a promising income source.

NFTs have gained popularity in recent years in large part due to the pandemic. Many artists generate revenue through touring — by selling merchandise, and getting a cut of ticket sales. But when the pandemic struck, all of that revenue dried up. As such, some turned to music NFTs as a way to incorporate a new revenue stream.

How Do Music NFTs Work?

Music NFTs work more or less the same way that other NFTs work in that they grant ownership to a unique piece of property to the holder. They use the same underlying cryptocurrency technology, blockchain, that cryptos such as Bitcoin are built on. Music NFTs, then, take the form of digital tokens, which their owners keep safely in digital crypto wallets.

Web 3.0 technology is growing as well, and because it’s also decentralized and permissionless, like many forms of crypto, it supports the widespread use of NFTs.

Music NFTs are minted, and then ownership details are grafted into a blockchain network, and when they are transacted, the details of those ownership changes are likewise recorded on the blockchain — similar to various other types of cryptocurrency transactions.

The big difference between NFT music and, say, purchasing a song or album on Amazon or another retailer, is that the NFT owner becomes the actual owner of the song itself. They own the asset, whereas purchasing a digital music track from a retailer only grants you the right to listen to the song. In effect, it’s licensing.

How Music NFTs Are Created

The creation of music NFTs is also the same process as creating image-based NFTs. That process, which is called “minting,” can only begin after there’s an underlying asset to mint. In this case, that would be a song or audio recording of some kind.

Let’s say a musician wants to mint a new song into an NFT and sell it. They would first need to select the necessary tools and platforms, such as which digital wallet they’d want to use for storing their assets, and which platform they’d like to use to execute the transactions (OpenSea is a popular choice, for example, as is Rarible and Mintable).

The musician would also need crypto to pay for minting fees and other transactions, as many platforms only accept crypto.

Using a platform like OpenSea, the minting process involves a few steps, but it’s fairly straightforward. It mostly involves selecting the audio track the musician wishes to mint, adding a title and some cover art, a description, and adding a few additional details.

Finally, the musician would choose a blockchain network to mint onto (usually Ethereum), and then hit the big red button to mint the song into an NFT.

From there, it can be sold to an investor.

Where Music NFTs Are Bought and Sold

The next logical question: Where can you sell or buy music NFTs? Or, how to buy and sell NFTs in general? The answer: An NFT marketplace. And again, there are many out there. OpenSea is one of the more prevalent, but a few simple Google searches will yield many more. It’s up to you to choose one.

In terms of the actual process of buying and selling music NFTs, it’s important to keep in mind that NFTs usually trade for ETH or native blockchain tokens, so you may not be able to fork over cold, hard USD cash in exchange for one.

How NFT Music Is Valued

Music NFTs have value for the same reason that any other digital asset, including other types of NFTs, have value: They’re scarce, and people are willing to pay for them. So, when they go up for sale, their value is ultimately determined by what an investor or music fan is willing to pay for them.

When it comes to music NFTs in particular, artists are creating digital assets — one-of-a-kind assets, at that — that are likely to catch the attention of many would-be NFT owners and investors.

Pros and Cons of NFT Music

NFTs are unique digital assets tied to blockchain technology and various crypto platforms. As such, they have their pros and cons:

Pros

Cons

Provide unique investment opportunities for music fans. Blockchain platforms may be vulnerable to hacks or even collapse.
Easily purchased and sold with a digital wallet. The NFT market is highly speculative, with a risk of volatility.
Popular artists are creating NFTs, validating the space. Unclear what the future of NFTs might be.

Notable NFT Music

One reason that music NFTs have become so popular is that some big-name artists are getting in on the action. Here’s a handful of recent examples that are notable for their success:

•   Kings of Leon: The rock band released an entire album, “When You See Yourself,” as an NFT in March 2021, generating millions of dollars.

•   Grimes: The singer sold a package of songs and digital art in early March 2021, likewise making millions of dollars.

•   3LAU: The electronic musician released a collection of NFTs in February 2021.

•   Haleek Maul: In 2021, the rapper sold four songs as NFTs, earning hundreds of thousands of dollars.

•   Mike Shinoda: Shinoda, a former member of the rock band Linkin Park, has also taken to NFTs, releasing a mixtape last year in the form of NFTs.

The Future of NFT Music

It’s hard to say what the future holds for music NFTs, but it’s hard to ignore the sales number. In 2018, for example, NFT sales overall totaled about $40.7 million. But in 2021 sales reached more than $44 billion — and shows no signs of slowing. Indeed, the prevalence and popularity of many digital assets is likely to grow, given the adoption of Web 3.0 technology.

For musicians, the ability to sell their music as NFTs offers some clear benefits, and possibly could allow them to make more money than they would under a traditional recording contract.

With that in mind, it’s easy to see why many people think music NFTs are here to stay.

The Takeaway

Music NFTs are the music industry’s take on non-fungible tokens, blockchain-based digital assets that allow artists and musicians to sell audio content in a new format. As mentioned, they’ve taken off over the past couple of years largely due to the pandemic, and offer musicians a new way to derive additional revenue from their work.

FAQ

What is NFT music?

Music NFTs are similar to other types of NFTs, except that they comprise audio files rather than digital artwork or pictures.

How can you buy NFT music?

You can purchase music NFTs from an exchange, of which there are many. There are some that are designed specifically for the music industry.

How is NFT music used?

Music NFTs can be used as investments (you hold onto them and hope they gain value so you can earn a return), or for personal enjoyment.


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Guide to Zero-Coupon Certificates of Deposit (CDs)

Guide to Zero-Coupon Certificates of Deposit (CDs)

A zero-coupon certificate of deposit or zero-coupon CD is a type of CD that’s purchased at a discount and pays out interest at maturity. Zero-coupon CDs can offer higher yields than standard CDs for investors who have the patience to wait until maturity to collect their original deposit and the interest earned.

Zero-coupon certificates of deposit are similar to bonds, in that both are considered low-risk, fixed-income instruments, but they serve different purposes in a portfolio. Understanding how a zero-coupon CD works can make it easier to decide if it’s a good investment.

What Is a Zero-Coupon CD?

To understand zero-coupon CDs, let’s recap how a certificate of deposit works. A CD account, also referred to as a time-deposit or term-deposit account, is designed to hold money for a specified period of time. While the money is in the CD, it earns interest at a rate determined by the CD issuer — and the investor cannot add to or withdraw from the account.

CDs are FDIC or NCUA insured when held at a member bank or credit union. That means deposits are insured up to $250,000.

CDs are some of the most common interest-bearing accounts banks offer, alongside savings accounts and money market accounts (MMAs).

A zero-coupon certificate of deposit does not pay periodic interest. Instead, the interest is paid out at the end of the CD’s maturity term. This can allow the purchaser of the CD to potentially earn a higher rate of return because zero-coupon CDs are sold at a discount to face value, but the investor is paid the full face value at maturity.

Recommended: CD Loans, Explained

By comparison, traditional certificates of deposit pay interest periodically. For example, you might open a CD at your bank with interest that compounds daily. Other CDs can compound monthly. Either way, you’d receive an interest payment in your CD account for each month that you hold it until it matures.

Once the CD matures, you’d be able to withdraw the initial amount you deposited along with the compound interest. You could also roll the entire amount into a new CD if you’d prefer.

Remember: Withdrawing money from a CD early can trigger an early withdrawal penalty equal to some or all of the interest earned.

How Do Zero-Coupon CDs Work?

Ordinarily when you buy a CD, you’d deposit an amount equal to or greater than the minimum deposit specified by the bank. You’d then earn interest on that amount for the entirety of the CD’s maturity term.

With zero-coupon CD accounts, though, you’re purchasing the CDs for less than their face value. But at the end of the CD’s term, you’d be paid out the full face value of the CD. The discount — and your interest earned — is the difference between what you pay for the CD and what you collect at maturity. So you can easily see at a glance how much you’ll earn from a zero-coupon CD investment.

In a sense, that’s similar to how the coupon rate of a bond works. A bond’s coupon is the annual interest rate that’s paid out, typically on a semiannual basis. The coupon rate is always tied to a bond’s face value. So a $1,000 bond with a 5% interest rate has a 5% coupon rate, meaning a $50 annual payout until it matures.

Real World Example of a Zero-Coupon CD

Here’s a simple example of how a zero-coupon CD works. Say your bank offers a zero-coupon certificate of deposit with a face value of $10,000. You have the opportunity to purchase the CD for $8,000, a discount of $2,000. The CD has a maturity term of five years.

You wouldn’t receive any interest payments from the CD until maturity. And since the CD has a set term, you wouldn’t be able to withdraw money from the account early. But assuming your CD is held at an FDIC- or NCUA-member institution, the risk of losing money is very low.

At the end of the five years, the bank pays you the full $10,000 face value of the CD. So you’ve received $400 per year in interest income for the duration of the CD’s maturity term — or 5% per year. You can then use that money to purchase another zero-coupon CD or invest it any other way you’d like.

Tips When Investing in a Zero-Coupon CD

If you’re interested in zero-coupon CDs, there are a few things to consider to make sure they’re a good investment for you. Specifically, it’s important to look at:

•   What the CD is selling for (i.e., how big of a discount you’re getting to its face value)

•   How long you’ll have to hold the CD until it reaches maturity

•   The face value amount of the CD (and what the bank will pay you in full, once it matures)

It’s easy to be tempted by a zero-coupon certificate of deposit that offers a steep discount between the face value and the amount paid out at maturity. But consider what kind of trade-off you might be making in terms of how long you have to hold the CD.

If you don’t have the patience to wait out a longer maturity term, or you need the money in the shorter term, then the prospect of higher returns may hold less sway for you. Also, keep in mind what kind of liquidity you’re looking for. If you think you might need to withdraw savings for any reason before maturity, then a standard CD could be a better fit.

Comparing zero-coupon CD offerings at different banks can help you find one that fits your needs and goals. You may also consider other types of cash equivalents, such as money market funds or short-term government bonds if you’re looking for alternatives to zero-coupon CDs.

Recommended: How to Invest in CDs: A Beginner’s Guide

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Pros of Zero-Coupon CDs

Zero-coupon CDs have some features that could make them more attractive than other types of CDs. The main advantages of investing in zero coupon certificates of deposit include:

•   Higher return potential than regular CDs

•   Guaranteed returns, since you’re unable to withdraw money before maturity

•   Suited for longer-term goals

•   Can be federally insured

Zero-coupon CDs are low-risk investments, which can make them more appealing than bonds. While bonds are considered low-risk investments generally, if the bond issuer defaults, then you might walk away from your investment with nothing.

A zero-coupon certificate of deposit, on the other hand, does not carry this same default risk because your money is insured up to $250,000. There is, however, a risk that the CD issuer could “call” the CD before it matures (see more in the next section).

Cons of Zero-Coupon CDs

Every investment has features that may be sticking points for investors. If you’re wondering what the downsides of zero-coupon CDs are, here are a few things to consider:

•   No periodic interest payments

•   No liquidity, since you’re required to keep your money in the CD until maturity

•   Some zero-coupon CDs may be callable, which means the issuer can redeem them before maturity, and the investor won’t get the full face value

•   Taxes are due on the interest that accrues annually, even though the interest isn’t paid out until maturity

It may be helpful to talk to your financial advisor or a tax expert about the tax implications of zero-coupon CDs. It’s possible that the added “income” from these CDs that you have to report each year could increase your tax liability.

How to Collect Interest on Zero-Coupon CDs

Since zero-coupon CDs only pay out at interest at the end of the maturity term, all you have to do to collect the interest is wait until the CD matures. You can direct the bank that issued the CD to deposit the principal and interest into a savings account or another bank account. Or you can use the interest and principal to purchase new CDs.

It’s important to ask the bank what options you’ll have for collecting the interest when the CD matures to make sure renewal isn’t automatic. With regular CDs, banks may give you a window leading up to maturity in which you can specify what you’d like to do with the money in your account. If you don’t ask for the money to be out to you it may be rolled over to a new CD instead.

How to Value Zero-Coupon CDs

The face value of a zero-coupon CD is the amount that’s paid to you at maturity. Banks should specify what the face value of the CD is before you purchase it so you understand how much you’re going to get back later.

In terms of whether a specific zero-coupon CD is worth the money, it helps to look at how much of a discount you’re getting and what that equates to in terms of average interest earned during each year of maturity.

Purchasing a $10,000 zero-coupon CD for $8,000, for example, means you’re getting it at 20% below face value. Buying a $5,000 zero-coupon CD for $4,500, on the other hand, means you’re only getting a 10% discount.

Of course, you’ll also want to keep the maturity term in perspective when assessing what a zero-coupon CD is worth to you personally. Getting a 10% discount for a CD with a three-year maturity term, for example, may trump a 20% discount for a five-year CD, especially if you don’t want to tie up your money for that long.

The Takeaway

Investing in zero-coupon CDs could be a good fit if you’re looking for a low-risk way to save money for a long-term financial goal, and you’d like a higher yield than most other cash equivalents.

Zero-coupon CDs are sold at a discount to face value, and while the investor doesn’t accrue interest payments annually, they get the full face value at maturity — which often adds up to a higher yield than most savings vehicles. And because the difference between the discount and the face value is clear, zero-coupon CDs are predictable investments (e.g. you buy a $5,000 CD for $4,000, but you collect $5,000 at maturity).

As with any investment, it’s important for investors to know the terms before they commit any funds. For example, zero-coupon CDs don’t pay periodic interest, but the account holder is expected to pay taxes on the amount of interest earned each year (even though they don’t collect it until they cash out or roll over the CD).

If you’re eager to earn a higher rate on your savings, you’ve got a lot of options — including the new high-yield bank account with SoFi. With SoFi, you don’t pay management fees or account fees, and you can earn a competitive APY.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is a coupon on a CD?

The coupon on a CD is its periodic interest payment. When a CD is zero coupon, that means it doesn’t pay out interest monthly or annually. Instead, the investor gets the full amount of interest earned paid out to them when the CD reaches maturity.

Is a certificate of deposit a zero-coupon bond?

Certificates of deposit and bonds are two different types of savings vehicles. While a CD can be zero-coupon the same way that a bond can, your money is not invested in the same way. CD accounts also don’t carry the same types of risk that bonds can present.

Are CDs safer than bonds?

CDs can be safer than bonds since CDs don’t carry default risk. A bond is only as good as the entity that issues it. If the issuer defaults, then bond investors can lose money. CDs, on the other hand, are issued by banks and typically covered by FDIC insurance which can make them safer investments.


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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://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.

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.

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Historical 30-Year Fixed-Rate Mortgage Trends

Historical 30-Year Fixed-Rate Mortgage Trends

Historically speaking, mortgage rates have remained relatively low since the Great Recession, with some fluctuation at times due to market conditions. As a result, a generation of homebuyers has become accustomed to a low 30-year fixed-rate mortgage.

But with mortgage rates on the rise, it can put a sour taste in the mouths of people trying to join the ranks of homeowners in the country. They may be thinking that they missed an opportunity to buy a home. However, it’s important to look at the history of mortgages and mortgage rates to put the current conditions into context.

The History of Mortgage Rates

The modern history of mortgage lending in the U.S. began in the 1930s with the creation of the Federal Housing Administration. From the 1930s through the 1960s, a combination of government policy and demographic changes made owning a home a normal part of American life. During this time, the 30-year fixed-rate mortgage became the standard for home buying.

When discussing the fluctuation of mortgage rate trends, analysts usually refer to the average 30-year fixed-rate mortgage. Here’s a look at the trend of these mortgage rates since the 1970s.

The 1970s

Throughout the 1970s, mortgage rates rose steadily, moving from the 7% range into the 13% range. This uptick in rates was due, in part, to the Arab oil embargo, which significantly reduced the oil supply and sent the U.S. into a recession with high inflation — known as stagflation.

As a result, Federal Reserve Chairman Paul Volcker made a bold change in monetary policy by the end of the decade, raising the federal funds rate to combat inflation. Though the Federal Reserve doesn’t directly set mortgage rates, its monetary policy decisions can still impact many financial products, including mortgages.

The 1980s

The average 30-year fixed-rate mortgage hit an all-time high in October 1981 when the rates hit 18.63%. The Federal Reserve’s tight monetary policy affected this high borrowing cost and put the economy into a recession. However, inflation was under control by the end of the 1980s, and the economy recovered; mortgage rates moved down to around 10%.

The 1990s and 2000s

Mortgage rates continued a downward trend throughout the 1990s, ending the decade at around 8%. At the same time, the homeownership rate in the U.S. increased, rising from 63.9% in 1994 to 67.1% in early 2000.

Several factors led to a housing crash in the latter part of the 2000s, including a rise in subprime mortgages and risky mortgage-backed securities.

The housing crash led to the Great Recession. To boost the economy, the Federal Reserve cut interest rates to make borrowing money cheaper. Mortgage rates dropped from just below 7% in 2007 to below 5% in 2009.

Recommended: ​​US Recession History: Reviewing Past Market Contractions

The 2010s

Mortgage rates steadily decreased throughout most of the 2010s, staying below 5% for the most part. The Federal Reserve enacted a zero-interest-rate policy and a quantitative easing program to prop up the economy during this time following the Great Recession. This helped keep mortgage rates historically low.

The 2020s

The Federal Reserve reduced the federal funds rate to near-zero levels in March 2020, causing a drop in rates of various financial products. The effects of the fallout from the Covid-19 pandemic pushed mortgage rates below previous historic lows. The average 30-year fixed-rate mortgage hit 2.77% in August 2021.

However, with inflation reaching levels not experienced since the early 1980s, the Federal Reserve reversed course. The central bank started to tighten monetary policy in late 2021 and early 2022, which led to a rapid increase in mortgage rates. In May 2022, the average mortgage rate was above 5%. While this is below historical trends, it’s the highest rate since 2018.

Recommended: How Rising Inflation Affects Mortgage Interest Rates

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Why Do Mortgage Rates Change?

As we can see from looking at interest rate fluctuations, major economic events can significantly impact mortgage rates both in the short and long term. As noted above, this has to do primarily with the Federal Reserve.

Federal Reserve actions influence nearly all interest rates, including mortgages through the prime rate, long-term treasury yields, and mortgage-backed securities. The Federal Reserve sets the federal funds benchmark rate, the overnight rate at which banks lend money to each other.

Recommended: Federal Reserve Interest Rates, Explained

This rate impacts the prime rate, which is the rate banks use to lend money to borrowers with good credit. Most adjustable short-term rate loans and mortgages use the prime rate to set the base interest rates they can offer to borrowers. So, after the Federal Reserve raises or lowers rates, adjustable short-term mortgage loan rates are likely to follow suit.

Longer-term mortgage rates have also risen and fallen alongside economic and political events with movement in long-term treasury bond yields. In the short term, a Federal Reserve interest rate change can affect mortgage markets as money moves between stocks and bonds, affecting mortgage rates. Longer-term mortgage rates are influenced by Fed rate changes but don’t have as direct an effect as short-term rates.

Can Changing Rates Affect Your Existing Mortgage?

If you have a mortgage with a variable interest rate, known as an adjustable-rate mortgage, changing rates can affect your loan payments. With this type of home loan, you may have started with an interest rate lower than many fixed-rate mortgages. That introductory rate is often locked in for an initial period of several months or years.

After that, your interest rate is subject to change — how high and how often depends on the terms of your loan and interest rate fluctuations. These changes are generally tied to the movement of interest rates, but more specifically, which index your adjustable-rate mortgage is linked to, which can be affected by the Fed’s actions.

However, most adjustable-rate mortgages have annual and lifetime rate caps limiting how high your interest rate and payments can change.

If you took out a fixed-rate mortgage, your initial interest rate is locked in for the entire time you have the home loan, even if it takes you 30 years to pay it off.

Recommended: What Is a Good Mortgage Rate?

The Takeaway

If you are in the market to buy a home, it might be tempting to rush and buy while rates are low and on the rise. Or, you may put off buying a home until rates decrease in the future. However, you never want to time the market. As mentioned above, mortgage rates are near historic lows and are constantly fluctuating, so choosing the perfect time to buy a home based on the ideal rate can be difficult.

Additionally, there are many factors to consider when buying a home beyond the mortgage rate. It’s important to understand all aspects of your finances, personal situations, and housing market trends before buying a home.

If you think you’re ready to buy a home, SoFi can help. With SoFi Mortgage Loans, you can find a competitive rate even in a rising rate environment. Turn your dream home into a reality with flexible terms, competitive mortgage rates, and down payments as little as 3% for qualified first-time homebuyers.

If you’re interested in taking out a mortgage, check out SoFi Mortgage Loans today.


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

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