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Pursuing a degree in another country can be an incredible learning opportunity — you can explore another culture and maybe even learn another language. International students may have to navigate different requirements when it comes to funding their education.

International students studying in the U.S. may not be eligible for federal student loans or other forms of federal aid. However, there are private loans for international students available.

American students pursuing a degree at an international university may be able to apply federal financial aid to their school costs. Keep reading for important details about student loans for international students.

What Are International Student Loans?

International student loans are available to students who are studying in a foreign country. For international students in the U.S., This generally means borrowing private student loans because for the most part, federal student loans are not an option for international students.

American students interested in studying abroad may be able to use federal student loans to pay for college costs. The Department of Education maintains a list of international colleges that participate in the Direct Loan Program. If you are interested in pursuing a degree abroad, consider confirming with the school as this list is updated quarterly.

To apply for federal student loans, interested students must fill out the Free Application for Federal Student Aid (FAFSA®) annually.

How International Student Loans Work

Student loans for international students in the U.S. are generally private student loans. These function similarly to other types of loans. After evaluating loan terms and interest rates at a few lenders, a student can apply for a loan with the lender of their choosing.

Each lender will likely have their own student loan application requirements. As a part of their decision making process, lenders will review factors including the applicant’s credit score and financial history.

Are Cosigners Required for International Student Loans?

Student loans for international students often require a cosigner. A cosigner is someone who legally agrees to repay the loan if the primary borrower fails to do so. Because college students may have little or no credit history, adding a cosigner who has a strong credit history can potentially help improve their chances of being approved. Additionally, lenders may require the borrower’s cosigner to be a U.S. citizen or permanent resident who has resided in the U.S. for at least two years.

International Student Loan Terms

When evaluating international student loans, borrowers will want to look at factors including interest rate, APR, and the repayment plans available. It’s also important to think critically about how much you plan to borrow in student loans.

Interest and APR

It’s important to understand the difference between interest rate vs. APR. Briefly, interest rate is just the cost charged for borrowing money. It’s generally charged as a percentage of the loan amount.

APR is a reflection of the interest rate and any other fees associated with the loan. When comparing loan quotes from different lenders, it’s more effective to compare the APR because it provides a more comprehensive picture of the total cost of borrowing.

Recommended: The Ultimate Student Loan Terminology Cheat Sheet

Student loans for international students may have fixed or variable interest rates. A variable interest rate may fluctuate over the life of the loan. Generally, a variable interest rate is tied to a prevailing interest rate. Starting in June 2023, the benchmark rate for student loans in the U.S. will be the Secured Overnight Financing Rate (SOFR).

Repayment Plans

The repayment plan will also vary based on the lender. The repayment period on student loans for international students may vary from 10-25 years. Generally speaking, there are a few types of repayment plans available, though it’s important to emphasize that each lender will set its own terms and conditions.

Some student lenders allow student borrowers to defer payments while they are in school on a full-time basis. This can be helpful for students who don’t have much room to make payments, but for the most part, interest will continue to accrue while the loan is deferred.

Other repayment plans may require just interest only payments while the student is enrolled in school. Other loans may require immediate repayment of both interest and principal, or initial loan amount.

Be sure to understand the loan’s repayment plan before borrowing.

How Much to Borrow

While borrowing student loans could help make international study a reality — it’s important to think critically about how much to borrow. Overborrowing can be a costly mistake. To determine how much you need, evaluate costs associated with the education including tuition, fees, room and board. Don’t forget to factor in additional costs that may occur as a result of living and studying in a foreign country.

Counting All Your Costs

You may need to apply for a student visa, as well as transportation costs. Round-trip tickets to a foreign country can also be very expensive, so if you go to school there, you’ll need to consider that you may miss out on family events like holidays or birthdays.

Regular Student Loans vs International Student Loans

Student loans for international students and traditional student loans function similarly. In both situations, an individual borrows a sum of money to pay for their education and then repays that money at a set interest rate.

Student loans for international students in the U.S., as mentioned, are generally private student loans. Most international students aren’t eligible for federal student loans or other types of financial aid.

Student Loans From SoFi

International students paying for college have a few options available to them. While they most likely won’t qualify for federal student loans, they can use a combination of savings, scholarships, and private student loans to pay for their education.

With SoFi, there are zero fees for private student loans. And flexible repayment options can help find a loan that works for your budget.

FAQ

Can foreign nationals get US student loans?

Yes, it’s possible for international students to get student loans in the U.S. If the student is a qualifying non-citizen they may qualify for federal student loans. Otherwise, private lenders offer student loans to international students.

How can international students get access to student loans?

International students can apply for student loans with a private lender. They may be required to have a cosigner on their application. Some lenders may require the cosigner be someone who is a U.S. citizen or permanent resident.

How do most international students pay for university?

International students may pay for their education with a combination of funding. Savings, independent or school-specific scholarships, or private student loans.

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SOPS0222020

Imagine this: After spending 12 long years of education, it’s finally time to head to college. But hang on, because there’s a catch — tuition is much higher than you thought, and the school didn’t offer an academic scholarship.

One alternative for students can be to find a non-academic scholarship and keep pushing toward that dream. Here are tips on finding non-academic scholarships to help pay for a college education.

What Is A Non-Academic Scholarship?

Scholarships are one type of financial aid available to students, which importantly, don’t need to be repaid and are typically awarded based on merit or some other quality. Grants, which also do not need to be repaid, are typically awarded based on need and not based on academic or athletic merit. For example, Pell Grants are federal grants awarded to undergraduate students who exhibit exceptional financial need.

Recommended: What are Pell Grants?

Scholarships can be awarded for many different reasons, including academic achievement. However, just because someone isn’t an A+ student doesn’t mean they too can’t qualify for a scholarship. There are non-academic scholarships for just about anyone. Students may just need to put in a bit of legwork to find ones they qualify for and apply.

Places to Find Non-Academic Scholarships

Often, the first step in getting a scholarship is to find it. Here are a few places to start your search.

School Counselor’s Office

High school students can check in with their high school counselor to see about any non-academic scholarship they may know about. The office may have a list of options available to students, and, because they may know the student, their skills, and their future aspirations, they may be able to hone in on the right scholarship for them.

School counselor’s may also have helpful information on navigating the financial aid process. One piece of the funding puzzle may be undergraduate loans — if scholarships don’t cover all of the costs. Students may consider private student loans after exhausting federal aid including federal student loans. This comprehensive private student loan guide dives into more detail.

College Admissions Website

If a high school student has already been accepted to school, they may check in with the college’s admission website. There, they could find a list of potential scholarships offered directly by the school. Students should also reach out directly to the admissions office or future academic counselors for assistance.

As the school year nears, you may consider checking in with your college’s financial aid office to see if they can guide you to unclaimed scholarships.

Scholarship Listing Websites

There are several scholarship search tools out there that roundup available scholarships to students, including destinations like FastWeb or CollegeBoard. Here, students can sift through hundreds of available scholarships and find help with the application process as well.

Friends and Family

Sure, it may not seem as obvious, but merely asking around for scholarship opportunities can’t hurt. Students should reach out to their network and let everyone know they are on the hunt for financial assistance. Someone may know of a specific scholarship that could be the perfect fit for the student.

Connect With the Community

Explore connections with local religious groups, business, and other organizations. Having an existing connection can potentially improve an applicant’s chances of securing a scholarship. Plus, students may face less competition when they apply for more local scholarships.

Non-Academic Scholarship Areas

Need a little help thinking about what type of non-academic scholarship may fit? Here are a few ideas to get students started.

Talents

Have a unique talent? There’s probably a scholarship available for it. For example, you can find scholarships for duck calling , dance, drawing and much more.

Heritage

Students may also find non-academic scholarships based on their heritage. Students from minority groups may find additional opportunities, for example scholarships for African American or Hispanic students.

Some scholarships may be available through churches, while others can be found on websites like College Board. There, students of various backgrounds can search for a suitable match.

Interests

Students can apply to non-academic scholarships based on their various interests too. For example, those interested in cars can apply for the National Corvette Club scholarship. Those students that love to cook can apply for the AAC Culinary Scholarships for High School Seniors .

Know a student who spends their Sundays completing The New York Times crossword puzzle in pen? Have them apply to the Crossword Hobbyist Crossword Scholarship . No matter the interest, odds are there is a scholarship out there for it.

Area of Study

Future and current college students may be able to find a scholarship that suits their future area of study. Students hoping to become their own CEOs can apply for The National Association for the
Self-Employed ’s Future Entrepreneur Scholarships, which helps promote “entrepreneurial thinking among aspiring business students.”

Again, if there’s an area of study odds are there’s a scholarship available for it.

Area Code

Students looking for a non-academic scholarship can search for regional scholarships on many online databases. SoFi runs a state-by-state grant and scholarship database so you can take a look at what is available in your area.

Other sources for regional or location-based scholarships may include local nonprofits and businesses.

Other Outlandish Options

There are scholarships available for less obvious reasons too. One of the more famous wacky scholarships is the Stuck at the Prom Scholarship Contest sponsored by Duck brand duct tape. Each year, the company awards a $5,000 scholarship to a teen who designs and wears a dress or tuxedo made out of their duct tape.

The Takeaway

Non-academic scholarships can be awarded based on talent, skill, interest, and more. Some scholarships may even be regional or location based. To find non-academic scholarships, consult with your guidance counselor, your college’s financial aid office, local business and nonprofits, and online scholarship databases.

If scholarships and federal financial aid aren’t enough to cover college costs, private student loans can help fill in the gaps.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
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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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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SOPS0622003

The SAT and ACT are both standardized tests that colleges use to evaluate a student during the admission process. Some schools will accept both SAT and ACT scores while others show preference to one, and some schools don’t require students to submit scores for either test.

It’s possible to compare estimated scores across the two tests using a simple conversion chart or formula. It’s also worth understanding how the two tests are different, and what a student can expect when taking each test.

ACT and SAT History

In 1926, the SAT was developed as the Army Alpha, to measure the IQ of Army recruits. Over time, the format and audience for the Scholastic Aptitude Test changed. The scoring method, format, and subjects have been adjusted over the years to better reflect the high school curriculum and college application process.

The current version of the SAT takes three hours and includes sections on math, reading comprehension, and writing. The highest score a person can achieve on the SAT is 1600.

The American College Test, created in reaction to the SAT, was first administered in 1959. University of Iowa professor of education Everett Franklin Linquist developed the standardized test to better evaluate a student’s practical knowledge instead of reasoning skills that the SAT focuses on.

The modern ACT takes two hours and 55 minutes (add 40 for the optional writing section) to complete. The test includes sections on English, math, reading, and science, and the optional writing portion. The highest score possible is 36.

Colleges and universities generally accept both the ACT and SAT, but preparing for and taking the two tests is not the same. Understanding the differences between the ACT and SAT might help students decide which test to take and how they might best maximize their score.

Difference Between the ACT and SAT Tests

Other than the score a test taker receives, the SAT and ACT have several differences that might inform a student’s decision to prepare for one over another. Students are taking both tests now more than ever, but preparing for each is different, and it’s possible to prefer one test experience over another.

Scoring

One of the most obvious differences between the two tests is the score. An ACT score ranges from 1 to 36, and there’s no penalty for getting a question wrong. The score is calculated by adding the raw scores of each section, then dividing by four to get the composite score (out of 36).

SAT takers get a score between 400 and 1600. Once again, there’s no penalty for answering a question wrong, and the score goes up with every right answer. Section scores are added together to yield the total score (out of 1600).

Type of Testing

There’s a common belief that students’ strengths in the classroom might allow them to test better on one standardized test over the other. The ACT, with a deeper focus on verbal skills, might be a better fit for students who excel in English classes. Those with strong math skills could prefer the SAT, with a bigger emphasis on math questions.

Both tests have a math section, but the SAT covers data analysis, while the ACT will have questions about probability and statistics.

Format and Subjects

Even when the essay portion is included, the ACT is shorter than the SAT. However, the SAT has 154 questions, while the ACT has 215 — how does that compute? SAT takers have an average of one minute and 10 seconds on each question, compared with 49 seconds for the ACT.

Time per question could be important to a student’s test taking strategy, especially when factoring in the difficulty levels of each test. In the SAT’s math section, the questions become harder the further a student moves along. The same goes for the ACT’s math section, as well as its science section, where passages and the questions become more difficult as the test progresses.

The ACT has more sections than the SAT, including multiple-choice questions on:

•   English: grammar, punctuation, sentence structure

•   Math: algebra, geometry, trigonometry

•   Reading: passage comprehension on fiction, humanities, and sciences

•   Science: comprehension, including summaries, charts, and graphs

•   Writing (optional)

The SAT has fewer sections, with all multiple-choice questions about:

•   Reading: comprehension questions based on passages

•   Writing and language: grammar, editing, and vocabulary

•   Math: algebra, trigonometry, and geometry

The SAT used to have an optional essay section, but it was discontinued in 2021.

The major differentiator between the SAT and ACT experience might be the ACT’s dedicated science section. The SAT includes questions about science, but they are dispersed across the test.

Pricing

The cost of taking the SAT and ACT is similar:

•   SAT: $60

•   ACT: $63, $88 with optional essay

The cost of taking the test shouldn’t keep a student from doing so. Both the College Board and ACT offer fee waivers for students who meet the requirements.

High school students preparing for the SATs may also be getting ready to pay for college and manage their own finances for the first time. SoFi’s money management guide for college students has some tips and strategies that can help.

Evaluating options for paying for college is another important piece of the college preparation puzzle. Options include grants, scholarships, and undergraduate loans, including both private and federal student loans.

Recommended: What Are Pell Grants?

Geography

Because the ACT was founded out of a Midwestern university, the test is somewhat more popular in middle America. The SAT has its origins in testing aptitude for admission to Northeastern educational Army institutions. Students on the East and West coasts are slightly more likely to take the SAT than the ACT.

Because of these geographic trends, students on the coasts might find more SAT prep courses than ACT prep courses, and vice versa.

Converting Test Scores

SAT to ACT conversion is a hot topic. Comparing the tests on their face is like comparing apples to oranges. However, if a student takes both, it helps to figure out which one they performed better on. That means finding a way to compare one test score to another.

Here’s how the ACT’s composite scores compare to the SAT:

Should I Take the ACT or SAT?

The SAT and ACT are both widely accepted by colleges and universities in the U.S. It’s common for students to take both the SAT and ACT. If you are deciding which test is best for you, consider taking a full, timed practice test for each type. This can give you a rough estimate of where you may score when you take the exam.

The Takeaway

Both the SAT and ACT are standardized tests designed to gauge a student’s readiness for college. One test is not inherently easier than the other and both are accepted at a wide array of colleges and universities. Taking a timed practice test can be one of the best ways to roughly estimate your score.

Paying for college is another important step in preparing for college. Students may consider using a combination of grants, scholarships, and student loans. Private student loans may lack borrower protections offered by federal student loans, so federal loans are generally prioritized over private loans. This private student loan guide has more information on the differences between private and federal student loans.

Borrowers interested in private student loans could consider SoFi — where private student loans have no fees, applications can be completed online and you can easily add a cosigner.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility 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.
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.
SOPS0722004

A 401(k) can be a valuable part of a retirement savings plan. But how much should you have saved in your 401(k) at different ages or career stages?

Charting the average 401(k) balance by age can help put your own savings in perspective. Seeing what others are saving in their 20s, 30s, 40s, and beyond can be a useful way to gauge whether you’re on track with your own retirement plans and what else you can do to maximize this critical, tax-deferred form of savings.

Keep reading to learn about these possible benchmarks and smart ways to handle common savings challenges people may face at different phases of life. After all, the point isn’t to see whether you measure up but to ensure you keep progressing toward your retirement goals.

Average 401(k) Balance by Age Group

Pinning down the average 401(k) account balance can be challenging, as only a handful of sources collect information on retirement accounts, and they each have their own methods for doing so.

Vanguard is one of the largest 401(k) providers in the U.S., with nearly 5 million participants. For this review of the average 401(k) balance by age, we’ll use data from Vanguard’s “How America Saves 2022” report . Specifically, we’ll look at the average and median 401(k) balances by age for savers in 2021.

Why look at the average balance amounts, as well as the median? Because there are people who save very little as well as those who have built up very substantial balances, the average account balance only tells part of the story. Comparing the average with the median amount — the number in the middle of the savings curve — provides a bit of a reality check as to how other retirement savers in your cohort may be doing.

Ages 35 and Younger

The average 401(k) balance for savers 35 and younger can be split into two groups:

•   Under age 25: $6,264

•   Ages 25 to 34: $37,211

Median 401(k) balances for both age groups are lower. The median balance is a dividing point, with half of savers having more than that amount saved for retirement in their 401(k) and the other half having less.

It makes sense that the under 25 group would have the lowest balances in their 401(k) overall, as they’ve had the least time to save for retirement. They’re also more likely to earn lower starting salaries versus workers who may have been on the job for 5 to 10 years. The youngest workers may not have as much income to put towards a 401(k).

Key Challenge for Savers

Debt often presents a big challenge for younger savers, many of whom may still be paying down student loan debt or who may have credit card debt (in some cases, both). How do you save for retirement when you want to pay off debt ASAP?

It’s a familiar dilemma, but not an insurmountable one. While being debt-free is a priority, it’s also crucial at this age to establish the habit of saving — even if you’re not saving a lot. The point is to save steadily (e.g., on a biweekly or monthly schedule) and, whenever possible, to automate your savings.

Then, when your debt is paid off, you can shift some or all of those payments to your savings by upping your retirement contribution.

Ages 35 to 44

•   Average 401(k) balance: $97,020

•   Median 401(k) balance: $36,117

The average 401(k) balance for workers in the 35 to 44-year-old group is $97,020. The median 401(k) balance for these workers is $36,117. That’s quite a gap! So what is a good average balance to have in your 401(k) by this point?

One rule of thumb suggests having three times your annual salary saved for retirement by the time you reach your 40s. So, if you’re making $100,000 annually, ideally, you should have $300,000 invested in your 401(k). This assumes that you’re earning a higher income at this point in life, and you can contribute more to your plan because you’ve paid off student loans or other debts.

Key Challenge for Savers

While it’s true that being in your late 30s and early 40s can be a time when salaries range higher — it’s also typically a phase of life when there are many demands on your money. You might be buying a home, raising a family, investing in a business — and it can feel more important to focus on the ‘now’ rather than the future.

The good news is that most 401(k) plans offer automatic contributions and the opportunity to increase those contributions each year automatically. Even a 1% increase in savings each year can add up over time. Take advantage of this feature if your plan offers it.

Ages 45 to 54

•   Average 401(k) balance: $179,200

•   Median 401(k) balance: $61,530

Among 45 to 54-year-olds, the average 401(k) balance is $179,200, while the median balance is $61,530.

The rule of thumb for this age suggests that you stash away six times your salary by age 50. So again, if you make $100,000 a year, you should have $600,000 in your 401(k) by your 50th birthday. Whether this is doable can depend on your income, 401(k) deferral rate, and overall financial situation.

Key Challenge for Savers

For some savers, these are peak earning years. But children’s college costs and the need to help aging or ailing parents are among the challenges savers can face at this stage. The great news is that starting at age 50, the IRS allows you to start making catch-up contributions. For 2022, the regular 401(k) contribution limit is $20,500 – but add in $6,500 in catch-up contributions, and you can save $27,000 annually in a 401(k).

While you may feel strapped, this could be the perfect moment to renew your commitment to retirement savings because you can save so much more.

Ages 55 to 64

•   Average 401(k) balance: $256,244

•   Median 401(k) balance: $89,716

The average 401(k) balance among 55 to 64-year-olds is $256,244. The median balance is much lower, at $89,716.

By this stage, experts typically suggest having eight times your annual salary saved. So going back to the $100,000 annual salary example from earlier, you’d need to have $800,000 tucked away for retirement by age 60.

Key Challenge for Savers

As retirement draws closer, it can be tempting to consider dipping into Social Security. At age 62, you can begin claiming Social Security retirement benefits to supplement money in your 401(k). But starting at 62 gives you a lower monthly payout — for the rest of your life. Waiting until the full retirement age, which is 66 or 67 for most people, will allow you to collect a higher benefit. And if you can wait until age 70 to take Social Security, that can increase your benefit amount by 32% versus taking it at 66.

Ages 65 and Older

•   Average 401(k) balance: $279,997

•   Median 401(k) balance: $87,725

The average 401(k) balance for those 65 and older is $279,997. The median balance is $87,725. So, is nearly $280,000 enough to retire, assuming you’re fully vested in your 401(k)?

Most experts would say no, unless you have other resources set aside for retirement. A pension plan, for example, or an Individual Retirement Account (IRA) could supplement your 401(k) savings. Investing in an annuity is also an option worth considering if you’re interested in creating a guaranteed income stream for retirement.

Key Challenge for Savers

Just because you turn 65, a common shorthand for “retiree,” doesn’t mean you’re at the end of the line or out of options. After all, 70 is the new 60 for many people these days, and you may be embarking on a new chapter in life, love, or business that could change your financial circumstances. The challenge here is to revisit your retirement plan and possibly speak with a financial professional, if you haven’t done so, to maximize all potential income streams and ways to save.

And don’t forget: A 2019 law eliminated the long-standing age limit of 70 ½ for making retirement contributions to your IRA (and Roth IRAs don’t have age limits). If life permits, you can (and should) keep saving.

401(k) Savings Potential by Age

Suppose an investor maxes out their 401(k) contribution of $20,500 annually beginning at age 25. Also, assume that the 401(k) has an average rate of return of 9.5%. By the age of 65, the investor will have contributed a total of $840,500 of their own money into their 401(k), but because of compounding returns, it could result in a 401(k) savings potential of nearly $9 million.

However, these figures are just hypotheticals to show the power of compounding returns in a 401(k) account. This does not account for fees, changes in contribution limits, a possible 401(k) employer match, or fluctuations in the market. Nonetheless, by contributing to a 401(k) early and often, investors may be able to build up a substantial retirement nest egg.

Tips on Improving Your 401(k) Return

Getting the best rate of return on your 401(k) can help you to fund your retirement goals. But different things can affect your returns, including:

•   Investment choices

•   Market performance

•   Fees

Time is also a consideration, as the longer you have to invest, the more room your money has to grow through the power of compounding interest. If you’re interested in maximizing 401(k) returns, here are some things to keep in mind.

1. Review Your Contribution Rate

The more you contribute to your 401(k), the more growth you can see. If you haven’t checked your contribution rate recently, it may be a good idea to calculate how much you’re saving and whether you could increase it. At the very least, it’s a good idea to contribute enough to qualify for the full employer matching contribution if your company offers one.

As noted above, if your plan offers automatic yearly increases, take advantage of that feature. Behavioral finance studies have repeatedly shown that the more you automate your savings, the more you save.

2. Make Catch-Up Contributions If You’re Eligible

As mentioned, once you turn age 50, you have an opportunity to contribute even more money to your 401(k). If you can max out the regular contributions each year, making additional catch-up contributions to your 401(k) can help you grow your account balance faster.

3. Take Appropriate Risk

The younger you are, the more time you have to recover from market downturns and, thus, the more risk you can generally take with your investments. This is important to note as some risk is necessary to grow your portfolio. On the other hand, being too conservative with your 401(k) investments could cause your account to underperform and fall short of your goals.

4. Pay Attention to Fees

Fees can erode your investment returns over time and ultimately reduce the size of your nest egg. As you choose investments for your 401(k), consider the risk/reward profile and the cost of different funds. Specifically, look at the expense ratio for any mutual funds or exchange-traded funds (ETFs) offered by the plan. This reflects the cost of owning the fund annually, expressed as a percentage. The higher this percentage, the more you’ll pay to own the fund.

Creating or Reassessing Your Retirement Goals

If you’re still working on putting your retirement savings plan together, a 401(k) can be a good place to start. As you decide how much to save, ask yourself these questions:

•   What kind of lifestyle do I want to live in retirement?

•   When do I plan to retire?

•   How much of my income can I afford to save in a 401(k)?

•   Is there an employer match available, and if so, how much?

•   How much risk am I willing to take with 401(k) investments?

A retirement calculator can help you estimate how much you might need to save for retirement. Some calculators can factor in how much you’ve already saved to tell you if you’re on track with your goals.

Recommended: When Can I Retire? This Formula Will Help You Know

It can be helpful to check in with your goals periodically to see how you’re doing. For example, you might plan an annual 401(k) checkup at year’s end to review how your investments have performed, what you contributed to the plan, and how much you’ve paid in fees. This can help you make smarter investment decisions for the upcoming year.

Improving Your Retirement Readiness

The best way to improve your retirement readiness is to start saving early and often. A good rule of thumb is to save and invest at least 10-15% of your income for retirement. The more you can save now, the greater chance it has to grow because of compounding returns.

But you want to save and invest your money wisely. Consider using a mix of investment vehicles, such as stocks, bonds, ETFs, and mutual funds, to help diversify your portfolio and minimize risk.

Additionally, you can make your money work harder for you by contributing to an IRA and a 401(k). These accounts offer tax advantages that can help you save more money for retirement.

Finally, be sure to monitor your retirement account balances and make adjustments as needed to ensure you are on track to reach your retirement goals.

The Takeaway

What is the average 401(k) balance by age? It’s a tricky question to answer as there’s no single source of information for these numbers. And it’s important to remember that the average 401(k) balance by age is just an average; it doesn’t necessarily reflect your ability to save for retirement.

That said, the average and median 401(k) balances noted above reflect some important realities for different age groups. It’s clear that some people can save more, others less — and it’s crucial to understand that many factors play into those account balances. It’s not simply a matter of how much money you have, but the choices you make. Every stage of life brings unique challenges that can derail your retirement, but with a bit of forethought and planning, it’s possible to keep your retirement on track.

Also, keep in mind that a 401(k) isn’t the only way to save and invest money for the future. You could also save for retirement with a Traditional or Roth IRA. By opening an online retirement account with SoFi Invest®, you can get access to a broad range of investment options, member services, and our robust suite of planning and investment tools.

FAQ

How much do you need to retire?

Determining how much money you need to retire depends on your lifestyle, goals for retirement, and your specific cost of living.

How much should someone in their 60s have in their 401(k)?

The amount someone in their 60s should have in their 401(k) will vary depending on factors such as income, investment goals, and retirement plans. However, as a general guideline, it is recommended that individuals in their 60s aim to have at least eight to 10 times their salary saved in their 401(k) to ensure a comfortable retirement.

How much should I have in my 401(k) by age 30?

Ideally, you should aim to have saved at least the equivalent of your annual salary in your 401(k) by age 30. So, if you make $50,000 annually, you should try to have $50,000 in savings by age 30. This will help ensure that you are on track to retire comfortably.

Photo credit: iStock/kate_sept2004

SoFi Invest®
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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 prequalification for any loan product offered by SoFi Bank, N.A., or SoFi Lending Corp.
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There are so many upsides to investing in your education — the personal enrichment and possibility of a bright and fruitful future being the most obvious. But, there are also some potential downsides that are hard to ignore, one of the main ones — if you’re like so many others — being the debt you may accrue.

If you’re a student loan borrower, you’ve probably noticed that your loans have a language all their own. Getting a grasp on terms like interest rate vs. APR, subsidized vs. unsubsidized loans, and fixed vs. variable interest rates can help you make more informed, confident decisions.

Instead of enrolling in Student Loan Language 101, you can use our quick and dirty reference guide to find some answers without information overload. Borrowing a loan can have long-term financial consequences, so it’s important to fully understand the fees and interest rates that will affect the amount of money you owe. Here are a few of the most important terms to understand before you take out a student loan:

Common Student Loan Terminology

Academic Year

An academic year is one complete school year at the same school. If you transfer, it is considered two half-years at different schools.

Accrued Interest

The amount of interest that has accumulated on a loan since your last payment. You can keep accrued interest in check by making your payments on time each month. However, after a period of missed or reduced payments, accrued interest may be capitalized, which essentially means you’d have to pay interest on the student loan accrued interest.

Adjusted Gross Income (AGI)

AGI is an individual’s gross income, less any deductions or adjustments to income. This includes things like wages, salaries, any interest or dividends you may earn and any other sources of income. You can find your AGI on your federal income tax returns.

Aggregate Loan Limit

The aggregate loan limit is the maximum amount of federal student loan debt a borrower can have when graduating from school. The aggregate loan limit may vary depending on whether you are a dependent or independent student.

Recommended: What is the Maximum Amount of Student Loans for Graduate School?

Amortization

Amortization refers to the amount of loan principal and interest you pay off incrementally over your loan term. Each student loan payment is a fixed amount that contributes to both interest and principal. Early in the life of the loan, the majority of each payment goes toward interest. But over time as you pay down your loan balance, the ratio shifts and most of the payment goes toward the principal.

Annual Percentage Rate (APR)

The annual rate that is charged for borrowing, expressed as an annual percentage. APR is a standardized calculation that allows you to make a more fair comparison of different loans. Consider the difference between interest vs. APR — APR reflects the cost of any fees charged on the loan, in addition to the basic interest rate. Generally speaking, the lower your APR, the less you’ll spend on interest over the life of the loan.

Annual Loan Limit

The yearly borrowing limit set for federal student loans.

Automated Clearing House (ACH)

An electronic funds transfer is sent through the Automated Clearing House system. The ACH is an electronic funds — transfer system that helps your loan payment transfer directly from your bank account to your lender or loan servicer each month.

The benefits of ACH are two-fold — not only can automatic payments keep you from forgetting to pay your bill, but many lenders also offer interest rate discounts for enrolling in an ACH program.

Award Letter

An award letter is sent from your school and details the types and amounts of financial aid you are eligible to receive. This will include information on grants, scholarships, federal student loans, and work-study. You will receive an award letter for each year you are in-school and apply for financial aid.

Award Year

The academic year that financial aid is applied to.

Borrower

The borrower is the person who took out a loan. In doing so, they agreed to repay the loan.

Campus-Based Aid

Some financial aid programs are administered by specific financial institutions, such as the Federal Work-Study program. Generally, schools receive a certain amount of campus-based aid annually from the federal government. The schools are then able to award these funds to students who demonstrate financial need.

Cancellation

This refers to the cancellation of a borrower’s requirement to repay all or a portion of their student loans. Loan forgiveness and discharge are two other types of loan cancellation.

Capitalization

Capitalization is when unpaid interest is added to the principal value of the student loan. This generally occurs after a period of non-payment such as forbearance. Moving forward, the interest will be calculated based on this new amount.

Capitalized Interest

Accrued interest is added to your loan’s principal balance, typically after a period of non-payment such as forbearance. When the interest is tacked onto your principal balance, your interest is now calculated on that new amount.

Most student loans begin accruing interest as soon as you borrow them. While you are often not responsible for repaying your student loans while you are in school or during a grace period or forbearance, interest will still accrue during these periods. At the end of said period, the interest is then capitalized, or added to the principal of the loan.

When interest is capitalized, it increases your loan’s principal. Since interest is charged as a percent of principal, the more often interest is capitalized, the more total interest you’ll pay. This is a good reason to use forbearance only in emergency situations, and end the forbearance period as quickly as possible.

Cosigner

A third party, such as a parent, who contractually agrees to accept equal responsibility in repaying your loan(s). A student loan cosigner can be valuable if your credit score or financial history are not sufficient enough to allow you to borrow on your own.

With a cosigner, you are still responsible for paying back the loan, but the cosigner must step in if you are unable to make payments. A co-borrower applies for the loan with you and is equally responsible for paying back the loan according to the loan terms on a month-to-month basis.

Recommended: Do I Need a Student Loan Cosigner?

Consolidation (through the Direct Loan Consolidation Program)

The act of combining two or more loans into one loan with a single interest rate and term. The resulting interest rate is a weighted average of the original loan rates — rounded up to the nearest eighth of a percentage point.

Only certain federal loans are eligible for the Direct Consolidation Program. Consolidating can make your life simpler with one monthly bill, but it may not actually save you any money. You may be able to reduce your monthly payments by increasing the loan term, but this means you’ll pay more interest over the life of the loan.

Consolidation (through a Private Lender)

The act of combining two or more loans into one single loan with a single interest rate and term. When you consolidate loans with a private lender, you do so through the act of refinancing, so you’re given a new (hopefully lower) interest rate or lower payments with a longer-term.

Most private lenders only refinance private loans, but SoFi refinances both private and federal loans. By refinancing, you may be able to lower your monthly payments or shorten your payment term.

Recommended: What Is a Direct Consolidation Loan?

Cost of Attendance

Cost of attendance is the estimated total cost for attending a college based on the cost of tuition, room and board, books, supplies, transportation, loan fees, and miscellaneous expenses. Schools are required to publish the cost of attendance.

Recommended: What Is the Cost of Attendance in College?

Credit Report

Credit reports detail an individual’s bill payment history, loans, and other financial information. These reports are used by lenders to evaluate your creditworthiness.

Default

Failure to repay a loan according to the terms agreed to in the promissory note. Defaulting on your student loans can have serious consequences, such as additional fees, wage garnishment, and a significant negative impact on your credit. It’s always better to talk to your lender about potential hardship repayment options, such as deferment or forbearance, before defaulting on a loan.

Deferment

The temporary postponement of loan repayment, during which time you may not be responsible for paying interest that accrues (on certain types of loans). Student loan deferment can be useful if you think you’ll be in a better place to pay your loans at a later date. However, deferment is usually only available for certain federal loans. To potentially cut down on interest, it may be wise to weigh your deferment options.

Delinquency

When you miss a student loan payment, the loan becomes delinquent. The loan will be considered delinquent until a payment is made on the loan. If the loan remains in delinquency for a specified period of time (which may vary for federal vs. private student loans), it may enter default.

Direct Loan

The Direct Loan program is administered via the U.S. Department of Education. There are four main types of direct loans including Direct Subsidized loans, Direct Unsubsidized loans, Direct PLUS loans, and Direct Consolidation loans.

Direct PLUS Loan

Direct PLUS loans are types of federal loans that are made to graduate or professional student borrowers or to the parents of undergraduate students. Direct PLUS Loans made to parents may be referred to as Parent PLUS Loans.

Disbursement

When funds for a loan are paid out by the lender.

Discharge

Student loan discharge occurs when you are no longer required to make payments on your loans. Typically, student loan discharge occurs when there are extenuating circumstances such as the borrower has experienced a total and permanent disability or the school at which you received your loans has closed.

Discretionary Income

Discretionary income is the money remaining after you pay for necessary expenses. An individual’s discretionary income is used to help determine their loan payments on an income-driven repayment plan.

Endorser

An endorser is similar to a co-borrower in that they also sign on to the loan agreement and are responsible for repaying the loan if the primary borrower is unable to do so. Individuals who may not qualify for a Direct PLUS Loan on their own can add an endorser to their application.

Enrollment Status

Determined by the school you attend, your enrollment status is a reflection of your enrollment at the school. Enrollment status includes, full-time, half-time, withdrawn, and graduated.

Expected Family Contribution (EFC)

An estimation of the amount of money a student and their family is expected to pay out of pocket toward tuition and other college expenses.

Federal Work-Study

A type of financial aid, students who demonstrate financial aid may qualify for the federal work-study program, where they work part-time to earn funds to help pay for college expenses.

Financial Aid

Funds to help pay for college. Financial aid includes grants, scholarships, work-study, and federal student loans.

Financial Aid Package

An overview of the types of financial aid you are eligible to receive for college. Financial aid packages provide information on all types of federal financial aid and college-specific aid such as scholarships, grants, work-study, and federal student loans.

Financial Need

Some types of financial aid are determined by financial need. Financial need is defined as the difference between the cost of attendance at your school and the expected family contribution of your school.

Fixed Interest Rate

An interest rate that remains the same for the life of the loan. The interest rate does not fluctuate.

Forbearance

The temporary postponement of loan repayment, during which time interest typically continues to accrue on all types of federal student loans. If your student loan is in forbearance you can either pay off the interest as it accrues, or you can allow the interest to accrue and it will be capitalized at the end of your forbearance.

Use forbearance wisely, because interest that accrues during the forbearance period typically capitalized making your loan more expensive. If you can afford to make even small payments during forbearance, it can help keep interest costs down.

You will usually have to apply for student loan forbearance with your loan holder and will sometimes be required to provide documentation proving you meet the criteria for forbearance. For a loan to be eligible for forbearance, there must be some unexpected temporary financial difficulty.

Forgiveness

Loan forgiveness is another situation in which you are no longer responsible for repaying all or a portion of your student loans. Public Services Loan Forgiveness and Teacher Loan Forgiveness are two types of loan forgiveness programs in which your loans are forgiven after meeting specific requirements, such as working in a qualifying job and making qualifying loan payments.

In August 2022, President Biden announced a loan forgiveness plan for borrowers with student loan debt. Under this plan, borrowers earning up to $125,000 (when filing taxes as single) may qualify for up to $10,000 in student loan forgiveness. He also announced that Pell Grant recipients may qualify to have up to $20,000 of their loans forgiven.

Free Application for Federal Student Aid (FAFSA®)

This is the application students use to apply for all types of federal student aid, including federal loans, work-study, grants, and scholarships. The FAFSA must be completed for each year a student wishes to apply for financial aid.

Recommended: FAFSA Guide

Grace Period

A period of time after you graduate, leave school or drop below half-time during which you’re not required to make payments on certain loans. Some loans continue to accumulate interest during the grace period, and that interest is typically capitalized, making your loan more expensive.

Grad PLUS Loans

Another term to refer to a Direct PLUS loan, specifically one borrowed by a graduate or professional student.

Graduate or Professional Student

A student who is pursuing educational opportunities beyond a bachelor’s degree. Graduate and professional programs include master’s and doctoral programs.

Graduated Repayment Plan

A type of repayment plan available for federal student loan borrowers. On this repayment plan, loan payments begin low and increase every two years. This plan may make sense for borrowers who expect their income to increase over time.

Grant

A type of financial aid that does not need to be repaid. Grants are often awarded based on financial need.

Recommended: The Differences Between Grants, Scholarships, and Loans

In-School Deferment

Students who are enrolled at least half-time in school are eligible to defer their federal student loans. This type of deferment is generally automatic for federal student loans. Note that unless you have a subsidized student loan, interest will continue to accrue during in-school deferment.

Interest

Interest is the cost of borrowing money. It is money paid to the lender and is calculated as a percentage of the unpaid principal.

Interest Deduction

A tax deduction that allows you to deduct the student loan interest you paid on a qualified student loan for the tax year. Interest paid on both private and federal student loans qualifies for the student loan interest deduction.

Lender

The financial institution that lends funds to an individual borrower.

Loan Period

A loan period is the academic year for which a student loan is requested.

Loan Servicer

A company your lender may partner with to administer your loan and collect payments. For questions about your student loan payments or administrative details such as account information, you should contact your student loan servicer.

Origination Fee

A fee that some lenders charge for processing the loan application, or in lieu of upfront interest. To minimize incremental costs on your loan, look for lenders that offer no or low fees.

Part-Time Enrollment

Students who are enrolled in school less than full-time are generally considered part-time students. The number of credit hours required for part-time enrollment are determined by your school.

Pell Grant

A grant awarded by the federal government to undergraduate students who demonstrate exceptional financial need.

Perkins Loans

Perkins Loans were a type of federal loan available to undergraduate and graduate students who demonstrated exceptional financial need. The Perkins Loan program ended in 2017.

PLUS Loans

Another way to describe Direct PLUS Loans, which are federal loans available for graduate and professional students or the parents of undergraduate students.

Prepayment

Paying off the loan early or making more than the minimum payment. All education loans, including private and federal loans, allow for penalty-free prepayment, which means you can pay more than the monthly minimum or make extra payments without incurring a fee. The faster you pay off your loan, the less you’ll spend on interest.

Prime Rate

This is the interest rate that commercial banks charge their most creditworthy customers. The basis of the prime rate is the federal funds overnight rate. The federal funds overnight rate is the interest rate that banks use when lending to each other. The prime rate can be used as a benchmark for interest rates on other types of lending.

Principal

Principal is the original loan amount you borrowed. For example, if you take out one $100,000 loan for grad school, that loan’s principal is $100,000.

Private Student Loan

A student loan lent by a private financial institution such as a bank, credit union, online lender, or other financial institution. These loans can be used to pay for college and educational expenses, but are not a part of the Federal Direct Loan Program. These loans don’t offer the same borrower protections available to federal student loans — like income-driven repayment plans or deferment options.

Promissory Note

A contract that says you’ll repay a loan under certain agreed-upon terms. This document legally controls your borrowing arrangement, so read your promissory note carefully. If you don’t fully understand the agreement, contact your lender before you sign.

Repayment

Repaying a loan plus interest.

Repayment Period

The agreed upon term in which loan repayment will take place.

Scholarship

A type of financial aid which typically doesn’t need to be repaid. Scholarships can be awarded based on merit.

Secured Overnight Financing Rate (SOFR)

An interest rate benchmark that is commonly used by banks and other lenders to set interest rates for loans. The SOFR is the cost of borrowing money overnight collateralized by Treasury securities. Starting in June 2023, the SOFR will begin replacing the LIBOR as a benchmark interest rate.

Stafford Loans

Stafford loans were a type of federal student loan made under the Federal Family Education Loan Program. Beginning in 2010, all federal student loans were loaned directly through the William D. Ford Federal Direct Loan Program.

Standard Repayment Plan

The Standard Repayment Plan is one of the repayment plans available for federal student loan borrowers. This repayment plan consists of fixed payments made over an up to 10 year period.

Student Aid Report

After submitting the FAFSA you will receive a student aid report (SAR). The SAR is a summary of the information you provided when filling out the FAFSA.

Student Loan Refinancing

Using a new loan from a private lender to pay off existing student loans. This allows you to secure a new (ideally lower) interest rate or adjust your loan terms.

Subsidized Loan

A Direct Subsidized Loan is a type of federal loan available to undergraduate students where the government covers the interest that accrues while the student is enrolled at least half-time, during the grace period, and other qualifying periods of deferment.

Term

The expected amount of time the loan will be in repayment. Generally speaking, a longer term will mean lower monthly payments but higher interest over the life of the loan, while a shorter term will mean the opposite. Loan terms vary by lender, and if you have a federal loan, you are usually able to select your student loan repayment plan.

Tuition

The cost of classes and instruction.

Undergraduate Student

A student who is enrolled in an undergraduate course of study.

Unsubsidized Loan

A Direct Unsubsidized Loan is a type of federal loan available to undergraduate or graduate students. The major difference between subsidized vs. unsubsidized loans is that the interest on unsubsidized loans is not subsidized by the federal government.

Variable Interest Rate

Unlike a fixed interest rate, a variable interest rate fluctuates over the life of a loan. Changes in interest rate are tied to a prevailing interest rate.

The Takeaway

Understanding key terms is essential for navigating student borrowing. Prioritizing sources of financial aid that don’t need to be repaid like scholarships and grants can be helpful. But these don’t always meet a student’s financial need. Federal student loans have low interest rates and, for the most part, don’t require a credit check. Plus they have borrower protections in place, like income-driven repayment plans or deferment options, that make them the first-choice for most students looking to borrow money to pay for college.

When these sources of aid aren’t enough, private student loans can help fill in the gap. Keep in mind that, as mentioned, private loans don’t offer the same protections afforded to federal loans. If you’re interested in a private student loan, check out what SoFi has to offer. SoFi’s private student loans are available for undergraduates, graduate students, or the parents of undergraduates. Plus, qualifying borrowers can secure competitive interest rates and the loans have zero fees.

FAQ

What are common student loan terms?

Student loan terms include Direct Loans — which are any loans in the Federal Direct Loan program. These include Direct Subsidized and Unsubsidized loans in addition to Direct PLUS Loans.

Beyond federal student loans, students can look into private student loans, which are offered by private lenders.

What are the most important loan terms to understand?

It’s important to understand terms associated with borrowing because you’ll be required to repay the loan. Understand the interest rate and any fees associated with the loan.

What does APR mean in relation to student loans?

APR stands for annual percentage rate. It’s a reflection of the interest rate on the loan in addition to any other fees associated with borrowing. APR helps make it easier to compare loans from different lenders.

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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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