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Who doesn’t like a little something extra? While there are some benefits your employer is required to provide you, they may also give you additional perks in the form of what are known as “fringe benefits.”

Here’s a look at some examples of fringe benefits, how they work, and whether they’re taxable.

What Are Fringe Benefits?

Typically, employers compensate their employees with a traditional paycheck and some additional benefits that they must provide, such as workers’ compensation coverage or unemployment.

But in an effort to keep workers happy, loyal, and motivated — attract new talent — many organizations also offer fringe benefits such as health insurance, childcare assistance, and employee stock options. These extras are above and beyond a regular paycheck and are often included in a hiring package.


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Common Fringe Benefits

Here’s a look at some common fringe benefits:

•  Accident and health benefits: Provides help with health-related costs not covered by your traditional insurance plan.

•  Athletic facilities: Provides access to on- and off-site athletic and gym facilities.

•  Dependent care assistance: Helps you pay for some care-related expenses for qualifying dependents, including children, a disabled spouse or legally dependent parents.

•  Adoption assistance: Provides payment and reimbursement for expenses related to adopting a child.

•  Employee stock options: Gives employees the chance to buy a certain amount of company stock at a specified price and by a certain time.

•  Group-term life insurance coverage: Allows employers to provide their employees with up to $50,000 in tax-free insurance. Coverage is traditionally 1-2x salary, where the first $50,000 is received tax-free, then any additional coverage is taxed.

•  Health savings accounts (HSAs): Provides tax-advantaged savings accounts for employees enrolled in high-deductible health plans. These accounts may receive contributions by the employer or simply be funded on a pre-tax basis by the employee to help them pay for dental and health care costs.

•  Transportation and commuting benefits: Helps employees get to and from work, such as through the use of a company vehicle. Employees may also be able to have qualified transportation costs taken from their pre-tax pay, which reduces their taxable income.

•  Tuition reduction: Allows employers to chip in for the cost of tuition to educate an employee and sometimes their spouse or children.

•  Meals: Provides employees with free on-site food and snacks.

For a more complete list of fringe benefits, check out IRS Publication 15-B .

Are Fringe Benefits Taxable?

Generally speaking, most fringe benefits are subject to employment taxes. The taxes are taken out of your paycheck and reported on your annual tax return. (If you’re a contractor, you’ll typically report fringe benefits on a Form 1099-MISC. If you’re a non-employee, fringe benefits are not subject to employment tax.)

That said, the IRS does consider some fringe benefits nontaxable. This means they’re not subject to federal income tax withholding, Social Security, Medicare, or federal unemployment tax, nor must they be reported on your tax return. Often, in order for a fringe benefit to avoid being taxed, certain qualifications must be met.

Here are some extra perks that are considered nontaxable (the full list is available on the IRS’ site:

•   Retirement planning services

•   Adoption assistance

•   Meals and snacks (If certain conditions are met)

•   Health insurance (up to a certain dollar amount)

•   Group-term life insurance (up to a certain amount of coverage)

•   Commuting or transportation benefits

•   Dependent care assistance (up to a certain amount)

•   Awards given for achievements

Tax-Advantaged Fringe Benefits

Some fringe benefits allow employees to direct a certain amount of funds pretax toward qualified accounts and expenses, which can lower their taxable income.

These tax-advantaged benefits are (somewhat oddly) known as “cafeteria plans,” because they allow employees to select the benefits they want. You must be permitted to choose from at least one taxable benefit, like cash, and one qualified benefit. Examples of qualified benefits include:

•  401(k) plans

•  Accident and health benefits, excluding Archer medical savings accounts and long-term care insurance.

•  Adoption assistance

•  Dependent care assistance

•  Group-term life insurance coverage

•  HSAs (distributions from HSAs can be used to purchase long-term care coverage.)

There are, predictably, a few more nuanced rules about cafeteria plans and employee tax treatment. While most regular employees receive normal tax treatment, other employees or contractors may not be treated as such for cafeteria plans.

If you have tax-related questions about fringe benefits, it might be a good idea to consult your attorney or preferred tax specialist.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

Planning Around Fringe Benefits

Employers typically offer fringe benefits to make the work environment better for the people who currently work there and more desirable for prospective employees.

Some benefits may hold a lot of appeal. For example, 401(k)s are a powerful tool for saving for your retirement. But others may be less appealing. For instance, you may decide you don’t want to use FSAs, which often restrict how much you can contribute and when you have to spend the funds.

It’s common to choose which fringe benefits you want when you’re starting a new job and filling out your initial paperwork. However, many companies will allow you to go back and make changes if you decide later that some choices aren’t right for you.

The Takeaway

Fringe benefits can run the gamut from use of the company car to adoption assistance to employee stock options (to name just a few examples). These extra perks are in addition to your paycheck and can be a powerful way to keep workers happy and loyal while also attracting new talent.

Generally speaking, most fringe benefits are taxable, though some — like retirement planning assistance, athletic facilities, and on-site meals and snacks — are not. Some fringe benefits will even allow you to direct a portion of funds pretax toward qualified accounts and expenses, which can help lower your taxable income.

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See exactly how your money comes and goes at a glance.

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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.

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.

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.

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Whether you’re purchasing a new pair of eyeglasses, stocking up on over-the-counter medications, or paying for your child’s daycare, there may be certain expenses your health insurance plan doesn’t cover.

In those cases, having a flexible spending account, or FSA, could help you save money. This special savings account lets you set aside pretax dollars to pay for eligible out-of-pocket healthcare expenses, which in turn can lower your taxable income.

Let’s take a look at how these accounts work.

What Is an FSA?

An FSA is an employer-sponsored savings account you can use to pay for certain health care and dependent costs. It’s commonly included as part of a benefits package, so if you purchased a plan on the Health Insurance Marketplace, or have Medicaid or Medicare, you may no longer qualify for a FSA.
There are three types of FSA accounts:

•   Health care FSAs, which can be used to pay for eligible medical and dental expenses.

•   Dependent care FSAs, which can be used to pay for eligible child and adult care expenses, such as preschool, summer camp, and home health care.

•   Limited expense health care FSA, which can be used to pay for dental and vision expenses. This type of account is available to those who have a high-deductible health plan with a health savings account.

How Do You Fund an FSA?

If you opt into an FSA, you’ll need to decide on how much to regularly contribute throughout the year. Those contribution amounts will be automatically deducted from your paychecks and placed into the account. Whatever money you put into an FSA isn’t taxed, which means you can keep more of what you earn.

Your employer may also throw some money into your FSA account, but they are under no legal obligation to do so.

You can use your FSA throughout the year to either reimburse yourself or to help pay for eligible expenses for you, your spouse, and your dependents (more on that in a minute). Typically, you’ll be required to submit a claim through your employer and include proof of the expense (usually a receipt), along with a statement that says that your regular health insurance does not cover that cost.

Some employers offer an FSA debit card or checkbook, which you can use to pay for qualifying medical purchases without having to file a reimbursement claim through your employer.


💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

What Items Qualify for FSA Reimbursement?

The IRS decides which expenses qualify for FSA reimbursement, and the list is extensive. Here’s a look at some of what’s included — you can see the full list on the IRS’ website.

•   Health plan co-payments and deductibles (but not insurance premiums)

•   Prescription eyeglasses or contact lenses

•   Dental and vision expenses

•   Prescription medications

•   Over-the-counter medicines

•   First aid supplies

•   Menstrual care items

•   Birth control

•   Sunscreen

•   Home health care items, like thermometers, crutches, and medical alert devices

•   Medical diagnostic products, like cholesterol monitors, home EKG devices, and home blood pressure monitors

•   Home health care

•   Day care

•   Summer camp

Are There Any FSA Limits?

For 2023, health care FSA and limited health care FSA contributions are limited to $3,050 per year, per employer. Your spouse can also contribute $3,050 to their FSA account as well.

Meanwhile, dependent care FSA contributions are limited to $5,000 per household, or $2,500 if you’re married and filing separately.

Does an FSA Roll Over Each Year?

In general, you’ll need to use the money in an FSA within a plan year. Any unspent money will be lost. However, the IRS has changed the use-it-or-lose-it rule to allow a little more flexibility.

Now, your employer may be able to offer you a couple of options to use up any unspent money in an FSA:

•   A “grace period” of no more than 2½ extra months to spend whatever is left in your account

•   Rolling over up to $610 to use in the following plan year. (In 2024, that amount increases to $640.)

Note that your employer may be able to offer one of these options, but not both.

One way to avoid scrambling to spend down your FSA before the end of the year or the grace period is to plan ahead. Calculate all deductibles, copayments, coinsurance, prescription drugs, and other possible costs for the coming year, and only contribute what you think you’ll actually need.

Recommended: Flexible Spending Accounts: Rules, Regulations, and Uses

How Can You Use Up Your FSA?

You can consider some of these strategies to get the most out of your FSA:

•   Buy non-prescription items. Certain items are FSA-eligible without needing a prescription (but save your receipt for the paperwork!). These items may include first-aid kits, bandages, thermometers, blood pressure monitors, ice packs, and heating pads. Check out the FSA Store to find out which items may be covered.

•   Get your glasses (or contacts). You may be able to use your FSA to cover the cost of prescription eyeglasses, contact lenses, and sunglasses as well as reading glasses. Contact lens solution and eye drops may also be covered.

•   Keep family planning in mind. FSA-eligible items can include condoms, pregnancy tests, baby monitors, fertility kits. If you have a prescription for them, female contraceptives may also be covered.

•   Don’t forget your dentist. Unfortunately, toothpaste and cosmetic procedures are not covered by your FSA, but dental checkups and associated costs might be. These could include copays, deductibles, cleanings, fillings, X-rays, and even braces. Mouthguards and cleaning solutions for your retainers and dentures may be FSA-eligible as well.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

Flexible Savings Account (FSA) vs. Health Savings Account (HSA)

You may have heard of a health savings account (HSA). It’s easy to confuse it with an FSA, as they share some similarities.

Both types of accounts:

•   Offer some tax advantages

•   Can be used to pay for co-payments, deductibles, and eligible medical expenses

•   Can be funded through employee-payroll deductions, employer contributions, or individual deductions

•   Have a maximum contribution amount. In 2023, people with individual coverage can contribute up to $3,850 per year, while those with family coverage can cset aside up to $7,750 per year.

That said, there are some key differences between HSAs and FSAs:

•   You must be enrolled in a high deductible health plan in order to qualify for an HSA.

•   HSAs do not have a use-it-or-lose-it rule. Once you put money in the account, it’s yours.

•   If you quit or are fired from your job, your HSA can go with you. This happens even if your employer contributed money to the account.

•   If you’re 55 or older, you can contribute an additional $1,000 to your HSA as a catch-up contribution — similar to the catch-up contributions allowed with an IRA.

•   If you withdraw money from your HSA for a non-qualified expense before the age of 65, you’ll pay taxes on it plus a 20% penalty.

•   If you withdraw money from your HSA for any type of expense after age 65, you don’t pay a penalty. However, the withdrawal will be taxed like regular income.

Recommended: Benefits of Health Savings Accounts

The Takeaway

Flexible spending accounts are offered by employers and can be a useful tool for paying for health care- or dependent-related expenses. Notably, you fund the account with pretax dollars taken from your paycheck, which can lower your taxable income and help you save money.

You typically need to spend your FSA money within a plan year, though your employer may give you the option to either roll over a portion of the balance into the next year or use it during a grace period. There are also guidelines around what you can spend the FSA funds on and how much you can contribute to your account.

Take control of your finances with the SoFi Insights money tracker app. Connect all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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

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

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College is more expensive than ever, making it more important for college students to determine ahead of time whether their degree is worth the cost. Math degrees are often worth the cost as they allow alumni to pursue many lucrative careers.

Math majors can be mathematicians, but they can also pursue analytical professions. Many of those career paths lead to high-paying jobs, but some pay more than others. Salaries depend in large part on the type of math degree you have and the career path you choose.

What Is a Degree in Math?

A degree in math is one that students earn by studying various mathematical disciplines, such as algebra, calculus, statistics, set theory, and stochastics. Math majors might also study applied mathematics, which is more theoretical in nature.

Those who earn math degrees develop the analytical skills necessary to solve real-world problems. The problem-solving skills that math students learn is one of the reasons they do well in fields beyond mathematics itself.

There are many types of math degrees that can lead to an even greater number of career paths. This has led to a slate of fast-growing fields for math program graduates, some of which make a math degree well worth it.

What Kinds of Math Degrees Are There?

Students who want to pursue a math degree have options throughout the post-secondary education system, ranging from associate’s degrees to doctoral degrees.

Associate Degree in Math

An associate degree in math is one that students can often complete in two years or less. These degrees are often earned at community colleges and usually require about 60 credit hours.

Associate degrees in mathematics are a great way for math majors to start their academic journey. Those who earn associate degrees in math often enroll in four-year colleges; credit hours from associate degree programs can be transferable to four-year math degree programs.

Bachelor’s Degree in Math

A bachelor’s degree in math is an undergraduate degree that provides training in both applied and core mathematics. These are generally four-year degrees requiring 120 credit hours.

Students will be expected to analyze and solve problems, construct mathematical solutions, and apply mathematical solutions to real-world problems. Students can pay for these degrees with undergraduate loans.

Master’s Degree in Math

A master’s degree in math is a graduate-level degree that may offer more specialized training in mathematics. These degrees usually take about two years to complete and prepare you for a career in either a teaching position or an industry job.

It may involve basic courses in real analysis and linear algebra. Later, you may complete fundamental courses such as probability, scientific computing, and differential equations. Students can pay for these degrees with graduate loans.

Doctoral Degree in Math

A doctoral degree in mathematics is typically a Ph.D. program that takes five to six years to complete. There might also be graduate school requirements that students must complete, plus a residency.

The curriculum for a doctoral degree might involve courses in the areas of algebra, analysis, and topology. There are also exams, a dissertation, and a thesis to complete.

Are Finance and Math Degrees the Same?

Math and finance degrees are both analytical in nature, and both math and finance majors are likely to engage in quantitative analysis as a part of their professions. Despite the overlap in skills, though, the two degrees are not the same.

Both math and finance majors might enroll in introductory mathematics courses, such as calculus I. But beyond the basic courses, the two majors usually diverge. Math majors will learn more complex mathematical theory, while finance majors’ curricula will be more focused on business.

What Jobs Can You Get With a Mathematics Degree?

One of the best things about mathematics degrees is the number of career paths that may follow. Mathematics majors can be math teachers or mathematicians, but they can also have several other types of roles.

Computer and Information Research Scientists

Computer and information research scientists find ways to use new and existing technology. They study and solve complex problems in business, science, medicine, and other fields.

Physicists

Physicists study the interactions of matter and energy. They might design and perform experiments with sophisticated equipment such as particle accelerators, lasers, or electron microscopes.

Actuaries

Actuaries analyze the financial costs of risk and uncertainty. This makes them essential to the insurance industry. They use mathematics, financial theory, and statistics to assess the risk of potential events.

Mathematicians and Statisticians

Mathematicians and statisticians analyze data, applying computational methods to solve practical problems in the areas of business, engineering, science, and other fields. They develop mathematical or statistical models to analyze data.

Mathematics College Professors

Mathematics college professors teach courses around mathematical concepts, statistics, and actuarial science. They also teach courses on the application of mathematical techniques in solving specific problems.

Mathematics High School Teachers

Mathematics high school teachers plan and teach math lessons to students in secondary education. Their primary responsibilities include grading assignments and quizzes and tracking students’ progress.

What Is the Average Salary if You Have a Math Degree?

Math occupations had a median annual wage of $98,680 in May 2021, according to the Bureau of Labor Statistics. However, some math majors earn more than others.

For example, actuaries have a median pay of $105,900, while mathematicians and statisticians have a median of $96,280. Not only that, but actuaries also need just a bachelor’s degree for entry-level positions, while mathematicians and statisticians need at least a master’s degree.

Ways to Pay for a Math Degree

Much like other types of degrees, there are multiple ways to pay for a math degree. That includes financial aid, merit-based scholarships, 529 plans, and more.

Financial Aid

Financial aid is one of the most common ways to pay for college. Grants vs. scholarships vs. loans are three large umbrellas of federal financial aid. Grants and scholarships are both considered gift aid which students are typically not required to repay. Federal student loans do require repayment.

Federal student loans have many benefits for borrowers, such as income-based repayment (IBR) plans and public student loan forgiveness (PSLF). To apply for financial aid, students will need to fill out the Free Application for Federal Student Aid (FAFSA®) yearly.

Merit-Based Scholarships and Grants

There are thousands of scholarships and grants that may be available to students pursuing a math degree. These scholarships range from amounts of just a few dollars up to covering the entire cost of college.

One of the biggest benefits of scholarships and grants is that unlike student loans, they usually don’t have to be repaid. While “merit-based” often refers to academic merit, it can be based on other criteria, such as athletics or leadership.

With so many scholarships available, you may want to leverage a combination of resources to find relevant opportunities. For example, you contact your school’s financial aid office and check with federal and state agencies. The U.S. Department of Labor also has a scholarship search tool available.

529 Plans

529 plans are college savings plans sponsored by a state or state agency. These plans are investment accounts that offer tax benefits and can cover qualifying education expenses such as tuition and textbooks.

529 plans are often opened by parents to save for their children’s future college education, but anyone 18 and over can open an account. You can even open an account for yourself and still take advantage of the tax benefits they offer.

Personal Savings

Personal savings is always an option when paying for your math degree. While it isn’t “free money” like a scholarship or grant, personal savings can help in some situations.

For example, certain expenses don’t qualify for the tax benefits of a 529 plan, such as entrance exams and test prep. You might decide to use your personal savings for non-qualified expenses and reserve your 529 for qualified expenses.

Private Student Loan

Private student loans are available from private financial institutions. You can qualify as long as you meet certain requirements, such as being enrolled in an eligible school and meeting credit and income criteria. Private student loans may offer lower interest rates for qualifying borrowers than federal student loans but may also lack some of the protections that federal student loans offer.

The Takeaway

Math degrees remain an excellent choice for anyone starting college as they are highly valued in sectors such as finance and tech, in addition to mathematics. Those pursuing a math degree can earn degrees ranging from associate degrees up to doctoral degrees.

However, college is expensive and most of us need help covering the costs. SoFi private student loans are one option. There are rate discounts, a six-month grace period, and absolutely no fees. You can even repay your student loans using rewards points.

Find out if you qualify for a no fee student loan from SoFi in just a few minutes.

FAQ

What can you do with a mathematics degree?

Math degrees allow people to pursue careers not only as mathematicians and teachers but also as actuaries, physicists, and computer scientists.

What are degrees in math?

Math degrees allow students to study and apply concepts learned in mathematical disciplines such as algebra, calculus, and statistics. In doing so, students learn analytical skills they can apply in solving real-world problems.

How can I pay for a math degree?

There are many ways to pay for a math degree, including scholarships and grants, federal and private student loans, and 529 plans.

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Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

After graduation and your six-month federal student loan grace period, it’ll be time to start paying your dues. If you are on the Standard Repayment Plan, you’ll pay at least $50 a month for 10 years. But there are other ways to pay back your student loans: through income-driven repayment plans.

Not all of these plans have the same repayment strategy, and not all federal loans qualify for income-driven repayment. We’ll help you find the one that aligns with your financial situation before you commit.

How Does Income-Driven Repayment Work?

The U.S. Department of Education offers four income-driven repayment (IDR) plans for holders of federal student loans:

•   Income-Based Repayment (IBR)

•   Income-Contingent Repayment (ICR)

•   Pay As You Earn (PAYE) Plan

•   Saving on a Valuable Education (SAVE) Plan

For most IDR plans, your monthly payment is calculated as a portion of your discretionary income. The Department of Education defines discretionary income as your adjusted gross income in excess of a protected amount.

Discretionary income under the SAVE Plan, for example, is any adjusted gross income you have above 225% of the federal poverty guideline appropriate to your family size. You’ll have a $0 monthly payment under the SAVE Plan if your annual income doesn’t exceed the protected amount of $32,805 for a single borrower and $67,500 for a family of four in 2023.

If you don’t qualify for a $0 monthly payment on the SAVE Plan, your monthly payment beginning in July 2024 will be set at 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average if you have both.

On the IBR plan, your monthly payment is typically set at 10% to 15% of your discretionary income above 150% of the federal poverty guideline appropriate to your family size. But unlike the SAVE Plan, a borrower’s monthly payment on the IBR plan will never be more than what you would have paid through the Standard Repayment Plan.

IDR Loan Forgiveness

All federal IDR plans can end with your remaining loan balance being forgiven after 20 or 25 years, but some borrowers may receive forgiveness sooner under the SAVE Plan. Beginning in July 2024, federal student loan borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments on the SAVE Plan.

For more details on federal IDR debt relief benefits, check out our Guide to Student Loan Forgiveness.

Your personal circumstances and goals may dictate which student loan repayment plan is right for you. You can estimate how much your monthly payments will be through the federal Loan Simulator calculator.


💡 Quick Tip: Ready to refinance your student loan? You could save thousands.

The Difference Between Income-Driven Repayment Plans

Deciding which IDR plan is right for you (and that you may qualify for) depends on your financial situation and your loan type(s). Here’s what they all mean:

•   IBR (Income-Based Repayment). This plan is based on your income and family size. The potential IBR payment must be less than what you would pay under the Standard Repayment Plan to qualify. Any remaining balance is forgiven after 20 or 25 years.

•   ICR (Income-Contingent Repayment). Under this plan, your monthly payment is adjusted based on your income (sometimes set at 20% of your discretionary income above 100% of the federal poverty guideline appropriate to your family size). It might not lower your payments as much as other plans, but it’s the only IDR plan that allows Parent PLUS Loans. Any remaining balance is forgiven after 25 years.

•   PAYE (Pay As You Earn). With this plan, you’ll never pay more than the fixed Standard Repayment Plan amount. Payments are typically set at 10% of your discretionary income above 150% of the federal poverty guideline appropriate to your family size. Any remaining balance after 20 years of payments is forgiven.

•   SAVE (Saving on a Valuable Education). This IDR plan replaced the former REPAYE Plan. Anyone with qualifying student loans can enroll into the SAVE Plan. However, you could end up paying more per month under this plan than the Standard Repayment Plan. You’ll have a $0 monthly payment under the SAVE Plan if your annual income falls below 225% of the federal poverty guideline appropriate to your family size.

Alternatives to Income-Driven Repayment Plans

The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1, 2023, and payments to resume in October 2023.

Aside from the Standard Repayment Plan, there are a few options to consider instead of IDR:

Consolidation

If you have federal student loans, you can get a Direct Consolidation Loan. This will move all your eligible federal student loans into one monthly payment. Your new interest rate is the weighted average of all your loans, rounded up to the nearest eighth of a percent.

This can be helpful if you have many smaller loans that each have a minimum monthly payment. It typically won’t lower your monthly payment, however, but it can make it manageable and easier to keep track of. Only federal loans are eligible for a Direct Consolidation Loan.

Refinancing

Refinancing is similar to consolidation. You get one loan to replace all of your other loans, but it’s a new loan with a new interest rate from a private lender or bank. Your credit report and other personal financial factors are considered to see if you’re a responsible borrower. If you previously had a co-borrower, such as a parent, you can look into refinancing without a cosigner.

Many lenders allow you to refinance all of your student loans, not just federal student loans. So if you have a mix of private student loans and federal student loans, refinancing will create one new loan with one payment to replace them.

If you qualify for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan. You may pay more interest over the life of the loan if you refinance with an extended term. You can explore different scenarios with our Student Loan Refinance Calculator.

You may ask, “Should I refinance my federal student loans?” Refinancing federal student loans with a private lender forfeits your access to Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and federal IDR plans. You can weigh the pros and cons when determining whether student loan refinancing is right for you.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

How Do You Calculate Income for an Income-Driven Plan?

The Department of Education considers three different components when calculating a borrower’s income. While this may seem needlessly complicated, it actually benefits borrowers:

Annual Income

Any income that’s taxable counts toward the Education Department’s calculation. That means regular wages, plus interest and dividends from savings and investments, unemployment benefits, etc. On the flip side, any income that isn’t taxed doesn’t count: gifts and inheritances, cash rebates from retailers, child support payments, and so on.

Spouse’s Income

If you and your spouse file a joint tax return, then their income must also be factored in. If you file separately, only your income counts.

Family Size

Your family size is the number of people who live with you and receive more than half their support from you. This includes children but also dependent adults, such as an older parent.

The Takeaway

There are four income-driven repayment plans for federal student loan holders, including IBR, ICR, PAYE, and SAVE. No new PAYE enrollments will occur after July 1, 2024, although current PAYE enrollees can remain on the plan after that date.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

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

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A freelancer is a self-employed worker who provides services for a client or multiple clients as an individual contractor. Freelancers typically have flexible hours, work remotely, and can be involved in as many or as few projects as they would like. Think about people you may know who provide social-media consulting for a few businesses, drive an Uber, or take catering gigs. All of them are freelancers.

Because freelancers are not employees, however, they do not receive typical work benefits like health insurance and paid time off. They are also subject to self-employment tax and are responsible for paying taxes entirely on their own.

Are you committed to being a freelancer or just curious about how it works? In this piece, you’ll get the answers you need to move ahead, including:

•  What is a freelancer?

•  How does freelancing work?

•  What are common types of freelancers?

•  What are the pros and cons of freelancing?

What Is Freelancing?

So what does freelancing mean? Freelancing is when a self-employed individual offers professional services to a company in exchange for payment. Unlike a traditional employee, the freelancer can set their own rates and hours. They can work for one or multiple companies.

In exchange for this flexibility, freelancers must be prepared to fund their own benefits like health insurance. They also typically pay their own taxes which are potentially higher.

Some people freelance as their sole source of income. If they work on a large or long-term project, you may hear the term “independent contractor” used (you’ll learn more about different terminology below).

However, it is possible to freelance on top of a regular salaried or hourly position. Such freelance work is commonly referred to as a side hustle or side gig and can help people bring in more cash.

Recommended: 15 Low-Cost Side Hustles

How Does Freelancing Work?

Now that you know the answer to “What is freelancing,” here’s more detail on how this kind of employment works. Freelancers make money by selling a service to another individual or company (i.e., a client). Typically, freelancers and their clients will enter into a contract with one another that specifies the nature of the work, the duration of the professional relationship, and the payment for services rendered.

After completing the work, a freelancer will usually submit an invoice to the client, who will then pay the freelancer by a predetermined method (direct deposit, paper check, peer-to-peer transfer, etc.). During tax season, a freelancer will receive an IRS 1099 composite form from each client instead of a W-2. This form will detail the total compensation the freelancer earned from the client.

Because freelancers are self-employed, they are solely responsible for paying federal, state, and local taxes on all earned income. In addition to paying what an employee would traditionally have withheld from their paycheck, a freelancer must also pay what an employer usually contributes toward taxes (typically Social Security and Medicare taxes). And because there is no steady paycheck from which funds are being withheld for taxes, freelancers are responsible for paying quarterly estimated taxes to avoid a penalty from the IRS.

If you decide to become a freelancer, it is a good idea to work with a certified accountant to ensure you are handling your taxes correctly. Not only can an accountant help you with quarterly taxes, but they can also point out important freelancer tax deductions you can be taking.

Recommended: Passive Income Options

Common Fields for Freelancing

Traditionally, freelancers have been thought of as roles like writers, photographers, consultants, and coaches. But today’s gig economy has broadened the definition of freelance work. Rideshare drivers, dog walkers, and online tutors — these just scratch the surface of jobs one can do as a freelancer.

In terms of what a freelancer is specifically, take a look at some common fields and roles:

•  Editorial

◦  Copywriters

◦  Journalists

◦  Bloggers

◦  Proofreaders

◦  Editors

•  Creative

◦  Graphic designers

◦  Photographers

◦  Podcasters

◦  Vloggers

◦  Animators

◦  Videographers

◦  Social media influencers

◦  Musicians

•  IT and Development

◦  Web developers

◦  Mobile developers

◦  Software developers

•  Admin

◦  Virtual assistants

◦  Transcribers

◦  Administrative assistants

•  Financial and Legal

◦  Accountants

◦  Bookkeepers

◦  Tax preparers

◦  Lawyers

•  Sales and Marketing

◦  Social media marketers

◦  Public relations specialists

◦  Digital advertisers

◦  SEO marketers

•  Consultants

◦  Business consultants

◦  Medical consultants

◦  Legal consultants

•  Gig Economy

◦  Delivery drivers

◦  Rideshare drivers

◦  Dog walkers

◦  Babysitters

◦  House cleaners

◦  Fitness instructors

The important thing to remember: Most of these jobs can be done as an actual employee, and many other jobs not listed here can now be done by freelancers. Many businesses rely on a healthy mix of freelancers and independent contractors to achieve success.

Recommended: How to Make Money Through Social Media

Types of Freelancers

You may hear different terms used and wonder what does freelancing mean exactly? Are independent contractors and freelancers the same thing? Here, the answer to that question as well as clarity on some other phrases you may encounter that describe this kind of work:

1.   Independent contractor: Most freelancers are independent contractors. They provide their services to multiple clients and companies, as specified by the contracts they agree to. An independent contractor may do a short, one-off project with a client, but it tends to be used (as noted above) when one is contracted to provide a service on an ongoing basis or does a larger scale project.

2.   Part-time freelancer: People who hold down a full-time job but make extra money on the side — like a weekend wedding photographer or a doctor who does some medical consulting with clients — are considered part-time freelancers.

3.   Small business owners: Some freelancers may earn enough work that they need to hire actual employees to keep up with it. For example, a freelance writer may attract enough clients to eventually form an agency.

4.   Temporary workers: Individuals who find temporary work, often through a temp agency, are considered freelancers. Sometimes, businesses need to fill a full-time role but only for a set number of months or years, like to cover for a full-time employee’s parental leave. The contracted worker who temporarily fills that role is also considered a freelancer but may enjoy some company benefits during their tenure, depending on contract specifics.

Recommended: 5 Ways to Achieve Financial Security

Tips on Becoming a Freelancer

Thinking about becoming a freelancer? The following tips may help you find success:

•  Finding clients: Before quitting a full-time job with steady income and benefits, it’s a good idea to have some clients as a freelancer. Many freelancers start out part-time and transition to full-time freelancers once they have enough steady work.

•  Understanding the financial implications: Knowing how you will pay taxes as a freelancer is an important requirement before transitioning into this career. It’s also wise to have a plan for health insurance, disability insurance, and other benefits that you may be losing by transitioning out of full-time work.

•  Staying organized: Having an organizational system to keep track of clients, projects, communication, and deadlines can be crucial. Successful freelancers often make their own work schedule with standard hours and stick to it, even if no one else is holding them accountable.

•  Networking: Word-of-mouth referrals are a great way to earn business as a freelancer; networking on sites like LinkedIn and in person with potential clients and others in your field is a great strategy. Depending on your line of work, having a website and portfolio advertising your services can make it easier to win new business.
Feeling unsure about the transition to independent contractor? Consider researching and following some financial planning tips for freelancers.

Recommended: Retirement Options for the Self-Employed

Pros of Freelancing

Freelancers enjoy plenty of perks, including:

•  Setting your own rates: As a freelancer, you can determine how much you’ll charge a client per project or hour. Just remember that if you set the price too high, companies may go with another contractor.

•  Setting your own hours: You can also work as much or as little as you’d like — and at the time of day you’d prefer. You don’t have to ask for permission to go to the grocery store, take a mental health day, or go to yoga class in the morning.

•  Diversifying your client list to keep work interesting: You can choose which clients you work with and have more freedom to define your job responsibilities.

•  Flexible time off: Freelancers may not get paid for their time off, but as long as you fulfill contractual obligations to clients, you can take vacation (or just lazy days) whenever you like.

•  Freedom from regular meetings and office politics: While freelancers may hop on a call or meet up with a client for lunch on occasion, there is typically more freedom to do the actual work instead of sitting through unnecessary meetings. This may not apply to some freelancers, like consultants.

•  Remote work: Most freelancers are able to work on the go or from a home office.

Cons of Freelancing

But there are also downsides to freelancing, like:

•  Lack of company-paid benefits: Freelancers are responsible for getting their own health insurance and can’t count on a company’s 401(k) match. (That’s where the solo 401(k) comes in!) Freelancers also won’t get paid while they’re on vacation.

•  Higher and more complicated taxes: If you’re self-employed, you’ll need to cover some taxes beyond those you would pay as a traditional employee. Freelancers must also pay their taxes quarterly to avoid fines from the IRS.

•  Less job security: Because freelancers are not employees, it is easier for a company to sever ties. Freelance work is sometimes on a per-project basis, so as a freelancer, you may need to spend a significant portion of your time just trying to market your services to find more work.

•  Lack of steady income: As a freelancer, you might not be able to depend on the same amount of money every week; it can vary by the type and amount of projects you take on. This can make it more challenging to build a monthly budget.

•  Loneliness: Working from a home office as a freelancer can be isolating. If you feed off other people’s energy and really enjoy networking and socializing with coworkers, you may find that freelancing isn’t right for you.

•  The constant need for “hustling”: Workers who do an average job might be able to skate by as a traditional employee and still earn a paycheck. To turn a profit as a freelancer, you must constantly impress clients with high-quality work and no missed deadlines. Otherwise, they might look elsewhere.

Here’s a look at the pros and cons of freelancing in chart form:

Pros of Freelancing	Cons of Freelancing
•   Set your own rates •   Set your own hours •   Choose your clients •   Have flexibility with time off •   Avoid meetings and office politics •   Can work remotely	•   Don’t get benefits •   Must cover more taxes •   Lack job security •   Don’t receive steady paycheck •   May be lonely •   Must constantly be pitching new work

Banking With SoFi

Freelancers rely on many tools to turn a profit, including a bank account that puts their hard-earned money to work. If you sign up for an online bank account with SoFi, you’ll enjoy a suite of tools that makes organizing your earnings, spending, and saving super convenient. Plus you’ll earn a hyper competitive interest rate and pay no monthly fees, so your money can grow faster.

Better banking is here with up to 4.60% APY on SoFi Checking and Savings.

FAQ

Is freelancing better suited for full-time or part-time?

Many freelancers are able to turn their work for a client or clients into a full-time career. If you are just starting out, it might be a good idea to freelance part-time and then transition to full-time if you feel confident that you can sustain a freelance career.

What skills are necessary for freelancing?

Beyond the actual job skills required by whatever field you’re freelancing in, being a successful freelancer requires several key skills, including:

•  Excellent communication

•  Strong organization

•  A commitment to deadlines

•  The ability to network

•  A solid understanding of finances.

Is freelancing difficult?

Freelancing can be difficult: You won’t enjoy employer-sponsored benefits, you’ll have to pay self-employment taxes, and you’ll need to “hustle” to win clients — and then deliver impressive work that convinces clients to keep you around. That said, freelancing offers freedom and flexibility and can be lucrative if your business is successful.

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Photo credit: iStock/AleksandarNakic

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.

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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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 http://www.sofi.com/legal/banking-rate-sheet..

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