mother and son on rooftop

Understanding Parent PLUS Loan Repayment Options

If you took out loans to help fund your child’s education, such as Parent PLUS Loans from the federal government, you’re eventually going to have to start paying them back. Parent PLUS loans can’t be transferred to your child — even once they graduate and get a steady job — so you’re the one who’s on the hook for paying them off in full. That prospect can be daunting, since this may be your largest chunk of debt outside of a mortgage.

But you have lots of options for temporarily putting off payments on Parent PLUS Loans or making them affordable. The choices can get overwhelming, so here’s a guide to help you figure out which plan is right for you.

Starting Repayments — and Pausing Them if You Need To

Unlike some other federal loans, Parent PLUS Loans do not have a grace period — a six-month break after the student graduates, or drops below half-time enrollment, before payments are due. Instead, their repayment period typically begins once the loan is fully disbursed.

The idea behind the delay with other loans is that it gives your child a chance to get settled financially. The federal government assumes you, as a parent, don’t need the same accommodation.

If you’re not ready to start paying, you have a couple of options for pausing repayment on your Parent PLUS Loan:

1.    Apply for deferment: One option is to apply for a deferment , which will allow you to temporarily stop monthly payments. You can ask for a deferment while your child is still in school at least half-time, or for six months after they graduate or drop to a lower level of enrollment.

   Keep in mind that interest will still be piling up, even if you’re not making payments. If you don’t pay the interest during this period, it will be capitalized, or added to the loan principal, when the deferment is over, which can increase how much you owe over the life of the loan.

2.    Request a forbearance: If the circumstances above don’t apply, you can still temporarily stop or reduce what you owe by requesting a forbearance . You may be eligible for forbearance if you’re unable to pay because of financial hardship, medical bills, or a change in your employment situation.

   You may also qualify for a forbearance if you’re in a medical or dental internship or residency, if you’re in certain teaching jobs, or if you pay 20% or more of your gross income toward the loan. Interest will still capitalize during this period, but if you’re going through a temporary financial difficulty, it may be worth approaching your loan servicer for a forbearance rather than risking missed payments.

Parent PLUS Loan Repayment Options

You can’t put off payments forever. Depending on the plan you choose, you will have between 10 and 25 years to pay off the loan in full. But Parent PLUS loan repayment doesn’t have to be daunting — here are a few of the Parent PLUS Loan repayment options you have:

•   Standard Repayment Plan: One of the most straightforward options is the Standard Repayment
Plan
. In this scenario, you will pay the same fixed amount each month and pay the loan in full within a decade. The benefit is that you always know how much you owe and you’ll accrue less interest than with most other plans, since you’ll be repaying the loan in a faster time frame.

   The difficulty is that this results in monthly payments that are too high for some people. It’s a good option if you can afford the payments and you don’t expect your situation to change in the next ten years.

•   Graduated Repayment Plan: Another option is the Graduated Repayment Plan . You will also pay off your loan within a decade, but the payments will start out smaller and then increase, usually every two years. You’ll pay more overall than under the previous plan because you’ll accrue more interest, but less than if you were to sign on for a longer repayment term. This plan is a good option if you expect to earn more in the relatively near future.

•   Extended Repayment Plan: A third choice is the Extended Repayment Plan , which spreads payments out over 25 years. You can either pay the same amount every month, or have payments start out lower and ramp up over time. You’ll end up paying more over the life of the loan because you’ll be racking up interest over a longer time period. But it’s a good way to make monthly payments more affordable while knowing you are on track to pay off the loan in full.

Loan Forgiveness for Parent PLUS Loans

Parent PLUS borrowers don’t have as many opportunities as students do for getting a portion of the loan forgiven. There are no income-driven repayment plans for Parent PLUS loans, even though the government offers four such plans for students.

That being said, you do have a couple of options:

•   Income-Contingent Repayment Plan: You do have one option for tying payments to your income, but you have to jump through one hoop first — you would need to consolidate your Direct PLUS loan (or loans) into a Direct Consolidation Loan through the federal government. This combines your existing loans into one and may change your monthly payment, interest rate, or the amount of time in which you have to repay the loan. Just note that Direct PLUS Loans received by parents to help pay for a dependent student’s education cannot be consolidated together with federal student loans that the student received.

   Once you consolidate, you may be eligible for the Income-Contingent Repayment Plan . Under that plan, your monthly payment would be no more than 20% of your discretionary income. If you make the monthly payment for 25 years, the remaining balance will be wiped away, though you may owe taxes on it. This can be a good option for making your payments affordable if you expect your income to remain relatively low for the foreseeable future.

•   Public Service Loan Forgiveness: Another way you might be able to get your loans forgiven is by signing up for Public Service Loan Forgiveness . You might qualify if you work in a public service job, including for a government organization, nonprofit, police department, library, or early childhood education center. Note that you are the one who has to work in this field, and not the student.

   Make sure you submit an Employment Certification Form every year or when you switch jobs. To qualify, you also need to take out a Direct Consolidation Loan and then start repayment under the Income-Contingent Repayment Plan. If you work in public service, this can be a very effective way to get the loan off your back within a decade.

Considering Student Loan Refinancing

If you’re looking for another way to tackle your Parent PLUS loan, consider refinancing your parent plus loans with a private lender. This involves taking out a new loan and using it to repay your old one.

The benefit of refinancing is that you may qualify for a lower interest rate or a lower monthly payment, especially if you have a solid credit and employment history. However, when you refinance federal loans with a private lender, you will lose eligibility for any federal repayment plans or loan forgiveness programs.

You can get a preliminary quote online in just a few minutes to see whether refinancing makes sense for you.

The Takeaway

By taking out a Parent PLUS loan, you are generously supporting your child to achieve their dreams of a higher education and a solid career — but that doesn’t mean that loan payments need to become a burden for you. If you learn about your options for reducing or managing payments, you’ll be on track to paying off your loan with peace of mind.

One such option you might consider is refinancing your Parent PLUS Loan, which could help you secure a lower interest rate or monthly payment.

Ready to tackle your Parent PLUS Loan? Look into whether refinancing with SoFi can help you get a better deal.


SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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.
SOSL19042

Read more
topdown two laptops

Exploring IVF Financing Options

Couples who are finding it hard to get pregnant can often feel isolated while they’re going through this difficult experience. But struggling with fertility is actually quite common.

Between 10$ and 15% of couples trying to have children in the US experience infertility problems, according to the Mayo Clinic. More than 12% of American women between the ages of 15 and 49 have gotten medical treatment for infertility issues, according to the last National Survey of Family Growth. And more than 55,000 American women per year give birth thanks to assisted reproductive technology.

One of the most common and effective treatments for fertility problems is in vitro fertilization (IVF). This involves removing an egg from a woman’s ovaries, fertilizing it with sperm in a lab, and then implanting the embryo in her uterus. Women under the age of 35 have a nearly 50% chance of having a baby through IVF, while women over the age of 42 have about a 3.9% chance.

The procedure is expensive—the average cost of one IVF cycle in the U.S. is between $12,000 and $17,000. That number can depend on the city or state you live in, the treatment center you use, how many medications you take, and other factors. In many states, insurance doesn’t cover IVF at all. So, on top of the emotional toll of fertility struggles, the high cost of treatment can sometimes be a financial burden as well.

Options for Financing IVF

For many would-be parents, that hefty price tag is worth it for the chance to have children. But how can people afford to pay for treatment? Here are a few ideas for IVF financing.

1. Tapping into Your Health Insurance

Your first step should probably be to check whether your health insurance will cover IVF. There are 15 states that require insurance companies to cover infertility treatment: Arkansas, Connecticut, Delaware, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Montana, New Jersey, New Hampshire, New York, Ohio, Rhode Island, and West Virginia. However, not all of these states include IVF in the requirement. Another two states—California and Texas—require insurers to offer coverage for infertility treatment, and in California this doesn’t include IVF.

You can contact your insurer to find out your specific benefits. If you have the option and if the timing works out with your enrollment period, you might consider switching your insurance plan to one that covers IVF. But in most states, where insurance companies don’t have to pay for IVF, so in those locations, you may be responsible for covering all expenses yourself.

2. Using Your Health Savings Account or Flexible Spending Account

A health savings account (HSA) allows you to put away money for medical expenses. Typically, you get an HSA in tandem with a qualifying high-deductible health plan. If you have funds in your HSA, you can use them to pay for IVF and related medical expenses. As long as you paid for the expenses after you opened the HSA, you can reimburse yourself for them at any time—it doesn’t have to be in the year that you incurred the costs.

If your employer offers a flexible spending account (FSA), you can also use those funds to pay for IVF. You don’t need a qualifying health plan to have and use this account. However, you do have to use all your FSA funds in the year they’re doled out or lose them.

Bear in mind that there are annual limits on how much money you can contribute to either kind of account. For 2022, the individual cap on HSA contributions is $3,650 and the family cap is $7,300. Health flexible spending account limits were at $2,750 in 2021. At the time this article was updated, the IRS had not announced what, if any, changes it plans to make for 2022.

3. Budgeting and Saving

If you’re planning to pay for IVF out-of-pocket and you don’t just have that kind of cash lying around, the most basic financial move is to save up, the way you would for any major expense. That likely means making a budget. You can start by tallying up your monthly expenses and take-home income. If you have enough financial leeway to save cash every month, you could set up an automatic paycheck withdrawal amount that could go directly into a savings account dedicated to your IVF fund.

If you don’t have enough left over after your expenses to save for IVF, one option is to work on cutting your spending. Can you take in a roommate or boarder to reduce housing costs? Could you spend time doing more free or low-cost activities with your friends instead of going out to bars or shows? What about giving up that gym membership in favor of YouTube fitness videos or running outdoors?

Another option is to increase your income. Perhaps you or your partner could ask for a raise at work or look for a better-paying job. Or you might take on a side hustle, such as driving for a ride-sharing service or renting your place out on Airbnb.

4. Borrowing From a Loved One

If you have a friend or relative who is financially comfortable, you might consider asking them for a loan. There may be people in your life who would be happy to support you in such an important and personal investment. But approach this option carefully to avoid damaging relationships. You may want to make it clear that the person you’re asking can say no with no hard feelings. If they agree, it’s a good idea to set out the terms of the loan clearly, including whether you’ll pay interest and your repayment schedule. Then, of course, you should be sure to honor the agreement.

5. Getting a Medical or Fertility Loan

Some IVF providers work with companies that offer financing for medical treatments. You can also search for IVF-specific loans and financing programs online. Take note of any origination fees or penalties for repaying the loan early.

These options can be convenient, but it never hurts to shop around before borrowing, since both loans and financing programs can come with higher interest rates than you might expect.

Some fertility treatment providers may also offer IVF payment plans that let you break the cost down over a number of months.

6. Applying for a Grant

A number of nonprofit organizations offer grants and scholarships to those who cannot afford to pay for IVF. Bear in mind that there’s no guarantee that you’ll receive a grant. That said, groups that provide assistance nationally include the AGC Scholarship Foundation, BabyQuest Foundation, the Tinina Q. Cade Foundation, the Family Formation Charitable Trust, the Footsteps for Fertility Foundation, among others.

Other groups may offer support to individuals and families who live in specific regions. You might also want to look at this list of infertility financing resources from Resolve .

7. Taking Out a Home Equity Line of Credit

If you own a home, you may be able to take out a revolving line of credit against the equity that you’ve built up. The advantage is that home equity lines of credit (HELOC) often have lower interest rates than credit cards or other types of loans. As of September 1, 2021, the average rate for a R30,000 HELOC was 4.10% (but this rate will change daily).

The amount you can borrow and the terms depend on the equity in your home, as well as your credit history, debt-to-income ratio, and other factors.

The downside of a HELOC is that if you have trouble making payments, your home is on the line. It’s up to you to pay the entire balance off within a certain time period, or else, typically, a sky-high interest rate kicks in.

8. Borrowing From Your Retirement Account

This is a path that financial advisors generally would not recommend. That’s because nest eggs usually stay untouched for decades in order to have enough time to grow for retirement. The more funds you leave in, and the earlier you invest, the more time your retirement savings has to grow or to recover from losses.

However, you may have the option of borrowing up to $50,000 or half of the amount vested in your 401(k)—whichever is smaller. If you take this path, you are basically lending the money to yourself at market interest rates for up to five years. However, if you leave your job for any reason during the time you’re paying off the loan, there may be penalties for early withdrawal if you don’t pay the loan off in time. Keep in mind that you will be repaying the loan with after-tax dollars, and they’ll be taxed again when you take the money out in retirement.

You may also qualify to actually withdraw money from your 401(k) to pay for out-of-pocket medical expenses, if your plan allows what’s called a hardship withdrawal . You’ll have to pay taxes and a 10% penalty on the amount you take out. If you have a Roth IRA, you can withdraw your contributions (but not earnings) at any time without penalties or taxes.

9. Taking Out a Personal Loan

Compared to using high-interest credit cards or money in your retirement accounts, a personal loan might be a better option for many people. A personal loan can be used for almost any expense, including IVF, and it often (but not always!) comes with a much lower interest rate than credit cards.

Unlike a HELOC, unsecured personal loans don’t require you to put up any assets as collateral. With SoFi, for example, you can borrow from $5,000 up to $100,000 without paying any fees or prepayment penalties. If you qualify, you then have a fixed rate with a fixed monthly payment for the term of the loan, so you know exactly what to expect.

The Takeaway

IVF might be one of the most meaningful investments you’ll ever make, but it’s undeniably expensive. You can look to your insurance, health savings accounts, cash savings, or a loved one. If that’s not enough, an unsecured personal loan may be a smart way to finance treatment and help make your dreams a reality. See if you might be eligible for one of SoFi’s IVF Treatment Loans with no fees to help you cover the costs.


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

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.

SOPL18158

Read more
dollar bill broken heart

What is the Average Cost of Divorce?

An uncontested DIY divorce could cost $300. For a messy, high-stakes parting, add zeros (knowing that the sum will be short of Jeff Bezos’ $38 billion). When the nuptial knot frays, average divorce costs add up to several thousand. So how much does divorce cost, really?

Specifically, $13,000, on average, when a full-service lawyer handles the split, Nolo found. But all kinds of factors, from attorney fees to assets, influence the bottom line.

Here are details about types of divorce and what to expect cost-wise with each.

How Much Does It Cost to Get a Divorce?

The cost of a divorce can depend on which state you live in, how amicable the parting is, and whether you work with a divorce attorney, own property together, and have children, among others.

Most cases settle before going to trial. Here are common costs if you need to prepare for a divorce.

Without an Attorney

A DIY uncontested divorce is the cheapest option. You and your spouse submit paperwork to your local family court, then fill out and file required documents.

DivorceNet found that the median cost of a DIY divorce is only $300. That could be because many filers who don’t hire a lawyer have no contested issues.

There is also the option of online assistance. In an uncontested divorce, an online service could add $150 to $1,500, LegalZoom says.

With an Attorney

A lawyer can only work with one client at a time, so two attorneys are required if both spouses want their own representation.

A divorce attorney will usually ask for a retainer, or down payment, of $2,500 to $5,000, and will charge from that. If the retainer runs out, the lawyer may bill by the hour. Hourly fees may range from $150 to $400 or more per hour, according to LegalZoom.

A reader survey by Nolo, a publisher that specializes in legal content, found that the average cost of a divorce handled by a full-scope attorney was $12,900, with $11,300 of that lawyer fees. The median, though, was $7,500, including $7,000 in attorney fees.

Of course, the longer it takes to reach a final judgment, the higher your heap of attorney fees will be.

Mediation

If you’re dealing with a more convoluted situation and don’t feel comfortable filing yourself, but don’t want to shell out money for a divorce lawyer, you could consider working with a mediator.

In this form of divorce, both spouses work with a neutral third party who has a handle on the financial and legal aspects of divorce and oversees the process.

A non-attorney mediator may charge $100 to $350 an hour, with a couple’s total mediation bill coming in anywhere from $3,000 to $8,000, according to DivorceNet.

Free or low-cost mediation services are often provided by courts, nonprofit organizations, and bar associations.

Collaborative Divorce

In this hybrid of mediation and a traditional divorce using lawyers, each spouse is represented by a collaborative divorce attorney. The goal is to help both parties work toward a mutually satisfactory outcome and, if children are involved, one that keeps their best interests in mind.

Both parties commit, in writing, to using cooperative dispute resolution techniques.

Collaborative divorce is more comprehensive in scope than mediation, and the cost can start at $10,000, according to LegalZoom.

If the process fails, both attorneys must withdraw from the case, and the couple will need to hire new lawyers and continue through family law court proceedings.

Consulting Attorney

If you can’t afford to hire a full-scope divorce attorney, you might be able to hire a consulting attorney for specific tasks. The average total fees for consulting attorneys were $4,600, and the median was $3,000, Nolo’s survey found.

Who Pays for the Divorce?

Most of the time, each spouse pays their own attorney fees and costs.

In select cases involving income disparities or one party unnecessarily complicating the proceedings, a judge may order a spouse to pay his or her partner’s divorce costs, LegalZoom says.

The following are some of the factors that affect the costs of a divorce.

Child Custody

In a contested divorce, the issue of child custody will likely come up. If the couple is able to agree on a child custody schedule that works for both parents, that is usually the easiest path forward.

For divorces involving children that require an attorney to iron out custody details, costs tend to increase significantly thanks to the additional time spent working with parents to reach an agreement.

A contested divorce involving custody could also include working with a court-assigned professional, who may interview the parents and children, observe each parent at home with the kids, and make an evaluation based on their findings.

A county custody evaluation could cost between $1,000 and $2,500. A private review could run $15,000 or more, according to DivorceNet.

Real Estate

Couples who share a property may require the help of real estate attorneys or agents who focus on helping couples ascertain the disposition of their homes.

A home appraisal is an unbiased, third-party estimate of a property’s value. It can cost between $300 and $400, HomeAdvisor says.

Sometimes couples opt to refinance the mortgage on the marital home into one name, releasing the other spouse from obligation. The cost of refinancing can be several thousand dollars.

Alimony

Another potential consideration in a divorce may be alimony, or spousal support.

If both individuals can’t agree on the amount of payment and the time payments are to be made, the court may have to step in.

That can involve litigation and a review of debts and finances. Since the process requires legal counsel, alimony decisions can quickly drive up divorce expenses.

Do Divorce Lawyers Offer Payment Plans?

Some family lawyers do offer payment plans, Experian says. The time to ask about that is during an initial consultation.

In most situations, paying for a divorce can be a major stressor.

If you and your spouse are on OK terms and have savings, you could consider pooling together as much as you can to put toward divorce costs. You could also ask to borrow money from relatives or friends. In some cases, couples may know that divorce is looming and start saving for it ahead of time, as unpleasant as that may be.

Some people may opt to put their divorce costs on a credit card and pay the debt over time, with interest. An option that may be more cost-effective is a personal loan.

A personal loan has several potential advantages. The interest rate could be lower than a credit card, depending on your credit score. Most personal loans come with a fixed interest rate, which makes budgeting easier.

And a personal loan might allow you to borrow a significant amount of money and have several years to pay it off.

The Takeaway

How much does a divorce cost? A good answer might be: More than most people hope it will be. Let’s just say average divorce costs are in the thousands.

If a fixed-rate personal loan sounds like something that could help, give SoFi a try. There are no fees.

Check your rate on a SoFi Personal Loan.


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

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.

SOPL19058

Read more
blue piggy bank with graduation cap

Paying for College: A Parent’s Guide

Parents can and do find ways to pay for their child’s college, but it often involves sacrifice and planning. Two keys: Save early and consistently.

Starting as soon as possible and making regular deposits into whatever vehicle you choose can help smooth out the ups and downs of the stock market.

Consistently making equal payments also makes the task of saving easier.

How Much Will I Need to Save?

The answer to this question is subjective. Do you plan to try to cover 100% of your child’s college costs, or will student loans, if needed, be palatable? Will your child likely qualify for need-based or merit aid? Might your high achiever be eligible for a college on the list of schools from Amherst to Yale that meet all demonstrated need?

Have you carved out your own retirement savings plan and an emergency fund and focused on paying down your own debt? It’s smart financial planning to get your house in order first, so you can save for your offspring’s college.

The cost of attendance, or “sticker price,” on every college website that estimates the total cost of a year of school can cause, well, sticker shock. But most students do not pay sticker price. They pay the net price, that number less scholarships, grants, and financial aid.

The College Board reports that the average published tuition and fees for full-time students for 2020-21 are:

•  Public four-year college, in-state student: $10,560

•  Public four-year college, out-of-state student: $27,020

•  Private nonprofit four-year college, any student: $37,650

The estimated average net tuition and fee price paid by first-time full-time in-state students enrolled in public four-year institutions was $3,230 in 2020-21; and at private nonprofit colleges, $16,000, according to the College Board.

Remember that the above numbers cite tuition and fees, not the total cost of attendance, which also includes the estimated annual cost of room and board, books, supplies, transportation, loan fees, miscellaneous expenses (including for a personal computer), and eligible study-abroad programs.

The upshot: Anticipating the cost of attendance of various colleges, your family’s eligibility for merit and need-based aid, and borrowing tolerance can help you prepare.

If you put a number on a savings target, another key question is: How can I start saving for college?

What Are Some Strategies for Saving?

Here are a few options to consider:

Automating savings. You could set up automatic transfers to a designated college savings account, so you won’t even have to think about it. You can transfer from your checking account or, if it’s an option, opt to direct deposit a portion of your paycheck directly to your savings account.

Putting windfalls to work. Another way to boost savings comes from the planned and unplanned windfalls in life. Getting a tax refund or receiving an inheritance? Keeping an eye out for unexpected money can help you achieve your savings goals.

Pruning expenses. If you haven’t already trimmed your expenses, you can use the natural course of time to turn expenses into savings. For example, once your child no longer needs diapers, you can put that cost toward college savings. When they no longer need day care, you could funnel what you were paying into your account. If piano lessons end, it’s yet another chance to increase how much you can save.

Finding scholarship matches. Once children get closer to high school graduation, you can help them find scholarships. FastWeb and Scholarships.com are two popular sites among many that will help you search for opportunities. Many allow you to set up a profile for your child that may include interests, intended majors, and even preferred schools—data points that will be used to help match your child with scholarships.

It’s usually more cost-effective to save than borrow, of course. Every dollar you borrow can cost you more than that dollar, when you add interest.

Many parents use a mix of sources to fund their children’s education. For example, you could save a third of your target, pay a third during your child’s time in college, and borrow the last third.

Which Savings Plan Is Right for Me?

If you have your target goal and a plan to make regular contributions, you’re ready to weigh which investment vehicles will fit your needs. Here are some common savings tools.

529 Plans

The 529 college savings plan is a tax-advantaged account to save for higher education costs, and it has become popular with parents saving for college. Anyone, even non-family members, can set one up and make contributions on behalf of a beneficiary.

Contributions to 529s are made with after-tax dollars, but they grow tax-free, and capital gains are tax-free as long as withdrawals are used to pay for qualified education expenses. Any withdrawals that are not used for higher education expenses may be subject to penalties and taxes.

Another caveat: If your child doesn’t go to college, the funds still need to be spent on education to avoid taxes and penalties. But you have the ability to change the beneficiary of a 529 account to another family member.

This means that if your oldest child does not use the funds for college, you can change the beneficiary on the 529 to a sibling or even a family member in the next generation. Even better news, if your child receives a scholarship for college, you can withdraw the amount of the scholarship from the 529 plan penalty-free. If you decide to withdraw it for another purpose, you’ll pay a 10% penalty , plus regular income taxes.

Annual contributions to a 529 plan are not limited, but any amount you give the beneficiary will be part of your annual $15,000 gift tax exclusion. The IRS will let you (and your spouse, if you elect to split gifts) make five years of contributions at once without paying gift taxes.

Many states offer these plans, so you’ll want to start by finding out if your state offers any tax incentives to participate in your own state’s sponsored plan. If you discover that your state does not offer additional tax benefits for contributions, you can shop around for the lowest fees.

Then there are 529 prepaid tuition plans , offered by a dwindling number of states, that allow parents, grandparents, and others to prepay tuition and mandatory fees at today’s rates at eligible colleges and universities.

Most state prepaid tuition plans require you or your child to be a resident of the state offering the plan when you apply. Most allow the funding to be transferred to a sibling.

Qualified distributions from prepaid 529 plans are exempt from federal income taxes and might also be exempt from state and local taxes.

The Private College 529 , not run by a state, offers guaranteed prepaid tuition at many participating colleges and universities, with no residency requirements.

Coverdell Education Savings Account

A Coverdell education savings account can also be used to pay for qualified education expenses.

The annual contribution limit is just $2,000. Contributions are made with after-tax dollars, but they grow tax-free, and withdrawals for qualified expenses are tax-free.

The account is limited to certain incomes. You can use a variety of investments to grow the account.

UTMA and UGMA Accounts

A Uniform Transfers to Minors Act or Uniform Gift to Minors Act custodial account can be set up to pay any expense that benefits a minor.

When your child reaches the age of majority, 18 or 21, depending on the state, they will be able to use the money for whatever they want, so many parents are wary of using these to plan for college.

The flip side is your child won’t be limited to just paying for education expenses and can use the money for living arrangements, a car, or other necessary purchases.

There are no contribution limits for UTMA and UGMA accounts, and they can be funded with any combination of cash and investments. Annual gift tax exclusions apply.

Because contributions are made with after-tax dollars, there are no taxes on withdrawals, but there may be taxes on capital gains.

What About Student Loans?

While your student may have to take out federal student loans to make it to graduation day, you can also shoulder some of the load.

Parent PLUS loans can be one way to help your child afford college. They are student loans offered by the U.S. Department of Education, and parents become the borrower. You can borrow up to the amount of education expenses not covered by other financial aid. It’s easier to qualify if you don’t have an “adverse credit history.”

Parent PLUS loans have a fixed interest rate, currently 6.28% , with a typical term of 10 years that may be extended to 25 years. However, unlike federal student loans, Parent PLUS Loans come with a fairly high origination fee—it’s currently 4.228%.

Even with savings, federal student loans, grants, and scholarships, your child may still have unmet needs. Private student loans, offered by private lenders, are often used to fill those gaps.

SoFi offers private parent student loans, when you, the parent, take responsibility for the loan. SoFi also offers undergrad private student loans that allow a cosigner. If you cosign, you and the student are responsible for the loan.

It’s important to know that federal student loans come with benefits, including income-driven repayment options and student loan forgiveness, that private lenders do not offer.

The Takeaway

Paying for a child’s college education involves two key things: saving early and consistently. Most students will still end up borrowing in order to pay for the many expenses of higher education.

When it comes time to fund the college journey, keep SoFi Private Student Loans in mind. They come with a fixed or variable rate and no origination or late fees. Private student loans may not have the same protections and benefits that come with Federal student loans and usually are not considered until all other financial aid options have been exhausted.

See your interest rate in just a few minutes. No strings attached.


We’ve Got You Covered

Need to pay
for school?

Learn more →

Already have
student loans?

Learn more →



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.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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

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

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SOSL18142

Read more
couple having coffee

Is A Joint Bank Account Right For You?

If you’ve recently gotten married or moved in with your mate, you may wonder whether it makes sense to combine your funds in a shared account, or to continue keeping your finances separate.

Opening a joint checking account can make it much easier for a couple to pay, plan, and track household and other shared expenses. The trade-off to that convenience, however, is giving up some of your financial privacy and independence.

To help you decide if opening a joint account makes sense for your situation, read on. We’ve got all the pros and cons, plus tips on how to open a joint account, along with some alternatives to consider.

How Does a Joint Account Work?

A joint account functions just like an individual account, except that more than one person has access to it.

Everyone named on a joint account has the power to manage it, which includes everything from deposits to withdrawals.

Any account holder can also close the account at any time. And, all owners of a joint account are jointly liable for any debts incurred in relation to the account.

Two or more people can own a joint account–and, they don’t have to be a married couple or even live at the same address.

You can open a joint account with an aging parent who needs assistance with paying bills and managing their money. You can also open a joint account with a teenage child, friend, roommate, sibling, or business partner.

Recommended: How to Combine Bank Accounts

Benefits of Having a Joint Bank Account

Here are some of the pros of opening a joint account.

•  Ease of paying bills. When you’re sharing expenses, such as rent/mortgage payments, utilities, insurance and streaming services, it can be a lot simpler to write one check (or make one online payment), rather than splitting bills between two bank accounts. A shared account can simplify and streamline your financial life.

•  Transparency. With a joint checking account, there can’t be any secrets about what’s coming in and in and what’s going out, since you both have access to your online account. This can help a newly married couple understand each other’s spending habits and talk more openly about money.

•  A sense of togetherness. Opening a joint bank account signals trust and a sense of being on the same team. Instead of “your money” and “my money,” it’s “our money.”

•  Easier budgeting. When all household and entertainment expenses are coming out of the same account, it can be much easier to keep track of spending and stick to a monthly budget. A joint account can help give a couple a clear financial picture.

•  Banking perks. Your combined resources might allow you to open an account where a certain minimum balance is required to keep it free from fees. Or, you might get a higher interest rate or other rewards by pooling your funds. Also, in a joint bank account, each account holder is insured by the FDIC, which means the total insurance on the account is higher than it is in an individual account.

•  Fewer legal hoops. Equal access to the account can come in handy during illness or another type of crisis. If one account holder gets sick, for example, the other can access funds and pay medical and other bills. If one partner passes away, the other partner will retain access to the funds in a joint account without having to deal with a complicated legal process.

Challenges of Having a Joint Bank Account

Despite the myriad advantages of opening a joint account, there are some potential downsides to a shared account, which include:

•  Lack of privacy. Since both account holders can see everything that goes in and comes out of the account, your partner will know exactly what you’re earning and how much you are spending each month.

•  Potential for arguments. While a joint account can prevent arguments by making it easier to keep track of bills and spending, there is also the potential for it to lead to disagreements if one partner has a very different spending style than the other.

•  No individual protection. As joint owners of the account, you are both responsible for everything that happens. So if your partner overdraws the account, you will both be on the hook for paying back that debt and covering any fees that are charged as a result. If one account holder lets debts go unpaid, creditors can, in some cases, go after money in the joint account.

•  It can complicate a break-up. If you and your partner end up parting ways, you’ll have the added stress of deciding how to divide up the bank account. Each account owner has the right to withdraw money and close the account without the consent of the other.

•  Reduced benefits eligibility. If you open a joint account with a college student, the joint funds will count towards their assets, possibly reducing their eligibility for financial aid. The same goes for an elderly co-owner who may rely on Medicaid long-term care.

How to Open a Joint Bank Account

If you decide opening a joint account makes sense for your situation, the process is similar to opening an individual account. You can check your bank’s website to find out if you need to go in person, call, or just fill out forms online to start your joint account.

Typically, you have the option to open any kind of account as a joint account, except you’ll select “joint account” when you fill out your application or, after you fill in one person’s information, you can choose to add a co-applicant.

Whether you open your joint account online or in person, you’ll likely both need to provide the bank with personal information, including address, date of birth, and social security numbers, and also provide photo identification. You may also need information for the accounts you plan to use to fund your new account.

Another way to open a joint account is to add one partner to the other partner’s existing account. In this case, you’ll only need personal information for the partner being added.

Before signing on the dotted line, it can be a good idea to make sure you and the co-owner know the terms of the joint account. You will also need to make decisions together about how you want this account set up, managed, and monitored.

Alternatives to a Joint Bank Account

If you’re not keen on opening a joint bank account, but do need some type of money management system, here are some alternatives you may want to consider.

•  Adding an authorized user to an existing individual bank account. An authorized user has access to the account, but they’re not an owner. You still have full control, which means you can remove them from the account at any time.

•  Joint bank account, plus separate accounts. This allows couples to streamline payment for shared expenses, but also gives each partner some freedom to spend on themselves without having to explain or feel guilty about their expenditures.

•  View-only account. A view-only account gives another person the opportunity to view transactions, but they don’t have the power to manage the account.

•  Joint credit card. A joint credit card allows both you and your partner to use it. If your partner isn’t responsible with the card, however, it can affect both of your credit scores.

The Takeaway

One of the main pros of opening a joint checking account as a couple is that it can simplify paying for shared expenses. Having a joint account can also provide a couple with a clear financial picture, and make it easier for them to track spending and stick to a budget. A joint account also fosters openness and teamwork.

On the downside, sharing every penny can sometimes lead to tension and disagreements, especially if partners have different spending habits and personalities. And, if your partner isn’t responsible with money, you can end up paying for their mistakes.

If you decide to open a joint account, communication can be key. It can be a good idea to lay out expectations with the other account holder and also have regular open and honest discussions about money.

Looking for Something Different?

For couples who are ready to integrate their finances, SoFi Money® makes it easy to create a joint account that gives couples shared access to their money.

When you open a SoFi Money cash management account, you’ll have the option to add a joint account holder. Your partner will then receive an application and, once they fill it out, you can simply approve them as a joint owner of the account from your SoFi account dashboard.

Whether you opt for two individual or one joint account, you and partner won’t pay any account fees, monthly fees, or other common fees.

Learn more about opening a joint cash management account with SoFi Money.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOMN18107

Read more
TLS 1.2 Encrypted
Equal Housing Lender