Tips for Finding a Lost Bank Account

With all of the demands on your time, you could lose track of an old bank account. While that might sound outlandish, it can happen to the best of us.

In California alone, there is $9 billion worth of unclaimed property—this includes lost bank accounts, “uncashed checks, insurance policy money, stocks, safe deposit boxes, and other unclaimed cash.”

Sometimes it’s your own account that you’ve forgotten about. Other times it can be an account you inherited after the death of a loved one. Whatever the reason, once you realize you’ve misplaced a bank account, you’ll likely want to track it down.

Finding Old Bank Accounts

If you’ve lost track of money that belongs to you, don’t panic. Here are a few potential ideas for how to find lost money in bank accounts. It might take a little leg work, but finding the unclaimed money due to you can be worth it.

If you’ve accessed the account within the past year, you might be able to recover the account directly from the bank. Exactly how to recover a lost bank account number will likely vary based on the financial institution. Your account information can be found on checks and often on old account statements.

If it’s been longer than a year, you might have to dig a little deeper to recover a lost bank account. The best place to start in a quest for unclaimed property is through your state of residence’s unclaimed property division, usually run through the state treasury department.

Each state will have its own rules and regulations for how individuals should go about proving ownership of the unclaimed money. Most of the time the process starts with filling out an online form. Generally, states will require substantial evidence that the money rightfully belongs to you.

The National Association of Unclaimed Property Administrators operates MissingMoney.com, which is a multi-state directory that allows you to search by name for missing or unclaimed money. You could also search for missing money from a lost bank account on Unclaimed.org , which directs you to your state’s unclaimed property office.

If you belonged to a credit union in the past, it may be worth checking the unclaimed deposits listing run by the National Credit Union Administration.

Depending on the circumstances, you may need to provide proof of your address from decades past. If you’re claiming money on behalf of a deceased relative, you may need more than just a death certificate—sometimes a full probate court order is required. You could check with the local government to confirm the regulations in your state.

Be on the Lookout for Fraud

As you’re searching for lost bank accounts, you may find organizations that offer to find unclaimed money, generally for a fee somewhere between 10% and 20% of the amount recovered. AARP recommends avoiding any services that require payment upfront.

Be wary of any emails or letters you receive offering to return unclaimed property to you for a fee—these are generally scams.

If you encounter an organization or individual who claims to be a part of the government and offers to send you unclaimed money for a fee, these are also generally a scam. Government agencies will not contact individuals about unclaimed money nor will they charge a fee.

If you’re in need of assistance as you search for lost bank accounts, you could consider consulting your financial planner.

Some financial planners offer services to clients to help them look for unclaimed money that may be owed to them. Depending on the financial planner, these services may not even have an additional fee.

Other Sources of Unclaimed Money

Unclaimed money isn’t limited to lost bank accounts. There are a variety of reasons you could be missing money due to you—perhaps you switched jobs and lost track of a pension plan or 401(k). Maybe you forgot to update your address and missed a payment or tax refund.

Pension and Retirement Plans

If you previously worked for a company that offered a pension plan, you can search the Pension Benefit Guaranty Corporation’s unclaimed pension database .

For lost or missing retirement plan funds, you could check the National Registry of Unclaimed Retirement Benefits , which is operated by PenChecks Trust, one of the largest providers of retirement plan distribution services.

Tax Refunds

If you suspect you are owed a missing tax return, you could use the online resource Where’s My Refund? , which is operated by the IRS. To use the tool, you’ll need to know your Social Security number or Individual Taxpayer Identification Number, your filing status, and the exact amount of the refund.

The IRS recommends calling regarding a missing tax refund only when it has been more than 21 days since you e-filed or six weeks since you mailed in your tax return.

If you’re missing a tax return, know you are working on a deadline. You have just three years to claim a missing tax refund before the money becomes the permanent property of the U.S. government.

Rolling the Money Into Another Account

Once you’ve successfully tracked down your lost bank account or other unclaimed money, you might consider choosing a new bank or want to compare the different types of deposit accounts available to you.

Finding the right account for you is a personal choice. One option you could consider is a cash management account like SoFi Money®. SoFi Money offers easy money management and saving all in one.

With SoFi Money®, you’ll have instant access to your accounts anywhere you go. The account allows you to easily track your spending and savings so you can see your cash flow at any given moment.

And if you’re working toward a few savings goals simultaneously, you could set up individual financial vaults for each goal. Plus, there are absolutely no account fees (subject to change) associated with SoFi Money®.

As a SoFi member, you’ll also have access to other member benefits, like career counseling and the opportunity to speak one-on-one with a financial advisor who can help you create a personalized financial plan.

Want to make the most of your recently found money? Find out more about how a SoFi Money® account can help.


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.
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 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.

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Pros & Cons of Living Cash-Only

When it’s time to split the bill at dinner with your friends, most people these days throw down a stack of credit cards. The world at large seems to be moving in the direction of plastic. About 30% of American adults say they don’t use cash at all to buy things in a typical week, according to a Pew Research Center survey.

Meanwhile, the survey found that only 18% of respondents use cash for nearly all of their purchases. Some stores and restaurants have stopped accepting cash entirely, in some cases inviting municipal bans on the practice. Countries like Sweden, Denmark, and Norway are transitioning to become nearly cashless societies.

But is the move away from cash really a good thing? Some people have decided to buck the trend and go in the opposite direction, opting for a cash-only existence. And when it comes to your own personal spending, is it better to rely on debit and credit cards or turn primarily to cash?

There’s no one answer to these questions—both methods come with advantages and drawbacks. If you’re trying to figure out whether living on a cash-only basis makes sense, here are the different factors you may want to consider:

Pros of Cash-Only Living

Spending money the old-fashioned way can offer some significant perks. Here are some benefits that come with using cash for all your transactions:

It Can Help You Budget and Save

Waving a credit card around can sometimes feel like magic. It can be easy to forget that you’re spending real money and to end up charging more than you intend. Using cash can help some people stick to a budget, supporting them to get out of debt or save more.

With cash, you can take out the amount you have to spend for a certain period of time, and when you’re out of bills, you’re done. Or you can set aside the amount you’ve budgeted in envelopes labeled with categories like “rent,” “food,” and “entertainment.” Using only the cash you’ve withdrawn can keep you from spending outside of those limits.

You Can Maintain Your Privacy and Security

Every debit or credit card transaction leaves a digital paper trail. You may not be keen on the idea of corporations keeping a record of everything you buy and when you buy it. An even more troubling concern is the potential for data leaks and identity theft.

In 2017, 143 million people had confidential personal information compromised in the data breach at Equifax, a major credit reporting agency. Identity theft, whether through digital loopholes, a lost credit card, or other means, is a widespread problem.

In 2018, more than 14 million Americans fell victim to identity theft. Using only cash is likely to make you less vulnerable to these security threats, since you will have less of a digital presence.

It’s Convenient

Sure, swiping a credit card can be faster than counting coins. But unlike credit cards, cash is accepted nearly everywhere, especially with more U.S. cities expanding legislation to ban cashless stores.

Instead of figuring out how to split a restaurant bill multiple ways using credit cards, you can just pay what you owe.

You Can Avoid Interest and Fees

Credit cards often come with extra fees. Some retailers charge extra to use a credit card since they have to pay for the transaction. Many credit cards also come with annual fees. Sometimes these fees are waived during the promotional period and can sneak up on you later.

If you don’t pay your credit card balance in full, you’re likely to end up paying exponentially more thanks to high interest rates. As of May 2019, the average credit card interest rate was 17.85% . And if you’re tardy with making payments, you may owe late fees as well.

Cons of Cash-Only Living

Using cash only can also have risks and disadvantages. Here are some of the drawbacks:

It Comes With Costs

Many ATMs charge fees for withdrawing cash, which can be troublesome if you find yourself suddenly out of money and need to use an ATM outside of your own bank.

By using credit cards instead of depending on ATMs, you may be able to avoid those costs. There also may be times when you need to mail a check (such as for rent or utility bills), since mailing cash is risky. Postage charges, however slight, can add up.

It Has Security Concerns of Its Own

Keeping cash on your person or in your home comes with vulnerability. You could be a victim of theft or your cash could be destroyed in a disaster. With no record behind it, the money is as good as gone. On the other hand, you can report a lost or stolen credit card and dispute any fraudulent charges.

You Miss Out on Perks

Some credit cards come with benefits—cash back or rewards points that can be redeemed for travel or other items. So if you pay in cash, you could be missing out on free money.

Credit cards may also come with perks that go beyond the financial, such as fraud protection, no foreign exchange fees, discounts at certain retailers and restaurants, or insurance for travel or car rentals.

You Fail to Build Up a Credit History

There’s something ironic about the way lenders look at credit history: If you haven’t borrowed much in the past, lenders may be reluctant to lend to you now.

Opening a credit card account is one way you can build up a credit history (other forms of credit, such as student or car loans, count as well).

A strong credit score is based in part on the average age of your account (the older the better), as well as a history of paying your bills on time and low debt relative to the amount of credit available to you.

Your credit score is an important factor if you’d like to take out a loan in the future, such as an auto loan or mortgage. If you always pay in cash, you may have trouble showing that you have the credit history to qualify.

SoFi Money to Help Bridge the Gap

If you like to pay in cash but still want to earn a return, SoFi Money® may be the right option for you. This is a cash management account where you can spend, save, and earn all in one place.

Additionally, you’ll have fee-free access to any ATM within the Allpoint® Network (subject to change).

Plus, you can complete transfers and deposits on your mobile phone or send money instantly to other SoFi Money users. It takes just 60 seconds to open an account online.

Spend cash conveniently while paying no account fees with SoFi Money.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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.

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Paying Off Credit Card Debt with a Personal Loan

People talk all day long about their workouts, favorite apps, and their love lives, but bring up the subject of money, especially credit card debt, and suddenly everyone clams up.

But just because we don’t talk about debt doesn’t mean it’s not an issue. After all, the average American household carrying a credit card balance has over $9,300 in credit card debt as of March, 2020. And it can cause a great deal of stress.

In fact, according to the American Psychological Association’s latest “Stress In America” report , money is the number two cause of stress—ahead of family and health concerns—and second only to work. Over 50% of Americans with debt who were surveyed in a 2017 American Institute of Certified Public Accountants poll said it had negatively affected their lives.

If you’re a Millennial, the same poll found that you might be twice as likely to worry about debt than Baby Boomers. While the poll found that 56% of people with debt said that it had a negative effect, that figure jumps to almost seven in 10 for Millennials. The study also found that Boomers and Millennials are equally likely to have debt.

So unless you’re expecting a windfall from a long-lost relative (who probably didn’t talk about money either), it’s likely up to you to come up with a game plan to manage your finances.

But how do you pay off credit card debt? There are many methods to choose from—here are just a few.

Budgeting Debt Payoff

Before embarking on paying off credit card debt, a good first step might be putting together a budget—which can help you better manage your spending.

There are simple options like an online spreadsheet and more advanced ones like pay services to track your spending. And you might even find money in your budget to put towards that outstanding debt.

If you’ve got more than one type of debt, say a mortgage, student loan, and maybe a car loan, you may want to think strategically about how you’re going to tackle them.

Some finance gurus recommend taking on the most expensive debt first—then the debt with the highest balance. Another approach is to pay off the smallest debts first, meaning the debts with the smallest balances.

Then you can take next month’s debt-paying money and funnel it into the next smallest balance. This method gives you some small wins early and over time can give you some room to make larger payments on some of your other outstanding debts. (Of course, for either of these strategies, keeping current on payments for all debts is essential.)

Looking for a better way to get rid of
high-interest credit card debt?
Check out SoFi Personal Loans.


Refinancing or Consolidating

Refinancing or consolidating debt are other strategies, especially for those in the post-grad plateau—the early stages of a promising career—if, for example, there’s a raise waiting just around the corner. In simple terms, refinancing is taking one loan or line of credit and replacing it with another (for instance, balance transfers). Consolidating is similar to refinancing, as it combines all your debt into one loan that you then have to pay off.

There are lots of reasons to consider refinancing. You may want to lower your monthly payment. Maybe you want to pay over a different period of time. Or maybe you just want to work with a new lender or loan servicer.

With fixed-rate credit cards becoming more difficult to find, and the average annual percentage rate (APR) for variable-rate credit cards hovering around 17%, you could potentially save by refinancing credit card debt (depending on how much you owe, of course) with a credit card consolidation personal loan—which, as of late 2019, had an average rate of 9.41%.

Fortunately, applying online typically doesn’t take more than a few minutes. And there are more options than ever with innovative fintech startups doing what they can to make the process of refinancing your credit card debt, quick and easy.

Again, there’s also the potential for saving. Of course, everyone’s situation varies, but you can use SoFi’s credit card interest calculator and personal loan calculator to do the math on your own.

So You’ve Decided to Apply for a Personal Loan. Now What?

The steps for paying off a credit card with an unsecured personal loan aren’t particularly complicated, but having a plan in place is important.

1. Getting the whole picture.

It can be scary, but getting the hard numbers—how much debt you have overall, how much you owe on each specific card, and what the respective interest rates are—gives you a sense of how big of a personal loan you’re aiming for.

2. Searching personal loan options.

These days, you can do most—or all—of your personal loan research online. What you’re looking for is a personal loan with an interest rate lower than what you’re currently paying on your cards. You’ll also want to keep an eye out for origination fees, which can cost you more and could throw off your payoff plan.

3. Paying off the debt.

Once you’ve chosen, applied, and qualified for your personal loan, you’ll likely want to immediately take that money and pay off your credit card debt in full.

The process of receiving the personal loan may differ; some lenders will pay off your credit card companies directly, others will send you a check that you’ll then have to deposit and use to pay off your credit cards yourself.

4. Hiding those credit cards.

One potential risk of using a personal loan to pay off your credit cards is that it makes it easier to accumulate more debt—after all, a $0 balance on a credit card can be a temptation. The purpose of using a personal loan to pay off your credit card debt is to keep yourself from repeating the cycle.

If possible, you can take steps like hiding your credit cards in a drawer and trying to use them as little as possible. This is where creating a budget comes in handy!

5. Paying off your personal loan.

A benefit of using a personal loan to consolidate your credit card debt is that you only have one monthly payment to worry about—instead of several. You’ll want to make sure you don’t miss any of those payments, so you may want to set up a monthly reminder or alert.

More Details About Personal Loans

So why would you consolidate credit card debt with a personal loan?

Most unsecured personal loans come with a fixed APR. A fixed APR is a rate that won’t fluctuate or change based on an index.

This doesn’t mean that your rate will never change over the life of your loan (for example, it could change if you missed several payments). But if it does remain the same, it means you’ll be paying the same amount monthly over the life of the loan.

Another pro is the ease of online applications and access to live customer support from many lenders. With online applications, the process for getting a personal loan can be quick and easy, and you don’t have to trudge to a post office or send certified mail or print out complicated tax documents. You also may be able to access live customer support to help you out with any questions.

Another possible benefit is pausing your payments in case of certain situations. Your loan(s) will typically have to be in good standing to be eligible for this benefit (among other requirements), but if you lose your job some lenders, like SoFi, may temporarily pause your payments and help you find a new job. (Note that interest accrues during the forbearance period and is added to principal when you resume repayment.)

SoFi’s Unemployment Protection Program is offered in three-month increments that can be renewed up to a maximum of 12 months over the life of the loan.

Borrowers looking to apply for this benefit may be eligible if they are (among other qualifications): a current SoFi member, have an eligible loan that is in good standing, certify that they have lost their job through no fault of their own (involuntarily), and actively work with Career Services to look for new employment.

Finally, there’s also the benefit of ending the vicious cycle of credit card debt, without resorting to a balance transfer card.

You may be among the 49% of Americans who know that balance transfer credit cards exist. Balance transfer credit cards are just credit cards that usually have an introductory offer of some sort to give you a lower rate (or a 0% rate) if you transfer your balance to the new card.

This might seem like an appealing offer. But if you don’t pay off the balance before the enticing offer is up, you could end up paying an even higher interest rate than you started with. You also may have to pay a transfer fee to the new cardholder.

Planning Debt Reduction

Armed with new information and a debt reduction plan, the next time the subject of money—specifically credit card debt—comes up, you’ll have plenty to talk about. You could now be able to confidently discuss APRs on personal loans compared to credit cards, the merits of no fees, and the plusses of a fast and easy user interface for a loan application.

And if you share this article with friends who want to cut up a few of their credit cards, they can join the conversation, too. Because chances are, based on the numbers, some of those friends might be among the 55% of Americans with credit cards who are also carrying other debt.

Maybe they’re as shy about their debt as you used to be and could use some handy advice from a friend or a solid five reasons why a personal loan might be worth investigating.

Remember, however, personal loans aren’t for everyone. While they typically have lower interest rates than credit cards, they are still debt and should be considered carefully and used responsibly.

Ready to get rid of your credit card debt? Look into a SoFi personal loan. You can check your rate in just a few minutes.


Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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 Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Can Refinancing Your Student Loans Lower Your Interest Rate?

You’ve probably heard the statistic that total outstanding student loan debt in the U.S. is over $1.5 trillion. As of late 2019, nearly 70% of students in America graduated with student loan debt, the average balance hovering around $30,000. The figures can be so shocking that they almost don’t seem real—until you have to make your monthly student loan payment, which is an average of $393 per month.

For some, student loan debt can be paralyzing. The hefty monthly payment can weigh down on borrowers, making it difficult to make ends meet. Student loan debt has also been attributed to Millennials delaying major life milestones like getting married, buying a house, or even having kids. It’s a burden that can, at times, feel like it’s too much to bear.

The good news is, thanks to student loan consolidation and refinancing, borrowers don’t have to be stuck with that nearly $400 a month student loan payment. Consolidating student loans or refinancing them might give borrowers the opportunity to get new terms and a new (hopefully lower) interest rate on their student loans.

Depending on the type of student loans you have, you can choose between two consolidation options. The first is for federal loans, which can be consolidated through the federal government. The second is consolidating and refinancing your loans through a private lender. Both options have their merits and drawbacks, so let’s dig into the details.

Consolidation versus Refinancing: How They Differ

For federal loans, consolidation means that your existing federal loans are combined into one new loan with a new rate that’s the weighted average of your old loans’ rates, rounded up to the nearest eighth of a percent.

Those who opt to consolidate their federal loans do so via a Direct Consolidation Loan through the government, which (depending on their original loan type) allows them to keep many of the protections their federal student loans offer, such as deferment, forbearance, or income-driven repayment plans.

But because the new interest rate is the weighted average of the existing interest rates, rounded up, consolidating loans through the government often doesn’t result in cost savings.

Typically, if lower monthly payments are the result of consolidation, it’s because of extending the term of the loan. This may mean paying more in interest over the life of the loan.

When you consolidate federal loans with a Direct Consolidation Loan, they’ll still be considered federal loans. This means a Direct Consolidation loan will still qualify borrowers for federal benefits like Public Service Loan Forgiveness (PSLF) and those mentioned above.

It’s important to note, however, that there are some drawbacks with a Direct Consolidation Loan. For instance, if you have started paying towards PSLF, you’ll have to start your qualifying payments over. And if you have a Perkins Loan, you could lose out on those benefits as well. Additionally, you can only consolidate once.

For those with private student loans, consolidation is the practice of combining your student loans into one single loan with a private lender. This is also often referred to as student loan refinancing, because existing student loans are paid off with a new loan from a private lender. The borrower then repays this new loan, under new terms with a new, potentially (and hopefully) lower interest rate.

Refinancing with a private lender may lead to savings, but it might not be right for every borrower. For those with federal loans, refinancing means losing all federal benefits. So for individuals pursuing student loan forgiveness or benefiting from income-driven repayment plans, refinancing might not be the best option.

Both options could help borrowers streamline their monthly payments, since both options allow borrowers to combine multiple loans into a single loan with one monthly payment. For people who are already juggling a lot of responsibilities, only having one student loan payment can make managing payments easier.

Deciding Whether or Not to Consolidate Student Loan Debt

Student loan consolidation might save you money and shorten your loan term, or may also make your monthly payment more manageable by lengthening your repayment term.

For example, you might have graduated with multiple loans that all come with varying interest rates and loan terms. But if you consolidate, you replace all of your loan bills with just one bill (with, of course, one term and interest rate).

You can even consolidate your private and federal loans together (but only through private student loan refinancing, which unfortunately means you need to give up the benefits of federal loans).

The option is to refinance your student loans which, if you receive a lower rate, could potentially help you cut the cost of interest over the life of the loan. You can refinance private or federal loans, though once again, you lose the benefits of federal loans when you refinance with a private lender.

If you’re considering consolidating your student loans, it’s important to weigh all of your options carefully. Part of this will likely be reviewing different lenders with your federal repayment options and comparing the terms and rates you qualify for.

This can be a time-consuming, and at times confusing process, but may pay off if you’re able to get a reduced interest rate on your student loans.

Before you start browsing interest rates, take a look at your current loans. How much do you owe? What are the average interest rates? Are you enrolled in any federal benefits? Are you eligible for any—or hoping to be?

Having this information at the ready can provide valuable insights as you start gathering information on different lenders. Some lenders, like SoFi, offer a convenient student loan refinancing calculator that can give you an initial idea of how much you could stand to save when you refinance.

A quick internet search about student loan consolidation will result in a number of companies popping up. If you’re trying to figure out what the best student loan consolidation companies are, a comparison of all the rates, terms, loan amounts they accept, and fees can be useful.

Understanding Your Options

While each of these refinancing companies advertise rate ranges and other terms, the loan terms you qualify for will be determined based on a variety of personal factors. To find out what a loan with each company might look like, you may want to get a few different quotes.

Each lender may review different criteria in order to make a lending decision, but most will likely review your credit score and credit history. While a strong credit history can help borrowers qualify for more competitive interest rates, it’s likely not the only factor lenders are considering.

Quotes can be useful tools as you consider refinancing your student loans. Many lenders allow potential borrowers to pre-qualify. This process usually involves a “soft” credit inquiry, which won’t impact your credit score1, to determine the initial interest rates for which you might qualify.

Understanding what rates you actually qualify for can be used to compare and contrast different lenders and terms. In addition to different rates, lenders will have different fees associated with the loan, so it may be helpful to review the fine print closely as you weigh your options.

After you’ve done the math and determined how much you could potentially save in interest by refinancing, consider looking at other benefits offered by the lender. Ideally, you’ll find a lender you feel confident working with as you pay off your loan, since depending on the refinancing terms, you could be working with them from anywhere from five to 20 years.

Some lenders may offer additional benefits. For example, SoFi members can benefit from perks like live customer service 7 days a week and access to exclusive member events.

Members who lose their job through no fault of their own may qualify for unemployment protection, which means they’re able to pause loan payments while they look for other employment. SoFi’s career services team can even help you through your job search.

There are absolutely no hidden fees when you refinance with SoFi and the application process can be completed online. If you’re ready to take the next step in refinancing your student loans, you can get a quote from SoFi in just about two minutes.

Essentially, it’s all about matching the right student debt consolidation company to your specific financial needs.

Take a look at your current interest rates, terms, and loan amounts for your student loans to assess what makes sense for your situation, and remember to consider whether you qualify for federal student loan benefits before consolidating and refinancing with a private lender. Then you can get started on the ultimate goal: paying off student debt sooner.

Learn more about how refinancing with SoFi could help you cut your interest rate and tackle your student loans. You can get a quote to find out what rates you pre-qualify for in just two minutes.


Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands 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.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi 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 DECEMBER 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.

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What is a Recession?

The coronavirus pandemic has sent the stock market reeling and pushed the country toward recession. The word itself can be unsettling, perhaps conjuring memories of the economic hardships during the Great Recession of 2007–2009 and maybe even provoking fears of a depression.

Recessions have a big impact on the economy, affecting businesses, jobs, and stock market returns. Here’s a look at what you should know to better understand what a recession is and some tips to prepare for one.

At its most basic, a recession is a period of general economic decline. Recessions are typically accompanied by falling stock markets, a rise in unemployment, a drop in income and consumer spending, and increased business failures.

Usually, a recession is declared when U.S. gross domestic product (GDP)—which represents the total value of goods and services produced in the country—drops for at least two quarters in a row.

However, that’s not the only criterion for declaring a recession. For example, during the Great Recession in 2007, the International Monetary Fund (IMF) added a number of economic indicators to describe a recession, including declines in industrial production, falling oil consumption, and increased unemployment for two quarters. The National Bureau of Economic Research (NBER) defines recession as a decline in economic activity lasting more than a few months, visible in GDP, real income, employment, production and sales.

While economic recessions aren’t common, they are a normal part of the business cycle. According to the NBER, the U.S. has experienced 33 recessions , the first of which occurred in 1857, and the last was in 2007.

What Causes a Recession?

No two recessions are exactly the same, and that goes for what causes them. But generally speaking, recessions happen when something causes a loss of confidence among businesses and consumers.

As consumers lose confidence they stop spending, driving down demand. And as a result, the economy shifts from growth to contraction. Here’s a look at some of the characteristics that recessions share in common.

High Interest Rates

High interest rates make borrowing money more expensive, and therefore limit the amount of money available to spend and invest. In the past the Federal Reserve has raised interest rates to protect the value of the dollar, which has resulted in recession.

For example, the 1970s saw a period of stagnant growth and inflation that came to be known as “stagflation .” In an attempt to fight it, the Federal Reserve raised interest rates throughout the decade, which created the recession of 1980–1982.

Falling Housing Prices

If demand for housing falls, so too does the value of people’s homes. Homeowners may no longer be able to tap the equity in the houses through vehicles such as second mortgages. As a result homeowners may have less money in their pockets to spend.

Stock Market Crash

A stock market crash occurs when a stock market index drops severely. If it falls far enough, by 20%, it enters what is known as a “bear market.” Stock market crashes can result in a recession.

As stock prices drop, businesses grow less and may produce less. They may have to layoff workers, whose ability to spend is curtailed. As this pattern continues, the economy may contract into recession.

Reduction in Real Wages

Real wages describe how much income an individual makes when adjusted for inflation. In other words, it represents how far consumer income can go in terms of the goods and services it can purchase.

When real wages shrink, a recession can begin. Consumers can lose confidence when they realize their income isn’t keeping up with inflation, which can lead to less spending and economic slowdown.

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Bursting Bubbles

Asset bubbles are to blame for some of the biggest recessions in U.S. history, including the stock market bubble in the 1920s, the dot-com bubble in the 1990s, and the housing bubble in the 2000s.

An asset bubble occurs when the price of an asset such as stock, bonds, commodities and real estate, quickly rises without actual value in the asset to justify the rise.

As prices rise, new investors jump in hoping to take advantage of the rapidly growing market. Yet, when the bubble bursts—for example, if demand runs out—the market can collapse, eventually leading to recession.

Deflation

Deflation is a drop in prices, which can be caused by oversupply of goods and services. This oversupply can result in consumers and businesses saving money rather than spending it. As demand falls and people spend less, recession can follow.

What are the Impacts of Recession?

Recessions have an impact on almost all people and businesses. Some may lose their jobs as unemployment tends to spike.

Long-terms savings, such as the money investors hold in their 401(k)s may also take a hit. Housing prices tend to fall, leaving consumers with less equity in their homes.

When consumer spending declines during a recession, corporate earnings start to shrink. If a business doesn’t have enough resources to weather the storm, it may have to file for bankruptcy.

Bear Market vs. Recession

Before there is talk of a recession, the economy often enters a bear market. For example, in response to the coronavirus outbreak in 2020, stock markets plunged, ending an 11-year bull market. However, while bear markets often accompany recessions, they are not the same thing and it’s important to understand how they differ.

The first thing to understand is that the stock market is not the same thing as the economy, though they are related. Investors do react to changes in the economy, because what’s happening in the economy at large can have an effect on the companies in which investors own stock.

So, if investors think the economy is growing, they may be more willing to put money in the stock market. If they think it is contracting, they are likely to pull money out of the stock market. These reactions can function as a sort of prediction of recession.

A bear market begins when the stock market drops 20% from its recent high. If you look at the S&P 500 index as representative of the market, there have been 12 bear markets since 1945 . Yet, not all bear markets result in recession.

For example, during 1987’s infamous Black Monday , the S&P 500 lost 22% and the resulting bear market lasted four months. However, the economy did not dissolve into recession. That’s happened three other times since in 1947.

Bear markets have lasted 14 months on average since World War II, and the biggest decline since then was the bear market of 2007–2009.

Recession vs. Depression

In general, a recession is an economic slowdown that lasts at least two months. A depression is a severe and prolonged downturn.

While recessions are a normal part of the business cycle, depressions are outliers that can last for years. Consider that the Great Recession lasted for 18 months, while the Great Depression lasted for 10 years, beginning in 1929.

While there have been 33 recessions, the Great Depression is our only example of a depression. During that decade, as many as a quarter of American were unemployed and GDP was cut in half.

What caused the Great Depression? In the months before the depression, the stock market doubled in value amid speculative investing. On October 29,1929, also known as Black Tuesday, that bubble burst.

Throughout the depression, actions by the federal government seem to have exacerbated the problem.

Former head of the Federal Reserve Ben Bernanke, who was Chairman from 2006 to 2014, has identified a few mistakes in an effort to learn from and avoid repeating them.

First, in 1928 and continuing through 1929, the Federal Reserve tightened its monetary policy, raising interest rates. Second, at the time, the U.S. backed its currency with the gold standard.

In 1931, gold speculation in the U.S. sparked a panic in the U.S. banking system after speculators started trading dollars for gold. In 1932, the Federal Reserve refused to reduce interest rates to increase the national supply of money, despite the fact that ongoing deflation meant borrowing was very expensive.

Finally, the Federal Reserve neglected to address ongoing problems in the banking sector. As a result runs on banks continued, banks closed in droves and Americans turned to hoarding cash.

The Great Depression came to a close beginning with the election of Franklin D. Roosevelt and the signing of the New Deal, which constituted large-scale government relief programs.

Some scholars argue that World War II was the event that finally brought the Great Depression to a close.

How Long Does it Take to Recover From a Market Downturn?

The lengths of economic recessions vary. According to the NBER, the shortest recession took place in the 1980s and only lasted six months.

The longest, from 1873 to 1879, lasted 65 months. However, clocking in at 18 months, the Great Recession has been the longest recession since World War II.

Let’s assume that’s an outlier for the moment. If you consider the other 11 recessions since 1945, they have lasted on average about 10 months. Even if the Great Recession is included in calculating the average, it’s extended less than a month.

What is an Economic Stimulus Plan?

Governments and central banks will often do what they can to head off recession through monetary or fiscal stimulus in an effort to boost employment and spending.

Central banks, like the Federal Reserve, can provide monetary stimulus. The Federal Reserve can lower interest rates, which reduces the cost of borrowing. As more people borrow, there’s more money in circulation and more incentive to spend and invest.

Fiscal stimulus can come in the form of tax breaks or incentives that increase outputs and incomes in the short term.

Governments may put together stimulus packages in an effort to boost economic growth. For example, stock market volatility increased wildly amid fears of the coronavirus pandemic and its economic fallout.

In an effort to ward off recession, the U.S. government put together a $2 trillion stimulus package that included direct payments to citizens, suspended student loan payments, a boost to unemployment benefits and a lending program for businesses and state and local governments.

The package included limits on corporations ability to use stimulus funds for stock buybacks. Stock buybacks occur when a corporation repurchases shares of its own stock. This reduces the amount of stock that is being publicly traded, and as a result, can cause the cost of each share to increase.

Managing Investments During a Recession

Recessions can be worrying to say the least. And watching stock prices fall can lead investors to panic and pull their money out of the market. However, this behavior can be counterproductive and possibly derail investors’ financial plans.

Stocks are an important part of a long-term investment plan, which means staying invested when markets are down. Recent recessions have lasted an average of 10 to 11 months and according to a Morningstar report from 2018, the market has always been up over any given 15-year period. Past performance is never a guarantee of what will happen in the future.

But this pattern suggests that if investors can hang on to their stocks for the long run, they have a good chance of yielding a return after at most 15 years. Selling when stocks are down ensures that investors lock in their losses and means they will miss out on gains when markets rebound.

Investment plans are usually created with an eye toward meeting long-term goals.

The resulting portfolio likely holds a balanced mix of assets that accounts for an investor’s time horizon and risk tolerance.

The inevitability of market downturns and risk management is already built into this type of portfolio. Panic selling can threaten to throw off these carefully laid plans.

It is possible during down markets that portfolios will need to be rebalanced. For example, say an investor has a portfolio that consists of 70% stocks and 30% bonds.

As stock prices drop, that portfolio will likely see its balance shift more heavily toward the bond allocation. As a result, a down market may actually be an opportunity to rebalance by buying more stock. The key to riding out a recession is for investors to stick to their long-term plans, only rebalancing when it will help them reach their long-term goals.

Investors who have questions about their portfolio during an economic downturn may find comfort in getting advice from a professional. At SoFi, all members have access to SoFi Financial Planners, who can provide personalized insights for investors.

To help manage your investment accounts, make an appointment with a financial planner at no cost. And for up-to-date market information, download the SoFi App.


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