How the Middle Class Affords College

How the Middle Class Affords College

Middle-class families today don’t make nearly enough money to afford full college tuition. In fact, many qualify for a significant amount of need-based financial aid.

This scenario is so common that some small, private colleges are beginning to “reset” their tuition prices to reflect what students actually end up paying after receiving financial aid, according to a New York Times report in Dec. 2022. For example, New Hampshire private school Colby-Sawyer dropped its published tuition from about $46,000 to $17,500.

Colby-Sawyer and other colleges are acknowledging what many parents and students already know. Plenty of middle-class kids who go to college don’t pay anywhere near the “sticker price.” Keep reading to learn how your family can maximize its financial aid with the help of a resource called the Common Data Set.

Stuck in the Middle

When you look at published tuition numbers, the cost of higher education has been rising at an astonishing pace over the past 20 years. But the amount that students actually pay is less than it was a decade ago, according to the College Board’s Trends in College Pricing report.

For the 2022-23 school year, students enrolled in private nonprofit colleges paid tuition and fees of $14,630 on average. Yet the sticker price for those institutions was much higher: around $39,400. Similarly, in-state tuition and fees at a public four-year college or university averaged $2,250 for 2022-23, compared to the published price of $10,950.

Even discounted college prices are substantial. Coming up with $60,000 for four years at a private college for one child is still a huge burden. Keep in mind that number includes tuition and fees only, not room and board.

Even with grants and other financial aid, many parents can’t afford the cost of college. At the same time, their earnings are too high to qualify for more need-based aid. College savings for kids can also be hampered by parents’ own federal and private student loans and other financial obligations, such as a mortgage or caring for aging grandparents.

If you’re feeling caught in the middle, know that resources are available to help make college tuition more affordable for your family. Here’s what to look for.

The First Step: Understanding Financial Aid

To maximize the amount of tuition help you get, you need to know how and when to apply for financial aid, the different types of aid, and especially how schools award that aid.

Financial aid can come from federal and state governments, colleges, and private organizations. Some help comes in the form of loans, which have to be paid back. Grants, scholarships and work-study programs do not have to be repaid.

Broadly, there are two types of financial aid: need-based and merit. Let’s take a closer look at both.

Need-Based Aid

Need-based aid is money students receive to help pay for college based on their financial situation.

How much need-based aid you get is largely determined by the information you submit on the Free Application for Federal Student Aid (FAFSA). Aid provided by the state and your college or university is also largely determined by FAFSA information.

Federal need-based aid includes subsidized government loans, Pell Grants, and work-study programs.

Then there’s need-based aid that colleges provide independently of federal financial aid. Many private colleges meet full financial need for admitted students without any loans. This aid is sometimes awarded to families with household incomes well over $100,000. Some colleges come very close to meeting full need, and many colleges will consider requests for more aid from admitted students.

Recommended: FAFSA Guide

How Colleges Calculate Your Need

Most colleges calculate aid based on the information you provide in the FAFSA each year. Factoring in your income and financial obligations, the government calculates your Expected Family Contribution, or EFC. (Starting with the 2023-24 academic year, the EFC will be renamed the Student Aid Index, or SAI.)

The EFC (or SAI) is the amount the government formula determines you can afford to pay for one year of college based on parent and student income, assets, number of dependents, number of children in college, and more. After you submit your FAFSA, you’ll see your EFC number in the confirmation email you receive.

Colleges use the EFC as a reference point, but are not obligated to stick to it. The colleges your student is accepted to may determine that your responsibility is higher than the EFC.

But need-based aid isn’t the only game in town. There’s also something called merit aid, or non-need aid, in the mix.

Recommended: FAFSA 101: How to Complete the FAFSA

What Is Merit Aid?

Merit aid consists of grants and scholarships that are awarded based on something other than financial need. It’s often given for academic, athletic, artistic, or other special interests. Merit aid does not need to be paid back, and it may or may not be renewed each year, depending on the award.

As you may guess, merit aid is far more subjective than need-based aid. During your student’s college search, it’s helpful to know these general trends in merit aid.

Which Schools Award Merit Aid?

Private and high-priced colleges usually award more merit aid than public state schools because of their larger endowments. One exception: Ivy League schools do not grant merit aid.

If your student plans to attend a public college or university out of state, you will likely face higher tuition. But attractive candidates may also be awarded more merit aid to help compensate for those extra costs.

Finally, state school honors programs can come with tuition discounts or academic scholarships.

Recommended: How To Get Merit Aid for College

What Is the Common Data Set and How Can You Use It?

One way to dispel the mystery around how colleges award financial aid is to understand the Common Data Set. The CDS is a standard set of data that schools collect about admissions, student demographics, faculty demographics, financial aid, academics, and campus life. Schools send the data to publications and organizations that rank colleges and universities.

The New York Times calls this data a “rich trove” about campus life and college finances. Most schools post their CDS on their website.

Not every school can meet every family’s full need for tuition. That’s where the CDS comes in: It can tell you how much need, on average, a school is able to meet and how many students receive need-based and merit aid. You and your student can then prioritize schools that either meet the most student need or award the most merit aid regardless of need.

How to Find the CDS

Most schools post their CDS data on their website. Often the best way to get to the data quickly is to type the name of the university and “Common Data Set” in your search engine. You’ll likely come up with a link to a PDF.

Try not to be overwhelmed by the length and less-than-reader-friendly format. As you scroll through, you’ll find lots of useful information on all aspects of admissions and campus life. If you’d like to get straight to the information about financial aid, skip to section H2. This will tell you how much need, on average, a school is able to meet and how many students receive all types of financial aid.

Why Some Schools Don’t Want You to See the CDS

You may discover in your search that some schools don’t post their CDS. That can be because they don’t want families to know they got a below-average aid offer, or they don’t want the public to know how many or few people are paying full price.

As efforts continue to encourage full disclosure and diversified, equitable student bodies across the country, the number of schools that don’t post this information is dwindling.

How You Can Fill the Gap

Even as savvy parents exhaust all sources of need-based and merit aid, you may find that you’ll still have to pay for some college costs. Here are some additional resources that may be available.

Scholarships

Scholarships are available for all types of students in virtually every area of study. Scholarship money, which does not have to be paid back, can be found through nonprofit groups, corporations, state governments, and community organizations, to name just a few. Start your search with SoFi’s scholarship search tool.

Federal Grants

•   Pell Grants. You do not have to pay back Pell Grants. They are awarded based on financial need to low-income families.

•   Work-study grants. As the name implies, these grants allow students to work at various part-time jobs at or around campus. You do not pay federal taxes on earnings from work-study programs.

Federal Student Loans

•   Subsidized Direct Loans. The government pays the interest on subsidized loans while you’re in school, during grace periods, and during periods of deferment. Interest rates are usually lower than private student loans, and there is usually a cap on how much you can borrow. You can learn more in our look at subsidized vs. unsubsidized loans.

•   Unsubsidized Direct Loans. These are not awarded based on financial need, but students with need often use them. Because the loan is “unsubsidized,” the principal will accrue interest while you’re in school. You may make interest-only payments during that time, but you’re not required to do so. If you don’t, the interest that accrued is added to the principal amount of your loan.

•   PLUS loans. Direct PLUS loans are fixed-interest rate loans available to parents of undergraduate, graduate, and professional degree students to help pay for tuition. They are not subsidized.

Private Student Loans

Once you’ve exhausted need-based and merit aid, you may find you still have some costs of attendance to cover. That’s where private student loans come in. The details vary, because terms and criteria will depend on the individual lenders and borrowers. SoFi offers no-fee private student loans for a variety of situations. You can find out more in our look at private vs. federal student loans.

The Takeaway

Middle-class families can often feel “caught in the middle” of the college financing situation. They earn too much to qualify for enough need-based aid but not enough to pay for all college costs. To maximize your financial aid award, it helps to know how and when colleges award their aid. First, use the Common Data Set to help you prioritize schools that award more need-based or merit-based aid. Then complete the FAFSA each year your student is in school. Also make sure to search for state and private scholarships that are not tied to the FAFSA.

SoFi private student loans can help families fill the gap between financial aid and the cost of attendance. There are never any fees: no origination fees, no late fees, and no insufficient-funds fees. And the application process takes just 3 minutes online.

Named a Best Private Student Loans Company by U.S. News and World Report.

FAQ

What income qualifies for need-based financial aid?

There’s no income cap for financial aid. Your need is determined by information you provide in the Free Application for Federal Student Aid (FAFSA) about your assets and financial obligations. Many families making six figures qualify for need-based aid.

Can middle-class families get financial aid?

Absolutely. It’s not unusual for families with annual income above $100,000 to receive financial aid.


Photo credit: iStock/jacoblund

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 Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
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How to Open a New Bank Account

What Do You Need to Open a Bank Account?

Do you need to open a new bank account? If you’re armed with the right information, opening an account online or in person won’t take long. In some cases, you can apply for a checking or savings account in a matter of minutes.

Whether you’re a first-time banker or changing from one financial institution to another, here’s information that may help make the process easier. We’ll review what you’ll need to open a bank account and highlight the differences between checking and savings accounts. We’ll also share some details about how to use a new bank account. Ready? Here we go!

What Will I Need to Open a Bank Account?

Here’s a list of what you are likely to need when opening a bank account. Gathering them before you actually begin the process of starting a new account will help you save time and frustration:

1. Qualifying information: First, you’ll need to make sure you’re eligible to open a bank account. If you’re under 18, many (but not all) banks may require a parent or legal guardian to open the account with you.

2. Identification: You’ll also need to provide a valid government-issued photo ID such as a driver’s license, non-driver state ID card, or passport.

3. Personal information: Be prepared to provide basic information such as your birthdate, Social Security or Taxpayer Identification number. You’ll also need to give contact information such as your address, phone number, and email.

◦  Other account holder information: If you’re opening a joint account, you’ll need the identifying and personal information listed above for all the account owners.

4. Initial deposit: You will likely need an initial deposit when opening a bank account. The minimum amount required to open an account varies from bank to bank but in some cases, it can be as low as $25. In some cases, it may even be absolutely zero! (We’ll share more on this in a minute.) If you’re transferring the minimum deposit from another bank, you will likely need the routing and account numbers.

5. Username and password: If you’re applying online or opening an account at an online-only bank, you’ll need to establish a username and password.

6. Signatures: If you are applying for an account in person at a branch, you’ll be able to sign all documents there. If you’re applying online, you may be able to use an e-signature, or, depending on the bank, you may have to wait and sign documents that are sent to you via the mail.

Why Open a New Bank Account?

You probably know that bank accounts offer convenience, safety, and flexibility. In fact, if you’re like most people, you probably already have an account or two up and running. But sometimes, there’s a good reason to start a new bank account. Perhaps you want to open a savings account in addition to your checking and earn more interest as you work towards a goal, like the funds to pay for a vacation. Or maybe an online bank offers a great incentive (say, a higher interest rate and fewer fees) than the bricks-and-mortar financial institution you are currently using.

Bank Account Types to Choose From

There are two main types of basic bank accounts: checking and savings accounts. Many people choose to open multiple types of bank accounts at the same time.

Type of Account

Pros

Cons

Checking Account
  • Easy access to money
  • Unlimited withdrawals/transfers
  • Low initial deposit; typically, $25-100 but possibly $0
  • FDIC-insured
  • Debit card
  • Direct deposit
  • No or low interest rate
  • Possible minimum balance required
  • Overdraft and nonsufficient funds often assessed
  • Savings Account
  • Earns interest
  • Easy access
  • Low initial deposit of $25 to $100
  • Low risk
  • FDIC-insured
  • Fees
  • Low annual percentage yields (APYs)
  • No tax benefits
  • Some account restrictions (such as limited monthly withdrawals)
  • If you’re looking for a bank account to use primarily for paying expenses, a checking account with no or low fees is probably best. If you are trying to save for short-term goals such as a car, vacation, or down payment on a home, a savings account may fit your needs. Here’s a closer look.

    Checking Account

    A checking account is held at a financial institution and allows withdrawals and deposits. Checking accounts are liquid. In most cases, you are allowed an unlimited amount of deposits and withdrawals. That’s different from most savings accounts that may limit transactions.

    You can get to your money using checks, ATMs, electronic debits, and debit cards tied to the account. You can deposit using ATMs, direct deposit, and over-the-counter deposits.

    Some checking accounts may pay interest on your balance, but at a very low rate. Almost all bank checking accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per individual. This protects your money against sudden bank closures and other crises.

    Many banks offer apps and other digital tools that help keep track of your checking account balance. They also enable you to make deposits, transfers, and automatic bill pay, as well as provide general budgeting and financial information.

    Depending on where you open the account, there may be minimum balance requirements and other fees to contend with, such as overdraft or non-sufficient funds (NSF) fees, if your balance dips below zero.

    Savings Account

    A savings account is an interest-bearing account also held at a financial institution. Savings accounts are an important source of funds for banks and other finance companies to use as loans. Just about every bank and credit union offers them, and they can be a good place to save funds you’ll need in the short term while still earning a modest amount of interest. The minimum deposit is usually in the range of $25 to $100. A word to the wise, though: High-interest savings accounts may charge a monthly maintenance fee that can erode your interest earned and your savings.

    Like checking accounts, most savings accounts are FDIC-insured. The amount of withdrawals you can make over a certain period of time may be limited (often six per month). Savings account interest rates vary, but in most cases, the amount of interest paid is quite modest (though online banks tend to offer higher rates than bricks and mortar banks). This is especially true when comparing them to less-liquid savings vehicles such as CDs. With most savings accounts, banks may change their rates at any time.

    One last thing to remember: Any interest earned on a savings (or checking) account is considered taxable income and will be reported to the IRS. You will also want to check with banks to see what the minimum deposit and balance requirements are and what kinds of fees are applied to savings accounts.

    💡 Recommended: How Does a Savings Account Work?

    Ready for a Better Banking Experience?

    Open a SoFi Checking and Savings Account and start earning 3.75% APY on your cash!


    How Much Money Do You Need to Open a Bank Account?

    You will likely need an initial deposit to open your checking account or your savings account. For checking accounts, this can be as low as $25 or $100, depending on the bank and the account services you’ve signed up for. In some cases, though, a bank (usually an online bank) may let you open an account for less – even with no money until your first paycheck is deposited, for instance.

    You can transfer money from an existing account at a bank or credit union into your new account, but be aware the existing account may charge a fee for this. If you’re opening an account in person, cash or a check will work. In some cases, you may have to wait several days for a check to clear before you have access to those funds.

    Using Your New Bank Account

    After your account is opened and funded, you’re ready to go. Be sure to keep an eye out for anything coming to you in the mail, such as a debit card or paper checks.

    •   Utilize Online Features: Next, you’ll want to sign up for any electronic features associated with your account that may help you manage your money. This includes online bill pay, which allows you to pay bills electronically, eliminate paper checks, and take advantage of remote check deposits. Account alerts are another benefit of electronic bank accounts, as they can warn you about unusual activity in your account and if your balance is getting low.

    •   Track Activity: This last feature is important: You’ll want to keep close track of the activity in your checking account to make sure you don’t overdraw. Most banks charge hefty overdraft fees for purchases that put the account in the red. Those fees can add up fast.

    •   Consider Linking Accounts: If you’ve opened both a savings and checking account, you may want to consider linking the two. This way, you may be able to avoid overdraft charges and have a place to put any extra money from your checking account into a more lucrative, interest-bearing account.

    As you see, starting a bank account takes just a little bit of time and information. Doing so is an important step towards optimizing your financial life and giving you a place to keep your money, access it – and even grow it and put it to work for you.

    Bank Better With SoFi

    Looking for one-stop banking? With high interest banking from SoFi, you can quickly open qualifying accounts that earn a healthy APY, banish fees (overdraft, monthly maintenance, and more), and give you access to your direct-deposit paycheck up to two days earlier! And you’ll have access to 55,000 fee-free ATMs within the Allpoint network worldwide just to make things even more convenient.

    Better banking is here with up to 3.75% APY on SoFi Checking and Savings.


    Photo credit: iStock/atakan

    SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
    SoFi members with direct deposit can earn up to 3.75% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 12/16/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
    Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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    Going Back To School for a Master’s Degree During a Recession: Good or Bad Idea?

    Going Back To School for a Master’s Degree During a Recession: Good or Bad Idea?

    With all the talk of a possible recession, you may be thinking this is a good time to get an advanced degree. You can wait out the tough times and unpredictable job market while learning new skills that put you in a better position in the future.

    You’re not alone. Historically, times of economic turmoil have seen big upticks in graduate school enrollment. But is this the right move for you now?

    We hope the following information will help you decide whether the cost of earning a master’s will pay off in greater career opportunities — and higher salary — down the line.

    Why People Go Back To School During Recessions

    Periods of decline in economic activity (aka recessions) are commonly accompanied by corporate layoffs, rising unemployment, and dwindling wage growth. Because there are fewer employment opportunities, job hunting and career advancement become more competitive. Many workers decide a return to school, often to earn a master’s degree, makes sense in a tough employment market.

    Earning an advanced degree can boost your earning power in your chosen field (more on that below) or provide an opportunity to change fields. Career changers may gravitate to growing, “recession-proof” industries and fields that they are passionate about.

    Who Should Get a Master’s Degree?

    The answer depends on your professional and academic goals. The first level of graduate study, a master’s degree indicates a high level of knowledge in a profession or research area. It takes anywhere from one to three years of full-time study to complete a master’s. A bachelor’s degree is required to apply for a master’s program.

    For academics, a master’s is usually a stepping stone to a Ph.D. or other doctoral degree. Professional master’s degrees can also be the first step toward advanced degrees required for doctors, pharmacists, and lawyers, and are a necessary part of education for those careers.

    Master’s degrees can also be required or particularly helpful in education, social service, healthcare, business, and STEM fields (science, technology, engineering and mathematics).

    Recommended: What Should I Do After My Master’s Degree?

    Pros of Getting a Master’s Degree in a Recession

    For many people, a recession is a good time to go back to school, either full- or part-time. Here’s why.

    Potential Salary Boost

    In many careers, a master’s degree will command a higher salary and increase job security. According to the Bureau of Labor Statistics (BLS), workers with graduate degrees (master’s, professional, and doctoral) have the highest earnings.

    The median weekly earnings for full-time workers over 25 with a master’s degree is $1,574, compared to $1,334 for employees with a bachelor’s degree only.

    Increased Job Security

    Workers with graduate degrees also experience lower levels of unemployment, according to BLS data. The unemployment rate in 2021 for people with a master’s was 2.6%, compared to 3.5% for workers with bachelor’s degrees.

    People who have been negatively affected by a recession — either laid off or unemployed for an extended period — often find that an advanced degree can lead to more job security and advancement. As mentioned above, recessions can also be a good time for workers in hard-hit industries to gain skills and knowledge through a master’s in a fast-growing field.

    Many grad school students find that networking with other students, faculty, and alumni helps them find new opportunities, especially in a competitive job market.

    Easy Access To High Quality Programs

    Hundreds of high-quality MBA, MSW, engineering, and other in-demand graduate degree programs are now available online from prestigious colleges and universities. Remote learning makes these programs accessible to students anywhere in the country. Online programs often cost less than in-person learning and can offer more flexibility for students who need to continue working full- or part-time.

    Cons of Getting a Master’s Degree in a Recession

    Grad school isn’t right for everyone, and making this move demands careful consideration.

    Costs and Potential Debt

    The average cost of a master’s degree is $66,340, according to a 2021 report from the Education Data Initiative. That does not include living expenses or lost wages from taking time off work. And people with a master’s degree carry an average of $46,798 in student loan debt.

    Determining whether taking on federal or private student loan debt is worth the increased earning potential or career satisfaction is an important step in your decision-making process.

    Increased Competition for Admissions

    You’re not the only one debating whether to ride out tough economic times by going back to grad school. That can mean increased competition for the best programs. If a degree from a particular college or university is part of your career plan, carefully consider your timing.

    Missed Work Experience

    If you’re considering leaving a job to attend grad school, keep in mind that you may miss valuable work experience that can put you in a better position when the recession ends. Working part-time can help pay for grad school and sometimes alleviates missed work experience, but not always. That’s because part-time employees don’t always encounter the same opportunities to gain valuable experience as full-time staffers.

    Recommended: Undergraduate vs. Graduate Student Loans: How They Differ

    How Much Does a Master’s Degree Cost?

    Depending on the field of study and institution, master’s programs range from $12,000 to $75,000. Unlike many doctorate programs that waive tuition and fees and even offer a stipend, master’s degrees are not fully funded.

    Ways To Pay for a Master’s Degree

    Most students rely on a combination of savings, scholarships, grants, federal loans, private loans, and help from employers to pay for graduate school.

    Federal Grants

    Federal grant programs include the Pell Grant, which is generally available only to undergrads who demonstrate exceptional financial need. However, it may be possible to receive some grant funding to help you pay for graduate school. Remember, this time around you’re an independent student, and you won’t be tied to your family’s income to determine need.

    Another federal grant that may be available to graduate students is the Teacher Education Assistance for College and Higher Education, or TEACH grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduation.

    Filling out the Federal Application for Student Aid (FAFSA) is the first step to determine whether you’re eligible for federal grants.

    Scholarships

    The FAFSA also gives you access to many scholarships. There are scholarships offered in every field imaginable. Start your search with these online tools:

    •   Graduate School Scholarship Search at Sallie Mae

    •   Scholarship Search Engine at CollegeScholarship.org

    •   SoFi’s State Scholarship Search

    Recommended: Finding and Applying to Scholarships for Grad School

    Federal Student Loans

    Grad students may be offered loans as part of their financial aid offer. A loan is money you borrow and must pay back with interest. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources.

    The lifetime limit for Direct Subsidized and Unsubsidized student loans is $138,500 for graduate or professional students. Of this amount, no more than $65,500 can be in subsidized loans. This includes student loans borrowed during undergraduate study.

    Private Student Loans

    Many students also rely on private student loans to help pay for graduate school. The maximum amount that students can borrow with a private student loan varies by lender, but can’t exceed the cost of attendance.

    The “cost of attendance” is the combined total of tuition and fees, books and supplies, living expenses, transportation, and miscellaneous expenses. This estimate may also include dependent care, study-abroad, and costs related to disabilities.

    The Takeaway

    Pursuing a master’s degree can be a great way to enhance your skills and career opportunities. Taking advantage of a slow or troubled economic time to do so can help ensure your job security in the future. That said, it’s important to consider the tuition costs associated with a graduate degree, the potential for taking on debt, and the effects of missed earnings and opportunities if you take time off work to go back to school.

    SoFi can help students manage the cost of tuition with its private student loans for grad students. SoFi private student loans offer competitive interest rates for qualified borrowers, flexible repayment plans, and no fees. SoFi makes it fast and easy to pay for a grad degree – and now, even a grad-level certificate — so you can focus on what matters the most: your education.

    SoFi was named a 2023 Best Private Student Loan Company by U.S. News and World Report.

    FAQ

    Is grad school a good place to ride out a recession?

    It can be. Recessions are usually accompanied by high unemployment and layoffs. For many people, gaining new skills and expertise in a graduate program can be a good way to make yourself recession-proof in the future.

    Do more people head for grad school during a recession?

    Yes, historically more people apply to and attend graduate school during a recession. The Great Recession starting in 2008 is a good example of that trend.

    What are worthwhile master’s degrees to get during a recession?

    Master’s degrees that give you the credentials and skills to move forward in your career can be well worth the cost through future salary increases and advancement opportunities. But pursuing a passion that will give you career satisfaction for years to come can be just as worthwhile.


    Photo credit: iStock/izusek

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

    Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
    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.
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    The College Money Talk: Explaining to Your Child What You Can and Can’t Afford

    The College Money Talk: Explaining to Your Child What You Can and Can’t Afford

    When your high schooler starts thinking about college, one of the best things you can do is to have The College Talk: a frank discussion about education, career, and life goals. The College Money Talk — the dollars and cents of the process — should be a part of the conversation. This will help you and your child stay on the same page during the college search.

    We’ve assembled a list of topics you may want to include, such as how much you, as parents, can contribute toward college. We’ll also guide you through how to structure the conversation, explain financial aid, and more.

    Figure Out How Much You Can Afford

    First and foremost, parents should look at their finances as a whole: retirement savings, other investment accounts, monthly budget, upcoming large expenses, etc. Also think about the current economy, especially inflation and the bear market.

    “Parents need to keep in mind their own financial security first and foremost,” says Brian Walsh, senior manager of financial planning at SoFi. “We don’t want parents to take on too much debt or put themselves in a sticky situation because they helped their kids too much.”

    Walsh adds that it’s essential for parents to figure out on their own how much they can contribute before talking to their kids. One way to do that is to see how their retirement savings stack up against suggested amounts:

    Age

    Amount Saved

    30 50% of salary
    40 1.5 to 2.5 times salary
    50 3 to 5.5 times salary
    60 6 to 11 times salary

    Recommended: Inflation and Your Retirement Savings

    Consider the Timing

    You may wonder when, and how often, you should have the college and money talk. Walsh says you can relax during the early high school years.

    “Things will heat up junior and senior year,” Walsh says. “That’s when you’re looking at schools the kids are interested in, and determining how realistic it is they’ll get into those schools and secure financial aid. Senior year is when everything comes together — making decisions about where to go and ultimately coming up with a plan for how to pay for college.”

    Consider blocking out time to have the conversation freshman year in high school, then intermittently throughout junior and senior year. Use your best judgment in broaching the conversation, and choose a time when your kids seem receptive.

    Structure the Conversation

    Walsh suggests beginning with a discussion of the paths available to your child after college. This may involve different professions and careers and how to attain them, even jobs that don’t require a college education. Your child may also have no idea about the potential earning power of various professions — a great segue into the cost of college.

    According to Walsh, it’s best to have this talk in an environment where everyone feels comfortable. That may be a favorite coffee shop or the living room couch. If you’re not sure, ask your student what they prefer.

    If you want to make it a more collaborative process, you can give your child assignments. For example, you may work with your child to search for colleges, look up financial concepts, debate the trade-offs of a big-name school vs. a lesser-known institution, and more.

    Your student may also want to research the graduation rates of colleges. Walsh suggests having students identify the schools where students tend to graduate in four years or close to that.

    When you start the money conversation, consider bringing up the average “net cost.” That’s a college’s cost of attendance (which factors in tuition, fees, books and supplies, and living expenses) minus any grants and scholarships. According to the College Board, the average net cost for 2022-2023 of a private college was $32,800. The average net cost for public college was $19,250.

    Avoid looking at the sticker price, or what school websites say tuition and room and board will cost. Instead, kick off the affordability conversation based on net price.

    Explain About Financial Aid

    Financial aid can come from various sources: colleges and universities, the government, and private lenders. Financial aid can include grants, scholarships, work-study, and loans:

    •   Grant: A type of need-based aid that you don’t have to repay.

    •   Scholarship: A financial award based on academics, athletics, other achievements, or diversity and inclusion. It may or may not be based on financial need, and doesn’t have to be repaid.

    •   Work-study: An on-campus job that helps cover the cost of school. You must file the Free Application for Federal Student Aid (FAFSA) to qualify for work-study.

    •   Federal Student Loan: A loan is money you borrow to pay for college or career school. You must pay back loans with interest. Federal student loans come from the federal government by filing the FAFSA.

    •   Private Student Loan: These loans come from a private bank or online lender. Private student loans do not offer the same federal protections that come with federal student loans, such as loan forgiveness and income-driven repayment plans. Consider these factors before you decide to pursue private student loans.

    For detailed information on all available financial aid options, reach out to the guidance office or college office at your child’s high school. Online resources, like StudentAid.gov and SoFi’s FAFSA Guide, are also helpful.

    “When you’re down to the final couple of colleges, work with the admissions and financial aid offices at those schools,” Walsh says. “They will be the best resources during senior year and going forward.”

    Recommended: Scholarship Search Tool

    Talk About Debt (and Debt Repayment)

    Many high school students don’t have experience with loans or understand them at all.

    “One of the risks of student loan debt is that it can feel like Monopoly money — it’s not real,” Walsh says. In your discussion, try to make student debt more concrete for your child.

    Walsh recommends going through a sample budget based on the average starting salary of a career related to your child’s preferred major. (Also check out our guide to ROI by bachelor’s degree.) Calculate the amount your child may earn each month. Estimate what they may pay for rent, utilities, groceries, transportation, student loans, and more. How much will they have left over after those expenses?

    Although it may feel awkward, it’s worth talking to your kids about student loans to help them understand how to handle them.

    Discuss Parent / Child Contributions

    “Be transparent with the student so they know what to expect when they look at different schools,” Walsh says. He urges parents not to overextend themselves or feel guilty if they can’t contribute as much as they’d like. Just 29% of parents say they plan to foot the entire bill for their kids to go to college, down from 43% in 2016.

    Look for Ways to Cut Costs

    During your college money talk, you may want to explore strategies for cutting expenses. Walk through a sample college budget, and look for ways to save on living arrangements, transportation and travel, Greek life, computers, books and supplies, dining out, and Wi-Fi. Doing all this ahead of time allows you to pick and choose what’s important and plan how parents and kids will spend their money.

    You might also suggest that your child begin at a two-year school to save money, then transfer to a four-year institution.

    Recommended: Money Management for College Students

    The Takeaway

    Paying for college often involves an emotional tug-of-war between a student and their parents. Walsh urges families to use The College Money Talk as a teaching moment. “It’s an opportunity for your child to learn valuable lessons on how debt and savings work,” he says. “And that can help them make better financial decisions in the future.” Parents should examine their finances and agree on their family contribution before discussing it with their student. Because high schoolers have little experience with money, parents can make it more concrete by walking through sample budgets: one for their expenses while in college, and another that projects their income and student loan debt after graduation.

    SoFi private student loans can help families bridge the gap between financial aid and the cost of college.

    SoFi can help you find the right private loan for you.

    FAQ

    How do you tell your kid you can’t afford their dream college?

    It may come as a surprise to your child when The College Money Conversation takes a turn and you reveal that you cannot pay for their dream school. However, it’s best to answer the question early on in high school while they can still consider other, more affordable colleges.

    Do most parents pay for their kids’ college?

    About 29% of parents plan to pay the full college costs. However, that doesn’t mean you must follow suit, particularly if it will put a strain on your finances. Consider all aspects of your financial situation before deciding how much you can put toward the cost of college.

    How do middle class families pay for college?

    Paying for college involves planning and research, and that’s the case for families at any income level. Most families cover the cost of attendance through a combination of personal savings, need-based grants, scholarships, work-study, and student loans. This involves filing the FAFSA to see the amount of need-based financial aid your child may receive. You can also arrange to set up a payment plan, in which you make payments over the course of 10 or 11 months during each school year.


    Photo credit: iStock/SDI Productions

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    Prepaid College Plans: What Does Each State Offer?

    Prepaid College Plans by State: What Does Each State Offer?

    College is a major expense. Even with years of thoughtful saving and planning, the costs can add up quickly. Prepaid college plans are one option families are choosing to work out a smoother financial process for students and parents alike. These plans used to be more readily available in the past. Still, it’s worth looking at prepaid college plans, where you can get one, and whether they’re a smart financial decision.

    What Are Prepaid College Tuition Plans?

    If you have a student who definitely plans on going to college someday, a prepaid college tuition plan can help set them up for success. You, as a parent, guardian, or relative, can start paying for college now, long before the student actually attends. This locks in the current tuition rate. Even as tuition costs go up in subsequent years, these plans allow you to keep paying the tuition rate you initially locked in.

    You can think of it as a loan of sorts. You pay up front, and the state earns money off of those payments. When it comes time for your student to attend college, the state pays the tuition out of the funds you provided.

    Of course, you need to be confident in your student’s plans for this to work. You will probably need to live in the same state as the college the student will attend since these plans tend to apply only to in-state tuition.

    Pros and Cons of College Prepaid Plans

    Obviously, locking in a lower tuition rate can be a tremendous financial benefit. With college costs constantly on the rise, a prepaid tuition plan offers the potential of a steep discount. And you might even enjoy some tax breaks if you choose this approach, such as a deduction based on your contribution to a prepaid plan, depending on where you live.

    However, this sort of plan can be somewhat inflexible. You may be limited in the choices you have in terms of schools. While you can get a refund if your student chooses a different school than you all expected, you may end up feeling some pressure to stay the course when investing in a plan like this.

    And you can’t use the money freely. There are restrictions to how you can use the funds in a prepaid college plan. For example, room and board probably aren’t covered. These plans generally focus specifically on tuition and fees.

    Despite this, many choose prepaid college plans to lock in a rate. They also enjoy the high contribution limits and tax benefits. Here are the major pros and cons of these plans.

    Pros Cons
    Steady tuition rate Lack of flexibility
    Tax breaks Eligibility limitations
    High limits Lack of control

    Prepaid College Plans vs 529 Program

    College prepaid plans and 529 college savings plans are similar. They serve the same basic function. However, when you look closer, they can be quite different. Prepaid tuition plans are a type of 529 plan, in fact, but 529 savings plans have distinct features that might sway your decision about investing in one or the other. Here are three of the biggest differences.

    Prepaid College Plan 529 Savings Plan
    Timeframe You must start investing within a certain time period. Different states will have different rules about this. You can generally invest whenever you like.
    Flexibility These plans are less flexible. You generally have to spend the money on tuition and fees specifically. You have more flexibility in how you spend your money here. You can use funds for books, room and board, and other expenses, as well as tuition.
    Risk These plans are stable. However, they won’t earn much over time. If your student changes their mind and you withdraw the money, expect to break even. These plans aren’t risky, but they aren’t going to earn much either. This is an investment. It could earn far more than a prepaid plan, but it does involve stock investments.

    The National Prepaid College Plan

    While many prepaid college plan options are state-run, there is also a national program called the Private College 529 Plan. Unlike other prepaid college plans, there’s no state residency requirement to join this plan. It applies to nearly 300 colleges and universities. However, they are all private institutions, not public. They span 30 states plus the District of Columbia.

    The national plan offers a bit more flexibility than state plans, and you don’t need to choose a school to start saving. That decision can wait until your student is actually enrolling, in fact. As long as it’s one of the private institutions that are part of the plan, you can use your funds there.

    Recommended: How to Start Saving for Your Child’s College Tuition

    States With Prepaid College Plans

    Only nine states still have prepaid college plan options, and each state will offer something a little bit different. You can compare all of the options below to see if any of these state plans work for you.

    State Plan Features
    Florida Florida 529 Prepaid Plan The child must be a Florida resident. This plan covers tuition and fees and you can opt into a one-year dorm plan as well. Florida lets you use this plan nationwide and it’s guaranteed by the state so you won’t lose money.
    Maryland Maryland Prepaid College Trust You can start by prepaying for just a single semester. This plan also works for out-of-state tuition. And it offers an income tax deduction for Maryland residents.
    Massachusetts Mefa U.Plan You can contribute the full cost of tuition and fees to this plan, which is invested in bonds. You can transfer the funds or cash out and receive your investment plus interest if your plans change.
    Michigan Michigan Education Trust Michigan offers a discounted, age-based pricing structure. Plus, you can transfer the funds to other family members. The funds work at in-state, out-of-state, and even trade schools.
    Mississippi MPACT You pay a lower monthly rate for younger children when you enroll in this plan. You have to use the funds on tuition and fees, but anyone can contribute to the plan.
    Nevada Nevada Prepaid Tuition Program There are some eligible out of state and private institutions that qualify under this plan. The student must use the funds within six years of graduating high school.
    Pennsylvania PA 529 Guaranteed Savings Plan This plan only applies to state universities. However, you can also use it for up to $10,000 at elementary and secondary public, private or religious schools. You can alter your contribution levels at any time by changing your tuition level.
    Texas Texas Tuition Promise Fund Save for public colleges and universities in Texas with this plan, excluding medical and dental institutions. You must enroll between September and March.
    Washington Guaranteed Education Tuition You can use your funds on schools nation-wide. You can even use the funds for room and board, books, computers, and other expenses. As long as you use the funds for higher education, they won’t be subject to tax.

    Are Prepaid College Plans Tax Deductible?

    It depends on the state and plan, but in many cases, yes! There may be stipulations, though. For example, you’ll probably have to use the funds for higher education only. However, withdrawals for educational purposes may be tax-free. Moreover, your contributions to the plan could earn you deductions.

    Are Prepaid College Plans Worth It?

    That depends on where you live and what your student’s goals are. If the future is pretty certain, or you live in a state with a very flexible plan, a prepaid college plan can be a safe, stable way to save up money for college.

    Because of the limitations and lack of flexibility, though, it may not be right for everyone. If, for example, you want to be more aggressive about your college planning, a 529 savings plan might suit your goals better. Plus, you can spend that money on things beyond just tuition and fees.

    Recommended: Parent PLUS Loans vs Private Parent Student Loans for College

    Alternative Methods for Prepaid College Plans

    Beyond a prepaid tuition plan, you can also try a college savings plan to build up cash for college. This allows you to save up money and spend it on qualified education expenses. It doesn’t lock in a tuition rate, but because it’s a more aggressive type of savings plan, you could end up saving up more money in the long run.

    There is also a national option. This plan applies even in many states that don’t have their own prepaid tuition plans. It also locks in rates, but you will have to choose one of the schools covered by the plan. Luckily, there are almost 300 to choose from.

    Of course, if your child is headed to college in the next few years, you may not have time to save much money. Parent PLUS loans can help. When an undergraduate’s financial aid doesn’t meet the cost of attendance at a college or career school, parents may take out a Direct PLUS Loan in their name to bridge the gap.

    The Takeaway

    The thought of large student debt scares off many who would otherwise attend a college or university. But with some strategic and long-term planning, college can fit in the budget. You can mix and match approaches to find what works for you. For example, you could combine a prepaid tuition plan with a no-fee student loan to pay for college. No matter what you ultimately choose, it will help to start planning well in advance.


    Photo credit: iStock/dangrytsku

    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.

    Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
    Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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