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What Are Actively Managed ETFs?

Exchange-traded funds or ETFs generally fall into two categories: actively managed and passively managed. Actively managed ETFs, a growing category in the ETF market, are overseen by a portfolio manager.

The goal of an active manager is to outperform a certain market index, which they use as a benchmark for their portfolio. By contrast, passive ETFs simply mirror the performance of a particular market index; they don’t aim to outperform it.

There are two types of actively managed ETFs: transparent and non-transparent. Active non-transparent ETFs are a new option that was introduced in 2019; these funds are sometimes called ANTs.

Keep reading to learn more about the distinction among different ETFs, the pros and cons, and whether investing in actively managed ETFs makes sense for you.

How Actively Managed ETFs Work

Actively managed ETFs employ a portfolio manager and typically a team of analysts who do market research and make decisions to buy, hold, or sell the assets held within the fund. Most ETFs are designed to reflect a certain market sector or niche. They typically measure their success by using a known index as their benchmark.

For example, a technology ETF would be invested in tech companies and potentially use the Nasdaq composite index as a benchmark to measure its performance.

Despite the fact that passive (or index) ETFs strategies predominate in the industry — index ETFs represent roughly 98% of the ETF market — active strategies are gaining ground. That said, it has been historically quite difficult for active fund managers to beat their benchmarks.

Actively managed transparent and non-transparent ETFs are similar to traditional (i.e. index) ETFs. You can trade them on stock exchanges throughout the day, and investors can buy and sell in amounts as small as a single share. Broad availability and low investment minimums are an advantage that ANTs (and ETFs more generally) boast over many mutual funds.

Actively managed transparent ETFs

When exchange-traded funds first appeared some 20 years ago, only passive ETFs were allowed by the Securities and Exchange Commission (SEC). In 2008, though, the SEC introduced a streamlined approval process that allowed for a type of actively managed ETF called transparent ETFs. These funds were required to disclose their holdings on a daily basis, similar to passive ETFs. Investors would then know exactly which securities were being traded within the fund.

Many active fund managers, however, didn’t want to reveal their trading strategies on a daily basis — which is one reason why there have been fewer actively managed ETFs vs. index ETFs to date.

Non-transparent or semi-transparent ETFs

In 2019, another rule change from the SEC permitted an active ETF structure that would be partially instead of fully transparent. Under this new rule, an active ETF manager would be allowed to either reveal the constituents of their portfolio less often (e.g. quarterly, like actively managed mutual funds), or communicate their holdings more obliquely, by using various accounting methods like proxy securities or weightings.

The SEC ruling opened up a new channel for active managers, and since then the number of actively managed ETFs has grown. According to Barron’s, in just the past two years the number of actively managed ETFs has more than doubled. Nearly 60% of the ETFs launched in 2020 and 2021 were actively managed — more than all the actively managed ETFs established in the past decade.

From an investor’s perspective, the most noticeable difference between these two kinds of actively managed ETFs — transparent vs. non-transparent — would be the frequency with which these funds disclose their holdings. Both types of ETFs trade on exchanges at prices that change constantly during trading days; both rely on a team of managers to select and trade securities.

Index ETFs vs Active ETFs

So what is the difference between index ETFs and actively managed ETFs? It’s essentially the same difference that exists between index mutual funds and actively managed mutual funds.

How do index ETFs work?

Index ETFs, also called passive ETFs, track a specific market index. A market index is a compilation of securities that represent a certain sector of the market; indexes (or indices) are frequently used to gauge the health of certain industries, or as broader economic indicators. There are thousands of indexes that represent the equity markets alone, and Well-known indexes include the S&P 500®, an index of 500 of the biggest U.S. companies by market capitalization, as well as the Russell 2000, an index of small- to mid-cap companies, and many more.

Because index ETFs simply track a market sector via its index, there is no need for an active, hands-on manager. As a result the cost of these funds is typically lower than actively managed ETFs, and many active and passive mutual funds as well.

How do actively managed ETFs work?

Actively managed ETFs, often called active ETFs, rely on a portfolio manager and a team of analysts to invest in companies that also reflect a certain market sector. But these funds are not tied to the securities in any given index. The ETF manager invests in their own selection of securities, but often uses an index as a benchmark to gauge the success of their strategies.

Transparent actively managed ETFs must reveal their holdings each day.

Actively managed non-transparent ETFs, or ANTs, aren’t required to disclose their holdings on a daily basis. This protects asset managers’ strategies from potential “front-runners” — traders or portfolio managers that try to anticipate their trades. By and large, the cost of these funds is lower than transparent ETFs, and also lower than actively managed mutual funds.

Mutual Funds vs Actively Managed ETFs

All mutual funds and exchange-traded funds are examples of pooled investment strategies, where the fund bundles together a portfolio of securities to offer investors greater diversification than they could achieve on their own. In addition to the potential benefits of diversification, which may mitigate some risk factors, the pooled fund concept also creates economies of scale which helps fund managers keep transaction costs low.

That said, the structure or wrapper of mutual funds vs. passive and active ETFs, is quite different.

Fund structure

Although a mutual fund invests directly in securities, ETFs do not. With both active and passive ETFs, the fund creates and redeems shares on an in-kind basis. So when investors buy and sell ETF shares, the portfolio manager gives or receives a basket of securities from an authorized participant, or third party, which generates the ETF shares.

By comparison, mutual fund shares are fixed. You can’t create more of them based on demand. But you can with an ETF, thanks to the “in-kind” creation and redemption of shares. This means that ETF fund flows don’t create the same trading costs that might impact long-term investors in a mutual fund. And fund outflows don’t require the portfolio manager to sell appreciated positions, and thus minimize capital gains distributions to shareholders.

Pricing

The price of mutual fund shares is calculated once a day, at the end of the day, and is based on a fund’s net asset value (NAV). Investors who place a trade must wait until the NAV is calculated because most standard open-end mutual funds can only be bought and sold at their NAV.

ETFs, by contrast, are traded like stocks throughout the day. And because of the way ETF shares are created and redeemed, the NAV can vary, creating a wider or tighter bid-ask spread, depending on volume.

Fees

The expense ratio of mutual funds includes management fees, operational expenses, and 12b-1 fees. These 12b-1 fees are a type of marketing and distribution fee that don’t apply to ETFs, which trade on stock exchanges.

Thus the expense ratio for most ETFs, including actively managed ETFs, can be lower than mutual funds.

Pros and Cons of Actively Managed ETFs

As with any investment vehicle, these funds have their pros and cons.

Pros

Potentially for higher returns

One advantage of an actively managed ETF is the potential for gains that could exceed market returns. While very few investment management teams beat the market, those who do tend to produce outsize gains over a short period.

Greater flexibility and liquidity

Active ETFs could also provide greater flexibility amid market turbulence. When world events rattle financial markets, passive investors can’t do much other than go along for the ride.

A fund with active managers might be able to adjust to changing market conditions, however. Portfolio managers could be able to rebalance investments according to current trends, reducing losses, or even profiting from panics and selloffs.

Like passive ETFs, active funds also trade throughout the day (as opposed to some mutual funds who only have their price adjusted once daily), allowing investors the opportunity to do things like short shares of the fund or buy them on margin.

Cons

Higher expense ratios

One disadvantage of investing in an actively managed ETF is the potentially higher expense ratio. Active funds, whether ETFs or mutual funds, tend to have higher expense ratios. The costs associated with paying a professional or entire team of professionals combined with the fees that result from additional buying/selling of investments typically adds up to higher costs over time.

Each purchase or sale might come with a brokerage fee, especially if the securities are foreign-based. These costs exceed those of passive funds, resulting in higher expense ratios.

Performance factors

While active ETFs aim to provide higher returns, most of them don’t. It’s a widely known fact in the investment world that the majority of actively managed funds (as well as most individual investors) do not outperform the market over the long term.

So, while an active ETF may have the potential for greater returns, the risk of lower returns, or even losses, can also be greater. The chances of choosing an active fund that fails to outperform its benchmark are greater than the odds of choosing one that succeeds.

Bid-ask spread

The bid-ask spread of ETFs can vary, and while it’s more beneficial to invest in an ETF with a tighter bid-ask spread, that depends on market factors and the liquidity and trading volume of the fund. To minimize costs, it’s wise for investors to be aware of the bid-ask spread.

Investing in Actively Managed ETFs

Once an investor opens an account at their chosen brokerage, they can begin buying shares or fractional shares of actively managed ETFs.

Historically, brokerages have required investors to buy a minimum of one share of any security, so the minimum investment will most often be the current price of one share of the ETF plus any commissions and fees (many brokerages eliminated fees for buying or selling shares of domestic stocks and ETFs in 2019).

Some brokerages like SoFi Invest® now offer fractional shares, which allow for investors to purchase quantities of stock smaller than one share. This option may appeal to those looking to get started investing with a small amount of money.

It’s important to note that many ETFs pay dividends, which are payouts from the stocks held in the fund. Investors can choose to have their dividends deposited directly into their accounts as cash or automatically reinvested through a dividend reinvestment program (DRIP).

Investors with a long-term plan in mind might do well to take advantage of a DRIP, as it allows for gains to grow exponentially. For those only looking for income, DRIP might defeat the purpose of holding securities that yield dividends, however.

The Takeaway

Like mutual funds, exchange-traded funds or ETFs are considered pooled investments and generally fall into two categories: actively managed and passively managed. Actively managed ETFs, a growing category in the ETF market, are overseen by a portfolio manager. By contrast, passive ETFs simply mirror the performance of a particular market index; they don’t aim to outperform it.

Although actively managed ETFs make up only about 2% of the ETF universe, owing to regulatory changes in recent years this category has been growing. In fact there are now two types of actively managed ETFs: transparent and non-transparent. These funds offer investors the potential upside of active management, with the lower cost, tax-efficiency, and accessibility associated with ETFs. If you’re curious about actively managed ETFs, you can explore these products by opening an account with SoFi Invest®.

Learn more about investing with SoFi.


SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected]. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.


Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.


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Closed School Loan Discharge Eligibility

Closed School Loan Discharge Eligibility

The Department of Education allows federal student loan borrowers to seek a student loan discharge in certain circumstances. One such scenario involves a discharge related to permanent school cancellation.

If your college or university closes while you’re enrolled you may be wondering if you still have to repay loans you took out to fund your education. Closed school loan discharge can relieve you of the financial responsibility of repaying federal student loans.

There are certain eligibility requirements you need to meet to qualify for a closed school discharge. Understanding the guidelines, along with other options for student loan discharge, can help with managing your student debt.

What Is School Cancellation Loan Discharge?

The Department of Education can discharge up to 100% of federal student loans through the closed school discharge program.

The types of loans eligible for school closure discharge include:

• Federal Direct Loan Program loans (including Subsidized and Unsubsidized loans, consolidation loans, Parent PLUS loans and graduate PLUS loans)

Federal Family Education Loan Program (FFEL) loans

Federal Perkins loans

School cancellation discharge of eligible loans is not the same as loan forgiveness. Federal loan forgiveness programs, including the Public Service Loan Forgiveness program (PSLF) and Teacher Loan Forgiveness, have service and repayment requirements. With PSLF, you’re required to work in a public service job and make 120 qualifying payments toward your loans. Teacher Loan Forgiveness requires you to teach in a qualifying school for five consecutive years to be eligible for loan forgiveness.

A closed school loan discharge, on the other hand, imposes no requirements with regard to any minimum number of payments you need to make toward your loans or work service commitments. If you qualify, your obligation to make payments to your loans disappears.

Recommended: Types of Federal Student Loans

Who’s Eligible for Closed School Loan Discharge?

Borrowers may qualify for a school cancellation discharged if their school closed and they meet any of these conditions:

• They were enrolled at the time of the closure

• They were on an approved leave of absence when the closure occurred

• The closure occurred within 120 days of their withdrawal from the school and their loans were first disbursed before July 1, 2020

• The closure occurred within 180 days of their withdrawal from the school and the loans were first disbursed after July 1, 2020

Borrowers may not qualify for any discharge of student loans related to a school closure if:

• The student’s withdrawal happened outside the 120-day or 180-day windows allowed, based on the date of their first loan disbursement

• They are continuing education at another school

• They completed all coursework toward their degree before the school closed, even if they haven’t formally received a certificate or diploma

If any one of those things happens to be true then it’s possible a borrower won’t qualify for a closed school loan discharge.

How Does A Closed School Discharge Work?

If the school closes while a student is enrolled, they can apply for a federal student loan discharge. In general, students who meet the eligibility criteria will automatically receive an application from the Department of Education. The application is also available on their website.

Automatic Closed School Loan Discharge

School closure discharge is automatic if the school closed between November 1, 2013 and July 1, 2020 and the borrower hasn’t enrolled in another school within three years of the date of the closure. The Department of Education handles the closure for the borrower, there’s no need to complete the application. However, borrowers who would prefer to fill out the application, are able to do so.

Once your loans are discharged, the borrower is no longer responsible for paying anything toward them. But while an application for closed school discharge is under review it is important to continue making payments toward the loans as usual if they’re already in repayment. This can help avoid late payments.

Any discharged loans are removed from a borrower’s credit reports once the discharge is complete. That includes your entire payment history as well as negative items such as late payments.

Other Options for Discharging Student Loans

If you aren’t eligible to have your loans discharged because of school cancellation, there are some other scenarios that may allow it.

Disability Discharge

For example, you could apply for a discharge of your loans if you become totally and permanently disabled. The disability discharge option is available to eligible borrowers who owe:

• Federal Direct loans

• FFEL program loans

• Federal Perkins loans

It’s also open to TEACH Grant program recipients. In order to be eligible for a student loan disability discharge, you must be able to provide proof of your disability through a physician, the Social Security Administration, or the Department of Veterans Affairs. You’ll need to complete a separate application for this type of discharge and once approved, you’re subject to a three-year monitoring period to certify that you lack sufficient income to pay your loans.

Discharge in Death

Student loans can also be discharged due to the death of the borrower. That includes loans taken out by a student as well as Parent PLUS loans. In the case of Parent PLUS loans, discharge is an option if the parent who took out the loans passes away. To qualify for a death discharge of student loans, proof of death (i.e. a death certificate) must be submitted to the Department of Education.

In Rare Cases: Declaring Bankruptcy

Though it is rare, bankruptcy may be another option for discharging federal student loans, though it can be difficult to achieve. In order to have student loans discharged through bankruptcy, the borrower must be able to prove through an adversary proceeding that having to repay their loans would cause a sustained undue financial hardship for both themselves and their family.

Filing a bankruptcy case could result in all of the loans being discharged, some of them being discharged or none of them being discharged. Declaring bankruptcy adversely affects a person’s credit score and is generally a last resort. Always consult with a qualified and trusted financial advisor, accountant, or attorney before considering bankruptcy.

Other Options for Managing Student Loans

Federal student loan borrowers who are ineligible for other forms of discharge or student loan forgiveness may want to consider alternative options such as income-driven repayment options or student loan refinancing instead.

Income-driven repayment plans are offered to borrowers with federal student loans and consider a borrower’s discretionary income when determining their loan terms and payments. This can help make monthly payments more manageable but may make borrowing the loan more expensive over the life of the loan by extending the loan term.

Student loan refinancing may allow qualifying borrowers to secure a more competitive interest rate or loan terms. Though, keep in mind, refinancing any federal student loans will eliminate them from federal plans and protections, including income-driven repayment plans and closed school loan discharge.

Does School Closure Discharge Apply to Private Student Loans?

Federal closed school discharge applies to federal student loans only. Borrowers with private student loans wouldn’t be able to apply for a discharge through the Department of Education should their school close.

It may be possible to contact your private student loan servicer to see if any type of discharge option is available. Your lender may be able to offer a solution for handling private student loans if your school closed while you were enrolled and you have no plans to re-enroll elsewhere.

The Takeaway

Closed school loan discharge can help erase federal student loan debt, in the event a qualifying borrower’s school has closed. But if your school remains open or you have private student loans, you may need to consider other possibilities for keeping up with your payments.

Refinancing student loans could help borrowers secure a lower interest rate. Know that refinancing a federal student loan into a private loan eliminates it from federal student loan borrower protections, like income-driven repayment plans, deferment, and loan forgiveness options. So it may not be the best option for everyone.

If you’re considering student loan refinancing, take the time to look around for the best loan rates and repayment terms for you. SoFi, for example, offers competitive student loan refinancing rates with no hidden fees. Weighing student loan refinancing alongside other options can help make your loans more manageable.

Learn more about student loan refinancing with SoFi.

Photo credit: iStock/jacoblund


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


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


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

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

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

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A Guide to Law School Scholarships

So, you’ve been accepted to law school—congrats! You’re well on your way to embarking on a career that could help you fight for others’ rights and further the public good.

These are all laudable motivations, but chances are there’s something stronger weighing on you: How to pay for law school? It’s not necessarily clear how to find (or negotiate) scholarships for law school.

According to The Association of American Law Schools, on average, law school students paid $49,567 in tuition and fees for the 2019-2020 academic year to attend a private, out-of-state school—and, that amount doesn’t even include living expenses and other non-school costs that could pop up during graduate school.

U.S. News & World Report notes that the average annual cost of a public, out-of-state law school is $41,726, or $28,264 for in-state . (Even the lower cost option here comes to $84,792 for a three-year law program.)

Because students aren’t yet racking up those billable attorney hours, it can be helpful to research law school scholarship opportunities before applying. Here’s a broad overview of potential law school scholarships—plus some links to resources for students thinking about going to law school.

Crunching (and Swallowing) the Numbers

On the whole, according to non-profit organization Law School Transparency, law school tuition has been steadily rising over the last 35 years for all American Bar Association-approved law schools.

Per the numbers mentioned above, there might be a fair amount of sticker shock for those who haven’t yet applied for graduate school and are only thinking of someday going the lawyer route. (Here’s SoFi’s guide on how to apply to law school.) Fortunately, there are a range of options for aspiring attorneys seeking to fund law school.

In some cases, there are full-ride tuition scholarships and need-based grants out there. Full-rides of course, are not available at all law schools. If a law school doesn’t explicitly advertise or highlight information regarding full-ride opportunities, interested students can contact the school to ask. To offset the cost of attending law school, some school applicants may opt to apply only to programs that offer full- or partial- rides. One simple way to figure this out is old-fashioned Googling.

Students deciding whether to apply to law school may want to familiarize themselves with the language universities adopt to explain these scholarships. In some cases, specific scholarships are designated for particular students. Here are a few examples of how law schools describe their full-ride law school scholarship offerings— including, the University of Chicago Law School (which has several such opportunities), NYU’s Latinx Rights Scholarship, and Duke Law’s Mordecai Scholars. Magoosh, the higher education test-prep and study counseling company with the silly-sounding name, has published a 2018 list of a handful of others (along with suggestions on how to strengthen one’s resume when applying for such scholarships).

Full-ride law school scholarships can be highly competitive—with some schools offering as few as two to four per enrollment year. One potential tip for the search for scholarships is to target law schools with more tuition help.

U.S. News & World Report has organized and tabulated a list of 10 law schools that offer the most tuition assistance—reporting that “at least 77.8% of students who received grants at these schools got enough to cover more than half of tuition.” Some of the schools listed in U.S. News & World Report , like Pennsylvania State University-Carlisle, go as high as 93.2% of full-time students receiving aid in that amount.

If all of this is starting to sound like alphabet (and number) soup, there are dedicated resources like Fastweb to help prospective students find scholarships for which they may qualify. Fastweb is an online resource to help students find scholarships, financial aid, and even part-time jobs in support of college degrees.

The American Bar Association’s law-student division also has a running list (along with deadlines) of law student awards and scholarships. Additionally, the Law School Admission Council offers a list of diversity scholarships available to students from diverse racial and ethnic backgrounds. Here’s another guide on finding and applying for scholarships and one on unclaimed scholarship money.

Another resource that could be useful in factoring living expenses is this student loan calculator for aspiring law school students. Tools like this can, usually, auto-load the tuition and cost-of-living breakdowns for specific law schools. From here, it’s possible then to compare how much degrees from particular schools may end up costing.

Negotiating Wiggle Room

Doing all this research and the math around law school scholarships could put applicants in a more informed position when evaluating which program to attend—and, potentially, help them to identify schools more likely to be interested in their application.

A reality of today’s admissions process for law school is negotiating scholarships. Some schools have a strict policy against negotiating, but others fully expect their initial offer to be countered. That’s why it can help to save acceptance letters and anything in writing from schools that offer admission.

Offer letters could then be shared with competing schools, asking if they’re able to match another university’s aid. It might be uncomfortable asking for more tuition assistance upfront, but a little discomfort now could help applicants shoulder less law school debt later on. If arguing a position makes an applicant uncomfortable, it might be worth pondering whether to become a lawyer.

Doing research on law schools (and figuring out the likely cost-of-living expenses at each institution) could help applicants to determine which scores or grades to aim for in an effort to make law school more affordable for them. Tabulating expenses (and having them on hand) may also demonstrate to universities that the amounts being negotiated are based in well-documented expenses.

Law School Scholarships

There are lots of options for law-school hopefuls to find potential scholarships. The nonprofit organization Law School Admission Council (LSAC) has compiled a list of the many law school scholarships available to applicants .

From the LSAC’s list, the Attorney Ken Nugent Legal Scholarship ($5,000) and the BARBRI Law Preview’s “One Lawyer Can Change the World” Scholarship ($10,000) are worth pinning, due to the sizable chunk of change they offer.

Many law schools themselves offer competitive scholarships to attract stronger candidates. It might be helpful to check if a school also offers in-state residents specific tuition reductions or grants—especially true, if the applicant is considering a public school in their home state.

Similarly, some law firms offer scholarships. Usually applying is a straightforward process: Many, like the Rise To Shine Scholarship , only require a short essay to be considered. On top of this, there’s the rising trend of law firms helping new hires to repay a portion of their student debt once onboarded.

Federal vs. Private Loans for Law School

Students wanting to apply to law school could consider the differences between federal and private student loans. Federal loans come with certain benefits not guaranteed by private ones (such as, forbearance or income-driven repayment).

Private loans—like SoFi’s—can also help applicants to cover the expense of graduate school. So, it might be a good idea to weigh the pros and cons of both federal and private student loan options for law school.

For example, Direct PLUS loans for grads charge 7.08% in disbursement fees for the 2019-2020 academic year. (2020 numbers aren’t out yet.) SoFi Graduate Student Loans, by comparison, have no fees whatsoever—not even late or overdraft fees. Another great resource in understanding federal loans can be found over at studentaid.gov .

It’s important to note that private student loans don’t offer the same benefits and protections afforded to federal student loan borrowers, like Public Service Loan Forgiveness (PSLF). If a law school applicant is interested eventually in becoming a public defender or pursuing non-profit legal work, forgiveness and forbearance perks may play a role in their decision.

In addition to the financial aid resources mentioned above, more information can be found in SoFi’s overview of private student loans for graduate school. Those interested in figuring out how to pay for law school may want to check out SoFi’s competitive-rate private law school and MBA loans.

Law School Loans from SoFi

Going to law school is a big life decision. And, law school’s attendant costs add even more weight to this choice. If students interested in law school find themselves coming up short on funds for the JD after scholarships or federal aid, additional options may be available.

Some might seek out a student loan from a private lender, to name one possibility. SoFi’s private loans for law school offer competitive rates, flexible repayment options, and access to member benefits.

You can check your rates in just three minutes to see if a SoFi Law School Loan might help you pursue that dream of becoming a lawyer.

Learn more about private student loans for law school with SoFi.



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.


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.

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

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Choosing a Student Loan Lender Outside Your Bank

When outlining your plans for how to pay for college, student loans may be part of the financial picture. According to information published by the Pew Research Center, roughly one-third of adults under age 30 have some student loan debt as higher education costs continue to climb.

If you’ve already qualified for federal student loans and have sourced other forms of financial aid but still need more funding for school, private student loans can help close the gap. When applying for private student loans, your current bank might be the first place you look. But there are some reasons to cast the net wider and compare other borrowing options.

Here’s some helpful information worth knowing about how to choose a student loan lender other than your current bank and why it might make sense to do so.

Pros and Cons of Getting Private Student Loans With Your Current Bank

Applying for private student loans with your current bank may seem like a natural choice. If you already have checking and savings accounts at the bank or other loans, then it is possible you may feel more comfortable borrowing from a financial institution you’re familiar with.

And that can have certain advantages. For example, some banks might offer an interest rate discount or reduction for private student loans if you have another account with the bank that is in good standing. Scheduling your student loan payments may also be easier if you can link your checking account to your loan account and see balances and payments in one place.

On the other hand, there are some benefits to getting private student loans with another bank or private lender. Banks and other lenders that offer private student loans can vary greatly when it comes to things like:

•   Minimum and maximum loan amounts
•   Interest rates
•   Loan fees
•   Repayment options

Looking for a private student loan with a different bank or lender could give you more options for a better interest rate, fewer fees, being able to borrow more money, or qualifying for more flexible repayment terms. These are important considerations which can impact student loan repayment.

Choosing a Lender for a Student Loan

Whether you’re borrowing a little or a lot, it’s important to find a bank or lender that matches up with what you need for private student loans. If you’re starting from square one with how to choose a lender for a student loan, these tips could help.

1. Considering Loan Limits

When comparing banks, credit unions, or other private student loan lenders one of the first things to look at is the lending limits at each institution.

Some private student loan lenders impose a minimum loan amount and cap on the total lifetime amount you can borrow to finance your education. Being aware of those thresholds matters for making sure that you can borrow what you need.

Keep in mind, however, that the actual amount you’re able to borrow may be lower than the total loan maximum advertised by the financial institution. The amount you ultimately qualify for (or don’t) can depend on many factors including state laws and your credit history. (More on that and other factors below.)

2. Looking at What’s Needed to Qualify

Every private student loan lender is different when it comes to their minimum qualifications to borrow. While thresholds vary from lender to lender, common criteria reviewed to make lending decisions might include:

•   Credit scores and credit history
•   Income
•   Enrollment status
•   Citizenship or permanent residency status

Also, be aware that you may not be able to qualify for a new private student loan if you have any existing loans that are in default. In that case, you’d need to bring your old loans current first before you could be approved for a new loan by most lenders.

3. Checking Co-Signer Requirements

Credit scores and credit history can play a big part in private student loan approval decisions. Borrowers with little or no credit history may need a qualifying co-signer to get approved for private student loans. Depending on the bank or lender, a qualifying co-signer could be a:

•   Parent
•   Grandparent
•   Sibling
•   Spouse
•   Other relative
•   Friend

For those who think they’ll need a co-signer to qualify for private student loans, there are a couple of things to remember.

First, it’s a solid idea to be upfront with the prospective student loan co-signer about the implications of signing off on the loans. As a co-signer, they’re equally responsible for the debt and all loan activity will show up on their credit report the same as it will on a primary borrower’s credit report. So if the borrower pays late or defaults, it could adversely affect both the co-signer and the primary borrower.

Second, you can check to see if the banks, credit unions, or private lenders you’re looking into offer a co-signer release. This allows the co-signer to be removed from the loans once certain conditions have been met. For example, you may be able to get a co-signer release after making a certain number of consecutive on-time monthly payments.

Going forward, then, only the primary borrower’s name would be listed on the loans. Each lender will have different requirements for co-signer release, and some lenders will not offer that option, so understand the policies at each institution before borrowing the loan.

4. Reviewing Repayment Options

Next, look at the different options a bank or lender offers for repaying private student loans. For example, do the loans come with five-year terms? 10 years? 15? Also, consider whether there is an option to make full payments or interest-only payments while in school or whether the lender offers a repayment deferment while enrolled.

Consider whether the lender offers any type of student loan grace period immediately after graduation in which no payments need to be made. And if a deferment or grace period is available, take note of what interest and/or fees accrue on your loan balances during that time.

5. Comparing Interest Rates and Fees

Cost is often one of the most important considerations for how to choose a student loan lender. After reviewing the other details of borrowing narrow the focus down to the interest rates and fees a private student loan lender charges.

Consider whether a bank offers variable rate loans, fixed rate loans, or both. On a variable rate loan, the interest rate is just that—variable. This means it can fluctuate over time, increasing or decreasing, depending on how the underlying benchmark rate moves. With fixed rate loans, the interest rate stays the same for the life of the loan.

Deciding which one to choose may depend on what’s happening with interest rates in general. With interest rates already low, a fixed rate loan option could make sense if you want reassurance that your rates won’t go up over time.

But if rates drop even further, a variable rate loan could allow you to capitalize on that and potentially save money on interest—provided rates don’t go back up again over time!

Other factors to consider when deciding between a fixed and variable rate loan include the length of the repayment term, and whether or not the borrower would be able to cover a higher monthly payment should the variable interest rate increase.

Aside from whether private student loan rates are fixed or variable, take time to compare the rates themselves across different lenders. If a lender offers a range of interest rates, look at how the high end and low end of that range lines up with what other banks or lenders are offering.

Remember, your credit score and history (or the credit score and history of your co-signer, if you need one) can play a big part in determining the rates you qualify for. But looking at how rates stack up overall can help with how to choose a lender for a student loan.

Banks and other lenders typically allow potential borrowers to see what rates they may qualify for. When getting rate quotes, double check that the lender is doing an initial “soft” credit pull. This won’t impact an individual’s credit score1, unlike a “hard” credit inquiry.

After you’ve compared rates, check out the fees a bank or lender charges as well. Some fees to consider include:

•   Loan origination fees
•   Late payment penalties
•   Returned payment fees

The good news is, there are plenty of lenders that don’t charge fees like origination fees for private student loans. These fees could add up, and if there is a fee for paying late or for unforeseen insufficient funds, it can be important to factor those costs in.

6. Asking About Loan Discounts or Other Benefits

Another item on the list of things to consider for how to choose a student loan lender are the “extras” a bank might offer. For instance, it’s not uncommon for lenders to cut you a break on interest when you enroll in automatic payments for your loans.

While the specifics vary by lender, some may offer a reduction of the interest rate when the loan is enrolled in autopay, which can help reduce the cost of interest over the life of the loan. Another consideration may be whether a bank offers things like hardship programs or forbearance options in case there are issues repaying the loan at some point.

Unlike federal student loans, private student loan lenders aren’t required to offer hardship deferment or forbearance programs, but some do. SoFi members, for example, may qualify to pause their payments temporarily through the Unemployment Protection Program.

And finally, look at whether a lender offers anything else that could make help make your life as a student loan borrower easier. That could include an easy-to-use mobile app for managing loans, free online educational resources to help you better understand student loans, or career counseling.

All of those features can add value when choosing a student loan lender that isn’t your primary bank or another lender.

Doing Your Homework Can Pay Off When Choosing a Student Loan Lender

When considering private student loans, it’s important to remember that all banks and lenders aren’t created equally. If you’re willing to spend some time researching loan options, it might become easier to find a lender that’s the best fit for your personal needs and budget.

While we believe exhausting your federal aid options first before taking on private student loans is wise, when looking for private student loans beyond your bank, consider adding SoFi to your list of potential lenders.

SoFi offers no-fee private student loans for undergraduate and graduate school and for parents, too, all with flexible repayment options and competitive interest rates.

Looking into borrowing a private student loan to pay for school? Learn more about how SoFi can help.


1Checking 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. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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


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.


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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Should You Give up on Student Loan Forgiveness?

Public service loan forgiveness has been in the news a lot over the last year—and not for good reasons. There was the news that very few people have actually had their federal student loans forgiven.

Then there was the Public Service Loan Forgiveness (PSLF) news that the whole program might be cut . And now a lawsuit has been filed on behalf of a number of teachers who had their PSLF forgiveness denied, alleging mismanagement of the program.

What does this news mean for you? Should you still try to get your federal student loans forgiven, and how can you plan ahead for any more public service loan forgiveness updates?

What is Public Service Loan Forgiveness?

The public service loan forgiveness program is supposed to work in a fairly straight-forward way: After ten years of public service (and making payments on your loans), you can have the remainder of your student loans forgiven.

There are, of course, some requirements—and this is where it gets more complicated. To qualify for public service loan forgiveness you have to:

•   Work full-time in a qualifying public service job.
•   Make 120 monthly loan payments on a qualifying repayment plan, which is typically an income-driven repayment plan.
•   Have a federal Direct Student Loan.

For the majority of people who have their PSLF applications denied, it’s because they allegedly didn’t meet these requirements.

Most importantly, only federal Direct Student Loans qualify. Federal Family Education Loans (FFEL) or Perkins loans do not qualify—even though many of the federal loans when the loan forgiveness program was created in 2007 were FFEL loans.

You may still be able to qualify if you have one of those loans, but you would need to consolidate your federal loans into a Direct Consolidation Loan and none of the payments made before the consolidation would count.

You also need to be on a qualifying payment plan, which is either the standard ten-year repayment plan or an income-driven repayment plan. These determine how much you’re required to pay each month as a percentage of your income.

And you need to work for a qualifying employer. To verify that your public service job qualifies, fill out the public service loan forgiveness employer certification form .

Once you meet all these requirements, you still have to apply for loan forgiveness after your ten years of qualifying payments. It doesn’t happen automatically. This is where much of the public service loan forgiveness news comes in.

What Is the Latest Public Service Loan Forgiveness News?

Since the Public Service Loan Forgiveness program was launched in 2007, the first federal student loans became eligible for forgiveness in late 2017.

However, instead of a rash of loans being wiped clean, more and more news has come out about the number of applications being denied.

The latest data from the U.S. Department of Education found 73,554 borrowers have submitted applications for loan forgiveness, but only 864 have been approved. That’s not very many.

Over 2 million people also took the first step of having their employer certification approved. Since not all of those people followed through the rest of the process, critics argue it suggests there continues to be confusion around the requirements.

In fact, this was exactly why Congress approved the the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) opportunity in 2018—which allows people who had their loan forgiveness applications initially denied because they were on the wrong repayment plan to get re-approved under the new requirements.

But the most recent numbers found only 442 of those TEPSLF applications had gotten their loans forgiven. That’s been frustrating for a lot of applicants and lawmakers. It’s even prompted a lawsuit from a number of teachers who’ve had their applications denied.

Even with all the distressing public service loan forgiveness news, many were still frustrated to hear the program was at risk of being eliminated in the most recent budget proposal .

What does all this mean for you?

Should You Still Try for PSLF Forgiveness?

Just because there’s been a lot of bad news for PSLF lately doesn’t mean you should necessarily give up on loan forgiveness.

Some of those applicants have been successful and, according to the data, the average amount of loan forgiven was $59,224. That’s worth following up on—even if it takes a lot of attention to detail.

The number-one reason applications were denied was because of qualifying payments—either not enough payments had been made yet or they weren’t made under a qualifying income-driven repayment plan.

That doesn’t mean those applications won’t eventually be approved, either after making additional payments or through the new temporary expanded program. (The average loan amount forgiven under the TEPSLF program was $39,723.) But it does mean you want to double-check all the requirements.

To do this, you may want to use the Department of Education’s PSLF Help Tool. Many who applied for loan forgiveness simply didn’t actually qualify for it in the first place.

It also means you should have a back-up plan and shouldn’t assume you’ll get your loans forgiven. Because employment gaps or payment forbearance periods (for instance, if you went to graduate school) can lead to delays in meeting the 120-month time requirement, you may want to plan ahead.

In this case, it may take an extra year or two to qualify for loan forgiveness. It also may take extra work on the application.

And if you’re working in a qualifying public service job just to get loan forgiveness, then you may want to consider your options if there are other jobs you’d want instead that might have a higher salary.

Regardless of the latest public service loan forgiveness news, you can always ask yourself: Is PSLF right for you?

How Can You Plan Ahead for Any Changes to Public Service Loan Forgiveness?

The good news is if you’re currently working towards Public Service Loan Forgiveness, then you could still qualify even if the program is cut. The proposal is only to eliminate loan forgiveness for students taking out new loans starting July 1, 2020, so it hopefully wouldn’t negate those already making qualifying payments.

It also may be true that federal loan forgiveness programs may yet get revised or amended to address the many rejections. But because these things can be uncertain, it may be a good idea to budget with the plan of paying your full student loans.

Ultimately, your goal is probably to save money and do good in the world. Public Service Loan Forgiveness is a great way to have any remaining loan balance after 10 years of payments wiped clean if you work in public service, and if you qualify, but it also has some drawbacks.

It means you have to stick to an income-driven repayment plan, which means your monthly payment amount will increase as your income increases. In that case, the loan could potentially be repaid in full before the standard 10-year repayment period ends, leaving no balance to be forgiven.

If you choose to consolidate federal loans that don’t qualify for PSLF without consolidating them, such as the Federal Perkins Loan and the Federal Family Education Loan (FFEL), keep in mind that the interest rate for the consolidation loan could be higher due to how the rate is calculated (and the interest rate of a Direct Consolidation Loan has no cap).

So, might you save money with the PSLF Program? The answer is a firm maybe. Another option, which would make you ineligible for loan forgiveness and other federal repayment benefits and protections, is to refinance your student loans at a lower interest rate or more ideal terms for your situation.

Refinancing is typically a better option for those who are in a stronger financial situation than when they graduated.

Through refinancing, borrowers consolidate their student loans into one new loan, ideally with rates and terms that work better for them.

For example, if you qualify for a lower interest rate that could help save money over the life of the loan and could allow you to pay off your student loans quicker— depending on the loan term you choose. You may want to weigh the pros and cons to consider what makes the most sense for you.

Find out what interest rate and terms you qualify for in just two minutes. Check out SoFi student loan refinancing today.


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.

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


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


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


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