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Ways to Prepare Financially Before a Big Trip

So you’re getting ready to head out on vacation. We’re jealous. As part of any well-planned trip, creating a vacation checklist—including financial aspects—is essential. Perhaps you’ve decided to go all-in on that mid-career sabbatical and you’re ready to take some much-needed time off. Maybe you’re about to take that weeklong trip to Mexico.

Whether you’re headed out for just a few days or stretching beach bum status for a few months, travel can get expensive. Domestic travelers spent $880 billion in the U.S. in 2017, $258 billion of which was spent on food alone. Aside from making sure you packed your phone charger and contact lens solution, planning a vacation checklist will help you prepare financially before you hit the road.

Funding Your Vacation

Is your vacation fully funded? Be sure you estimate vacation costs, including airfare, accommodations, transportation, food, drinks, fun activities, and any shopping or souvenir buying you might do. A fun five-day vacation loses some of it, well, fun if you’re still paying it off three months later.

A great way to avoid going into debt for a vacation is to estimate your vacation costs upfront and then set aside a travel allowance each month. Use fare comparison sites like Expedia or Booking.com to get an idea of how much your trip will cost. The top two spending categories for domestic and international travelers are food and lodging , so make sure you include these expenses.

Add up the totals to get an estimate and then divide the total by the number of months before you take your trip. Then you can set aside a monthly allowance which will hopefully be what you need by the time you travel. For example, if you estimated $1,000 for a trip to Florida in five months, plan on setting aside around $200 each month into a designated travel account.

Designate a Vacation Financial Planner

This doesn’t have to be someone you hire, but someone who will hold you accountable and keep you from going overboard. Think of a vacation financial planner as someone who can accurately forecast travel expenses and anticipate unforeseen expenses, like extra cab rides to and from the airport or tips for tour guides.

Being able to plan for these types of expenses can potentially help you feel more at ease while on vacation. Instead of waking up each day in paradise in a cold sweat because you forgot about the 10% hotel daily surcharge, you’ll hopefully wake feeling well-rested and ready for that fancy umbrella-topped drink.

Credit or Cash?

How will you spend money while you’re on vacation? Whether you take cash, credit, or a bit of both, decide on how you will make purchases. If you are traveling internationally, be aware of foreign transaction fees with credit cards, currency exchange rates, and one time change fees when converting cash into foreign currency.

Finance your vacation with a vacation loan or travel credit card, but be sure you have enough cash to cover all travel expenses. Select a credit card that has travel advantages, like zero foreign transaction fees and rewards travel purchases such as rental car bookings and dining out.

By using one card during your vacation, it makes it easier to review associated transactions at the end of the month. You also may rack up more rewards points when you use a card that’s specifically tied to travel.

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Cash also has its advantages whether you’re laying oceanside or hiking a new trail. When you use cash during vacation, you don’t want the hassle of logging on to a credit card account and paying your bill after the fact.

Try taking a $20 bill (or the country’s equivalent) out with you during the day and see how far you get. Using cash encourages more of an emotional attachment to the money versus swiping plastic. You may think twice about the souvenir magnet that costs $12, thus saving you money while in vacation mode.

Alternatively, you may choose to use a debit card that withdraws money directly from your checking account. A more organized approach could be a separate checking account with debit card privileges that’s specifically for vacation use only. This way, you keep ordinary transactions separate from vacation transactions.

Money for Miscellaneous

Be sure to include money for miscellaneous vacation expenses as part of your vacation checklist. Trekking across New York City and using Google Maps on your phone to get around? App usage may drain your battery, resulting in the need for a portable charger on the fly. Try your best to account for any unexpected expenses that might occur.

Consider setting aside $50 for miscellaneous expenses like earplugs for noisy hotel rooms, cold and cough medicine for travel-related illnesses, or replacement contact lens solution and a toothbrush if you forget yours somewhere.

Create Travel Notifications

Create a travel notification when preparing for a trip. Call your credit card and bank companies and let them know the dates and locations of your vacation.

This will prevent any temporary holds or freezes companies will put on your account if they see unusual activity. Call seven days prior to departure to ensure your travel notification is ready to go when you are.

Account for any bills that might be due while you are away. Make sure automatic payments are put into place or pay bills before you go. There’s nothing worse than coming home from a great vacation only to find you’ve been slapped with late fees on a cell phone or internet bill that you forgot to pay.

Bring the Confirmation

If you pre-booked your transportation or accommodations, bringing payment confirmation along with the credit or debit card you used to pay will help expedite the check-in process.

Often times, the receipt will include a confirmation or reference number which can help the service desk member find your reservation more quickly and can help dispute any discrepancies in charges.

Okay, Now You’re Ready to Go

Planning for a vacation can be stressful. Dealing with unexpected expenses can make it worse. Fortunately, with a vacation checklist, vacation financial planner, and a way to finance your vacation, the whole process can be much easier, letting you lay back, relax, and enjoy.

Want to make it easy to finance your next adventure? Set up a SoFi Money® cash management accounts account charges no account fees (subject to change). Learn how to get the most out of SoFi Money.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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When Do You Have To Start Paying Back Student Loans?

Whether you’re still a student or are already in the working world, it feels like between project deadlines and the rest of life, there’s enough to worry about. Add on any stress of those student loans waiting for their first payment, and it might feel like you’re drowning.

But not knowing when that first loan repayment is due can add more stress when that day finally creeps up on you—and that day may be sooner than you think. So when do you have to start paying back student loans?

Federal vs. Private Loans: Similarities and Differences

When it comes to repaying your student loans, your first step will be to determine whether you borrowed private student loans or federal student loans (or both). Private student loans are borrowed from a bank, credit union, or another lender. Federal loans are backed by the U.S. Department of Education.

If you’re not sure, you can take a look at the National Student Loan Data System to review information on federal loans. If you took out student loans with a private lender, contact your loan servicer for more information.

Grace Periods

Your grace period is the time you’re given after graduation before you have to start paying back your student loans. The federal government and many private lenders understand that you might not find a steady job straight out of college.

Since not all loans have grace periods, you’ll have to check yours to know when interest will start adding up.

The majority of federal loans come with a six-month grace period, including :

•  Direct Subsidized Loans

•  Direct Unsubsidized Loans

•  Subsidized Federal Stafford Loans

•  Unsubsidized Federal Stafford Loans

Direct PLUS loans for graduate students and parents don’t have a grace period. Make sure you understand which loan you have so you can start to make payments on time.

While the grace period helps to give you time to find a job before you have to start making payments, it’s important to understand that most federal student loans continue to acrrue interest during their
grace periods

Federal Student Loans

For Direct Subsidized Loans, your interest won’t start accruing until six months after you graduate. But for Direct Unsubsidized Loans, interest starts accruing as soon as the loan is disbursed (in other words, while you’re in school).

So, your grace period might allow you to delay paying back your loans, but that doesn’t mean your interest is delayed. This means you’ll likely end up paying more for an unsubsidized loan if you’re not paying the interest that accrues while you’re in school.

Private Student Loans

Some private student loans operate with the same six-month grace period as federal student loans. However, it’s up to each individual lender to implement a grace period of any kind. If you have a private student loan, check your loan terms to see if you have a grace period.

If you’re looking to take out a private student loan, and you would like a loan that has a grace period, you may wish to review different lenders to see if any offer terms comparable to federal student loans. Also check to see if interest will accrue while you’re in school or if it starts after your grace period.

Unlike federal student loans, interest rates for private student loans vary based on your creditworthiness. Because of this, your interest rates might be higher than they would be with federal loans.

Can You Get More Time Before You Start Paying Back Your Student Loans?

If you’ve already graduated and you’re having trouble finding a job in your field, you might be stretching your finances as thin as they go. Even your student loan repayments might not get priority. Before you let late payments get the best of you, a great first step is to see if you have other options.

You can talk to your lender or loan servicer about delaying your payments a little longer—like a few more months. Your lender doesn’t want you to be late, either, and might be willing to work with you.

You might qualify for student loan deferment or forbearance , which allows you to temporarily pause payments. Keep in mind that interest may still accrue while your loans are in deferment or forbearance, depending on the type of loan you hold. You’d be responsible for that interest regardless of when you start making your payments.

The start date of those repayments isn’t the only thing you should be concerned with. If you have student loans, lowering your payment amount is probably on your mind as well. Not sure what your monthly payment is? Use our student loan calculator to estimate your student loan payments.

Can You Lower Your Student Loan Payments?

Depending on the types of loans you have, there are a few different methods available to lower your student loan payments.


If you have many different federal student loans, you might want to consider student loan consolidation. Consolidating your existing loans with a Direct Consolidation Loan means consolidating all of your federal loans into one and potentially lengthening the term so your payments go down. A longer term, however, means paying more interest over the (now longer) life of your loan.

And the new interest rate is the weighted average of all your federal loans combined, rounded up to the nearest eighth of 1%, which means consolidation might not lower your interest rate.


Refinancing your student loans is a lot like consolidation, but instead of just combining your loans into one new one with an average interest rate and longer term, you get one new loan to replace all your old ones with a hopefully lower interest rate. And you can typically choose to lengthen or shorten your loan term. Refinancing can be done with private student loans, federal student loans, or both.

Your new interest rate is typically based on your creditworthiness among other financial factors. If you’re having trouble getting the lowest interest rate you can, you can see if a co-borrower will help you refinance.

Income-Driven Repayment Plans

If you have federal student loans and have a lower income, you might want to look into Income-Driven Repayment plans. There are a few different IDR options that vary based on your income and household needs, like how many family members you care for.

All IDR plans forgive the remaining balance on your loans either 20 or 25 years after you begin paying the loan back. This could be a good option to consider if you are a recent grad.

Paying Back Your Student Loans

Generally, most student loans give you some time after you graduate to get your career and finances in order. A traditional federal student loan grace period is typically six months. It’s important to know when you’re expected to start repaying your loans, and what your options are in terms of lowering your interest rate or monthly payment.

Ready to start paying back your student loans? Learn more about how SoFi student loan refinancing might help.

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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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How to Prepare for Baby #2 with Student Loans

You’ve (more or less) survived having baby #1, which is already an accomplishment. Way to go mom or dad; what an incredible journey it is to be a parent and to raise a child.

Now, you’re toying with the idea of baby #2. But, you’re curious about how much it will cost you. And to make matters more confusing, you’ve got student loans that you’re paying off.

One study showed that 26% of people put off having children because of their student loan debt. This doesn’t have to be you. Having a second baby with student loans can be done, but it requires some planning.

To help you with that planning, we’re going to break it down. First, we’ll cover what to expect financially with a second child. Will it be as expensive as baby #1? What expenses can you prepare for?

Second, we’ll discuss tips on how to prepare for having a second baby, and give specific tips for parents who are having a baby with student loan debt. This will include tips on whether to pay them off, put them on hold, or to keep doing what you’re doing—for all of you parents who are thinking, “want a baby, but in debt!”

What You Can Expect Financially

The good thing about having a second child is that you’ve been through this before—you know what you’re doing. Just think of all that you’ve learned since you had your first baby.

That said, it can be hard to mentally prepare for adding a second baby into the mix. There will undoubtedly be moments where you will have to take it one day at a time, and you should give yourself that freedom and compassion to make mistakes and learn how to keep a kid alive all over again.

Still, there are plenty of ways to help prepare for baby #2 to ensure that the experience is as “under control” as can be. First, let’s talk a bit about what you might expect, financially, when you’re expecting a second.

Hand-me-downs Are Great

It is widely believed that a second baby is less expensive than the first because the second child can wear hand-me-down clothes, use baby #1’s cribs and changing table, and play with hand-me-down toys. And for the most part, this can be true, if parents are able to resist the urge to buy adorable new clothes and toys (although you’re probably going to need another car seat).

Hand-me-downs aren’t limited to clothes and toys, of course. There are other items that can be reused: Carriers, high chairs, bottles (although you’ll want to replace the teat), cribs, strollers, breast pumps, baby baths, baby monitors, children’s toilets, cloth nappies, bouncers, stationary activity centers, nursing pillows, changing pads, and so on. You can save a lot of scratch if you don’t need to buy these again.

(Tip for parents who haven’t had baby #1 yet: Avoid buying obviously gendered clothes. You may find gender-neutral clothes easier to re-use for baby #2.)

Hand-me-downs Have Limits

While it’s a great idea to reuse certain items, this won’t be possible with every item you’ll want or need for baby #2. For example, you may want to purchase new pacifiers, bottle nipples, and even car seats.

Car seats have an expiration date—check the bottom of the seat for a sticker that should list the manufacturer, model number, and manufacture date. It is generally accepted that the expiration date is six years after the manufacture date, but don’t use it if it’s been in a car accident previously—even a minor one.

Similarly, any crib, chair, or bouncer that has sustained significant wear and tear should be replaced; it’s better to be safe than sorry with any piece of baby equipment that could lead to injury if it in some way breaks or fails. This is especially true for any piece of equipment that “holds” a baby in some way.

Also, it can be hard to resist buying special items for each baby. Parents may be unlikely to use only hand-me-down clothing, toys, furniture, and other baby equipment, so be realistic and know that you’ll probably want to buy some stuff new. This goes for enrichment items, too. There could be classes and opportunities for your second child that may be independent (and potentially very different) than for your first child.

You Still Have to Buy Daily Use Items

You can’t reuse disposable diapers, wipe cloths, baby cream, formula, medicine, and other daily use items obviously. And as anyone who has purchased diapers before knows, these items can really add up (it could cost $550 dollars in the first year! ).

Childcare May or May Not Double in Cost

Depending on your specific child care situation, your childcare may or may not double in cost. Be sure to ask your childcare provider if they provide a sibling discount. If they don’t, you may want to look around for providers that do. It may not be a lot, but any discount will help when budgeting for baby #2.

With two children, parents may even want to rethink their current childcare set-up altogether. It may be more economical to consider an at-home nanny or an au pair, or even working with another family to establish a shared childcare situation.

Ideally, you wouldn’t have to double your childcare costs, but figuring out an alternate situation just may not be feasible for some people. It’s good to have some idea of what childcare will look like as you’re planning for your second child, as childcare is a major expense for many young families.

You May Need More Space

Having a second child can be economical in some ways, and less economical in others. For example, will you need more space to accommodate another body? Will you need to move to a larger home or buy a larger car? As families expand, it’s natural for a family’s space to expand as well.

Buying or renting a house with an additional room could be a significant added cost down the line. You might not need to move right away—babies are small—but think about what you might do once your baby grows into a child and later, into a teenager.

So, what’s the verdict? Is having a second kid significantly less expensive than the first? As you can tell, it all kind of depends. Families planning to have a second child will probably want to weigh the items above to see whether the cost is going to feel similar to baby #1, or whether it could be more or less expensive.

Planning Financially For Baby #2

Project Expenses

Before having a second baby, you might wish to sit down and project the expenses involved, from medical costs to childcare to diapers to an allowance for the unexpected. If you can, consider longer term expenses like extracurricular programs and college.

Spending projections not only help you to see whether you can afford a child at your current level of income and spending, but they can guide you in knowing where you can splurge and where you might need to cut back. Spending on children can quite literally be limitless, so think of this as an exercise in prioritization.

Prepare an Emergency Fund

Kids are small, adorable… walking liabilities. Things get broken and kids (and parents) can and do get sick. Also, “regular” life stuff still happens: The economy could turn, parents can get laid off from jobs, grandparents can get sick, and accidents could happen. With little ones in tow, it’s even more important to be prepared in the event of an emergency.

Make a Debt Plan

If you have multiple sources of debt, it’s a good idea to sit down and map out a plan as soon as possible. The first step is to list all sources of debt, including monthly payments and interest rates.

Knowing that your monthly expenses are about to increase, are there any sources of debt—and therefore, monthly payments—that you can eliminate altogether? For example, do you have any credit card balances that you can work hard to wipe out, or significantly lessen, in a few months? High-interest credit card debt is a money suck; doing what you can to reduce interest expenses can help free up money for other stuff.

Consider Options for Student Loans

For some parents, paying off every source of debt, such as their student loans, won’t be possible prior to having children. This is especially the case for families that are attempting to balance making debt payments with saving up an emergency fund. Each parent will have to decide just how much to prioritize both debt payoff and saving prior to and while raising a child.

When you’re pregnant, student loans can feel overwhelming. First, know that you’re not alone and that plenty of parents successfully manage student loan payments while raising a child. If you’ll maintain a student loan balance after your second baby comes into the world, it may be worth exploring options to make those student loans cheaper.

One way to do this is through student loan refinancing. When a borrower refinances their student loans, they’re paying off their old loans—either federal, private, or both—with a new loan. Ideally, this new loan is issued at a lower interest rate or with more favorable terms. But remember, refinancing means you’ll forfeit federal loan benefits such as income-based repayment plans, deferment, and forbearance.

With a new loan, for example, a borrower can do one of a few things: First, they can keep the loan’s term (length) the same, and possibly lower their monthly interest payment thanks to an improved credit score and/or financial situation. This tactic could help free up some cash to spend on other things. Second, a borrower could use this new leeway to speed up their loan term, and pay their loans off faster. They would likely save the most on interest with this strategy, but monthly payments would likely be higher.

Third, a borrower could potentially refinance to a lower rate and lengthen the loan’s term, which could lower the monthly payment significantly. This is an option that borrowers would be wise to consider only if they absolutely must, because you might end up paying even more in interest over the long run, even with a lower rate. (You can read more about all this here .)

When preparing financially for baby #2, there’s lots of planning to consider. But it will all be worth it to bring another bundle of joy into the world.

Check out SoFi student loan refinancing, with competitive rates and no hidden fees for refinancing your loans.

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.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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How Much Stock Market Fluctuation is Normal?

If you are turn on any of the up-to-the-minute financial news programming, you’d hear the anchors yelping about what stocks are up, which stocks are down, and all of the reasons why.

Every day, someone compares the stock market to a rollercoaster ride, with its ups, downs, and sideways action; sometimes enough to make you want to lose your lunch.
The stock market has become something of an affair in entertainment. If the stock market is down, it’s entertainment. If the stock market is up, it’s entertainment. But, it’s also people’s lives and livelihoods.

There are millions of people who have their retirement savings tied up in the stock market. For these people, fluctuations aren’t fun or interesting, they can be painful. A great way to overcome the pains associated with stock market fluctuation? Understand why it’s happening. We all know that some amount of stock fluctuation is normal. But just how much?

Below, we will first answer the question, “Why does the stock market fluctuate?” in order to understand how much market fluctuation is normal. Having a good grasp on volatility in the stock market is critical to as an investor in the stock market over your lifetime.

Why Does the Stock Market Fluctuate?

To understand market fluctuation, it helps to first understand stocks and the stock market.

A stock, which is a small percentage of ownership in a company, can be bought and sold by investors like us. That’s right, everyday folks can own a share of companies like Tesla, Starbucks, and Snapchat. That’s why investors of stocks are also called shareholders.

A stock might be bought and sold in what we call the stock market. And the stock market is like any other open marketplace; it just so happens that what’s for sale are these pieces of ownership in a company, called shares. And just as in any open marketplace, there are two important forces that determine the value (and therefore the price) of these goods for sale: supply and demand.

Remember our old friends, supply and demand? Let’s do a refresher, because they’ll be important later. Supply is how much of a good is available for sale. Demand is how much consumers want to buy the good. Between the pressures of supply and demand, the economy determines the value of that good.

Here’s an alternate way to describe supply and demand: buying and selling. How much investors are buying or selling a certain stock on any given day, month, or year, quite literally give a stock its value.

Go big in scope, smart on risk.

Distributor, Foreside Fund Services, LLC

Crazy, right? So while the television commentators may have you believe that it’s some single, external event (such as a tsunami or newly released economic numbers) that causes the price of stocks to increase or decrease, that’s not totally true.

The real truth is that investors were selling out of their stocks in a way that outpaced how many investors were buying into those same stocks; supply and demand at work. Why does the overall stock market fluctuate? Because investors are buying and selling stocks in such a way, and in such volume, that stock prices make a large move in one direction or another. That’s it.

Volatility Means the Stock Market Is Working

As tough as a nasty price drop in your investments can be to stomach, stock market volatility is a normal part of stock market investing. In fact, volatility is natural and even healthy, and shows that the stock market is working as it should. If you want to be a good stock market investor, you have to accept this.

Here’s why: The more investors weigh in—by actively buying and selling stocks—the more accurate the prices of stocks will ultimately be. Think of it this way: If you needed an opinion about something that didn’t have a precise answer (in this case, what the value of any one stock should be), would you ask just one person? Two people?

Or would you take a poll from as many people as possible, weighing out all of their many respective perspectives and responses? That’s essentially what is happening in the stock market—it’s a weighing of information about the “correct” price of a stock from investors across the globe.

It’s also helpful to remember that volatility doesn’t just relate to rising stock prices—it also relates to plummeting stock prices Yet for whatever reason, some only really think about “volatility” and “stock market fluctuation” as happening when there’s a downturn in the market. But when the stock market makes a surge upward, that is also considered stock market fluctuation too.

If you want the possibility of returns, you have to be willing to see your investments dip sometimes. Risk and reward are two sides to the same coin. You cannot have one without the other. If you hear someone promising outsized returns with no risk, it is absolutely a scam; run far, far away.

The stock market has returned about 10% annualized over the long term according to some estimates . But almost never does this come in the form of perfectly 10% years. Usually stock market returns are higher or lower than this, and they sometimes even go into the negative.

So, What is Normal?

This is a notoriously hard question to answer because really, almost any amount of market fluctuation is possible.

Of course, this would be hard to believe if all of your stock investments were down 50% or more. But such drops have happened in the past, and could happen again.

Our best guide for understanding what is normal (and what is abnormal) is to look at what has happened in the past. While past performance is never a guarantee of future financial success, it’s helpful to look at the data.

The most commonly cited pool of data is the S&P 500, which is an index that measures the returns of the United States’ 500 “leading” U.S. companies. The S&P 500 can give us a good historical gauge of stock market movement.

Since World War II—the “modern” stock market era, the S&P 500 has seen 11 drops in the stock market of over 20% . A more than negative 20% market is what is classified as a “bear market,” or a bad market.

Peak (Start)


  May 29, 1946     -30%
  August 2, 1956     -22%
  December 12, 1961     -28%
  February 9, 1966     -22%
  November 29, 1968     -36%
  January 11, 1973     -48%
  November 28, 1980     -27%
  January 11, 1973     -48%
  November 28, 1980     -27%
  August 25, 1987     -34%
  July 16, 1990     -20%
  March 27, 2000     -49%
  October 9, 2007     -57%

You’ll notice that a big drop in the stock market happens about once every five to ten years—so somewhat frequently. And smaller fluctuations of 5% or 10% to the downside happen much more frequently than that. In fact, it’s common to see a drop like this in most years.

As far as we’ve seen, there has never been a market dip that hasn’t eventually recovered. And really, it seems like the most upward movements happen after the worst of times. While there’s no denying that seeing a big drop in the value of your investments is painful, it’s possible to learn from the bad times. It is important to understand that dips are normal, and that shouldn’t necessarily scare you from investing in the market.

Also, know thyself. Investing in good times is easy. Investing in bad times is hard. If you’re skittish or uncomfortable with market gyrations, you may want to consider having a financial advisor on hand who can help talk you through any confusion.

SoFi Invest® not only helps you invest according to your goals and risk tolerance, but provides you with real, live financial advisors to answer any questions. Because keeping investors on track is so important, this is a service that SoFi provides its members for free.

Want help investing during the good times and the bad? Open an investment account with SoFi, an easy, automated way to invest, but with the assistance of real, live wealth advisors.

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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.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member

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How to Refinance Your Student Loans

Did you know that upon graduating, the average student loan borrower has approximately $37,000 in student loan debt? Meanwhile, the average graduate student holds significantly more—sometimes up to hundreds of thousands of dollars.

No matter which way you slice it, that much student debt amounts to a lot of interest payments, made by both the collective holders of over $1.44 trillion of student loan debt, and by each individual borrower.

If you’re one of those borrowers that’s tired of paying hundreds or even thousands of dollars toward student loan interest, there’s some good news: Student loan borrowers have many options for repayment.

One of the more compelling options for borrowers to have a look at is student loan refinancing. Through refinancing with a private lender, some student loan borrowers have the opportunity to lower the interest rates on their loans.

Lowering an interest rate isn’t the only reason that borrowers are refinancing. Below, we’ll dive into the details of who refinances student loans and how to refinance student loans. And by the end of the next few paragraphs, you’ll hopefully be able to answer the question, “Should I refinance my student loans?”

How Student Loan Refinancing Works

What is student loan refinancing? Refinancing is the process of paying off your existing loan, or multiple loans, with a new loan. Ideally, the new loan would have a better rate of interest or terms that work better for the borrower than the current terms. For example, the borrower may want to switch from a fixed to a variable rate or extend their term so their monthly payments are lower.

To understand why a borrower might refinance, it helps to first understand the major parts of a student loan. Every student loan is comprised of the following variables:

  1. The value of the loan (the “principal”)

  2. The interest rate on the loan

  3. The repayment period (also known as the loan’s term)

When a borrower refinances their student loan(s), they are typically looking to change either the second or third list item, or both. Keep in mind that refinancing means forfeiting federal loan benefits like income-based repayment plans, deferment, and forbearance. Here are some of the most common potential outcomes from student loan refinancing:

Lower Interest Rate

By lowering the interest rate on a loan, the borrower may pay less in interest over time. Those who qualify for a lower interest rate typically have a solid credit score and income.

Switch to a Fixed/Variable Rate

It is also possible to refinance a loan from a fixed rate to a variable rate, or vice versa. A fixed rate doesn’t change over the life of a loan. Federal student loan interest rates are determined by federal law and depend on loan type; since 2006, new loans adjust their interest rates every year on July 1. A variable interest rate typically uses an underlying interest rate benchmark and fluctuates accordingly.

Oftentimes, variable interest rates start lower than fixed rates, but you’re taking a risk given that they could rise at some point in the future. Refinancing can give you the flexibility to choose between fixed or variable rates.

Lower Monthly Payment

By changing the student loan repayment period, a borrower may be able to lower their monthly payment. By extending the loan repayment period, monthly payments get lower, because the borrower is now taking longer to pay off the loan. Borrowers who go with this strategy should be aware that although their monthly payments are lower, they will likely owe more in total interest over time.

Shorter Loan Term

It is also possible to refinance a loan to a shorter repayment period. This strategy generally results in a higher monthly payment, but can save the borrower money in interest over time. And it can help you get out of debt faster.

Loan Consolidation

Some graduates may want to consider refinancing simply for the benefit of consolidating multiple student loans into one new loan, and thus one easy monthly payment.

It should be noted that multiple student loans can be effectively consolidated through the process of refinancing, but this is different than Federal Loan Consolidation. Federal Loan Consolidation is a program offered by the federal government that allows borrowers to wrap each of their federal loans into one loan with a weighted average of their original loan interest rates rounded up to the nearest 1/8 of 1% (0.00125%).

Should I Refinance My Student Loans?

To know who refinances student loans and whether you should too, the first step is to identify your types of student loans. Student loans come in two main varieties: federal and private.

Federal student loans are backed by the U.S. government’s Department of Education. These are the loans that borrowers apply for using the Free Application for Federal Student Aid (FAFSA®) form. Private loans, on the other hand, are obtained through a bank, credit union, or other lender, and these loans are not backed by the U.S. government.

Some banks are only able to refinance federal loans, and some are able to refinance both federal and private loans. Always be sure to ask whether a student loan refinancing company can refinance the types of loans that you currently have. Next, use that information to ask yourself the following questions:

1. Am I planning on using a student loan forgiveness program?
Because refinancing is the process of paying off your existing loans with a new, private loan, you will lose any access to the programs offered by federal loan programs, such as student loan forgiveness or income-driven repayment.
If you are currently using an income-driven repayment plan and working towards student loan forgiveness, you’ll probably want to think twice before refinancing your federal student loans. And only the federal government offers forgiveness programs to graduates who are working in certain areas of public service.

2. Am I currently using an income-driven repayment plan?

Flexible repayment plans such as one of the income-driven repayment plans are another offering by the federal government on federal student loans. Private loans don’t generally offer any such programs. If you need to keep your monthly payments low and have exclusively federal student loans, refinancing might not be right for you. Refinancing with a private lender forfeits your access to the government’s income-based repayment plans.

However, if you want to shorten your loan term and can afford to pay more, refinancing might help because it may allow you to pay off your loans at a lower interest rate.

3. Am I planning on using a forbearance or deferment program?

Both forbearance and deferment allow the borrower to suspend their payments for a certain period of time and for a variety of reasons, such as economic hardship or military service.

A key difference between the two is that the government pays interest costs during periods of deferment on Perkins and subsidized loans. During periods of forbearance, you are responsible for paying the interest that accrues on any federal loans you have.

Some private lenders offer programs that are similar to forbearance. One such program is SoFi’s unemployment protection program, which allows qualified borrowers to suspend their loans while they look for a new job. SoFi also has a deferment program for qualified borrowers to pause payments if they go back to graduate school.

If it is likely that you would ever need one of the federal government’s forbearance or deferment programs, then this might be a reason to put off refinancing student loans, because you give up your access to these federal programs if you refinance with a private lender. Again, make sure to do your research before making a decision.

4. Do I have a good or great financial history?

There’s a bit of a misperception that federal loans will always offer a better interest rate than private loans. Due to the low interest rate environment and because of student loan refinancing companies looking to shake up the industry by providing competitive rates and top-notch customer service, many borrowers may be able to achieve a better private loan rate.

This could be especially true for borrowers that have good credit and a solid financial foundation. Even if you think that this isn’t you, it costs nothing to check and see if you qualify for a better rate.

Steps To Refinance Student Loans

Prepare Your Personal Financial Information

If you decide that refinancing is right for you, or you just want to give it a shot and see if you qualify for a better rate, it’s a good idea to shop around at different lenders to check their rates. But before you do that, you’ll want to have your basic personal financial information ready. In general, potential lenders need some combination of the following information about you to give you a quote:





  -Total Student Loan Debt


  -Total Housing Costs

  -Credit Score Estimate

The information a borrower needs to provide varies from lender to lender, but this is the basic idea.

Check Rates and Terms with Multiple Lenders

Because student loan refinancing companies set their own rates and terms, it is important to do some shopping around. Not only will you want to get rate quotes, but you may also want to ask questions like the following:

  -Are there other fees, such as origination fees?

  -Is there a prepayment penalty if I want to pay my loan off early?

  -Can the lender refinance both federal and private loans?

  -Is there a forbearance program if I am laid off from my job?

  -How do I access customer service?

  -What is the loan application timeline?

If a company interests you, you can submit the information that you gathered from Step 1. With this information, the lender will likely run a soft credit check. This should not affect your credit score, but make sure the lender guarantees it won’t.

If you meet a lender’s eligibility requirements, they’ll generally provide you with multiple offers, including offers with different term lengths and interest rates (both fixed and variable rates).

Choose a Lender and a Loan

After you’ve had the chance to review both the loan offers and the lenders themselves, it’s time to decide.
While many borrowers gravitate toward the loan with the lowest rate of interest, it is worth remembering that the lowest rate might not amount to the lowest amount of total interest paid on a loan.

The longer the loan’s term, the more interest a borrower will pay. For example, if you have a loan term of 10 years, you’ll have to pay off the entire loan balance plus the interest that was accrued over the 10 years. But, if you extend your loan term to, say, 20 years, that means 10 more years of interest accruing on your loan.

Also, a loan that charges an origination fee could end up costing more than a loan with a higher rate of interest that does not charge an origination fee. Often, an origination fee is added to the balance of the loan, with the interest rate calculated on top of this new figure.

Again, weigh all of the information you discover.

Gather Your Documents

Once you’ve chosen a lender and a loan, you’ll probably submit documentation that supports the information you provided during the initial rate check, as well as identifying information.

Although it will vary by lender, you’ll likely need some combination of the following:

  -Proof of citizenship

  -Valid ID number

  -Paystubs, tax returns, or other income verification

  -Statements for all of the loans you are planning to refinance

If you are applying for a refinance with a co-signer, they will need to provide this information as well.

Upon turning this information into the lender, they typically run a hard credit check and send the application through a final approval process. How long this process takes will depend on the lender, but it could be as short as 24 hours and as long as a couple of weeks. Check with each lender to be sure.

A lender should inform you if any of your documentation is missing, but you may want to check back in after a few days if you haven’t heard from a customer service representative.

Wait for Your New Loan to Be Approved

Continue making all payments on your existing loans while you wait. Soon, you should hear from your new lender about the status of the refinance application, including information on where new payments are to be directed.

Once your loan is approved, consider signing up for auto-pay (if they offer it and you haven’t already). Many lenders offer a discounted rate for borrowers who allow payments to be automatically deducted from their accounts.

And there, you’ve done it! You’ve learned how to refinance student loans. If you ultimately decide that refinancing is right for you and venture down this path, good luck and enjoy your new, shiny student loan.

Check out SoFi student loan refinancing for competitive rates and award-winning customer service.

To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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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