May
31
2023
Diamond Hands? Tendies? A Guide to Day Trading Terminology

A User’s Guide to New Day Trading Lingo

By | Growing Wealth, invest, Investing, Terminology | Comments Off on A User’s Guide to New Day Trading Lingo

A new interest in trading and investing in recent years has sparked new nicknames, jargon, and day trading lingo. For most, the jargon used on Wall Street and in other facets of the financial industry was largely unknown outside of the markets. But with more and more people trading and investing, it can be helpful to know what certain terms and phrases actually mean.

Note, of course, that language is always evolving, and that there may be even newer phrases out there that we’ve yet to include!

Popular Day Trading Lingo in 2023

Tendies

This term is short for chicken tenders, which is a way of saying gains or profits or money. The phrase originated with self-deprecating jokes by 4Chan users making fun of themselves as living with their mothers, who rewarded them with chicken tenders, or tendies.

STONKS

This is a playful way of saying stocks, or of referring more broadly to the world of finance. The obvious misspelling is a way of making fun of the market, and to mock people who lose money in the market. It became a popular meme — of a character called Meme Man in front of a blue board full of numbers — used as a quick reaction to someone who made poor investing or financial decisions.

Diamond Hands

This is an investor who holds onto their investments despite short-term losses and potential risks. The diamond refers to both the strength of their hands in holding on to an investment, as well as the perceived value of staying with their investments.

Paper Hands

This is the opposite of diamond hands. It refers to an investor who sells out of an investment too soon in response to the pressure of high financial risks. In another age, they would have been called panic sellers.

YOLO

When used in the context of day trading or investing, the popular acronym for the phrase “you only live once” is usually used in reference to a stock a user has taken a substantial and possibly risky position in.

Bagholder or Bag Holder

This is a term for someone who has been left “holding the bag.” They’re someone who buys a stock at the top of a speculative runup, and is stuck with it when the stock peaks and rolls back.

To the Moon

This term is often accompanied by a rocket emoji. Especially on certain online stock market forums, it’s a way of expressing the belief that a given stock will rise significantly.

GUH

This is similar to the term “ugh,” and people use it as an exclamation when they’ve experienced a major loss. It came from a popular video of one investor on Reddit who made the sound when they lost $45,000 in two minutes of trading.

JPOW

This is shorthand for Jerome Hayden “Jay” Powell, the current Federal Reserve Chair, also popular on online forums as the character on the meme “Money Printer Go Brrr.” Both refer to Federal Reserve injections of capital in response to the COVID-19 pandemic, as well as “quantitative easing” policies.

Position or Ban

This is a demand made by users on the WallStreetBets (WSB) subreddit to check the veracity of another user’s investment suggestions. It means that a user has to deliver a screenshot of their brokerage account to prove the gain or loss that the user is referencing. It’s a way of eliminating posters who are trying to manipulate the board. Users who can’t or won’t show the investments, and the gain or loss, can face a ban from the community.

Recommended: What is a Brokerage Account and How Do They Work?

Roaring Kitty

This is the social media handle of Keith Gill, the Massachusetts-based financial adviser who’s widely credited with driving the 2021 GameStop and meme stock rally with his Reddit posts and YouTube video streams.

Apes Together Strong

This refers to the idea that retail investors, working together, can shape the markets. It is sometimes represented, in extreme shorthand, by a gorilla emoji. And the phrase comes from an earlier meme, which references the movie Rise of Planet of the Apes, in which downtrodden apes take over the world. In the analogy, the apes are retail investors. And the idea is that when they band together to invest in heavily-shorted stocks like GameStop, they can outlast the investors shorting those stocks, and make a lot of money at the expense of professional traders, such as hedge funds.

Hold the Line

This is an exhortation to fellow investors on WSB. It is based on an old infantry battle cry. But in the context of day traders, it’s used to inspire fellow board members not to sell out of stocks that the forum believes in, but which have started to drop in value.

DD

This refers to the term “Due Diligence,” and is used to indicate a deeply researched or highly technical post.

HODL

“HODL” is an abbreviation of the phrase “Hold On For Dear Life.” It’s used in two ways. Some investors use it to show that they don’t plan to sell their holdings. And it’s also used as a recommendation for investors not to sell out of their position — to maintain their investment, even if the value is dropping dramatically. HODL (which is also used in crypto circles) is often used by investors who are facing short-term losses, but not selling.

KYS

This is short for “Keep Yourself Safe,” and it is a rare bearish statement on WSB and other boards. It’s a way of advising investors to sell out of a given stock.

The Takeaway

Many retail traders have found a new home on message boards — and created a new language in the process. Some of the phrases are based on pop culture and memes, others are appropriated from terms used for decades. No matter the origins, it’s clear that the investors using these phrases are evolving the way retail investors talk about investing online and maybe IRL as well.

Learning to speak the language of the markets can be helpful, too, so that you don’t miss anything important when researching investment opportunities. That doesn’t mean it’s absolutely necessary, but it may help decipher some of the messages on online forums.

Ready to invest in your goals? It’s easy to get started when you open an Active Invest account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

Photo credit: iStock/FG Trade

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.

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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May
31
2023
Short Calls vs Long Calls: Complete Comparison

Short Calls vs Long Calls: Complete Comparison

By | Growing Wealth, invest, Investing | Comments Off on Short Calls vs Long Calls: Complete Comparison

What’s the Difference Between Short Calls and Long Calls?

Every time a call option contract transaction takes place there is a seller and a buyer. The seller is said to have gone short the calls and the buyer is long the calls. “Short calls” and “long calls” are simply shorthand for these two positions and strategies.

Short calls are a bearish options strategy used to profit from an expected sideways to downward price action on a security. On the other hand, a long call is a bullish options strategy that aims to capitalize on upward price movements on an asset such as a stock or exchange-traded fund (ETF).

Short calls are the opposite strategy to long calls and their potential payoffs reflect that. Long calls have the potential to be unlimited in gain, and short calls the maximum gain is the premium.

What Are Short Calls?

“Short calls” is shorthand for pursuing the strategy of selling a call option.

Short call sellers receive a premium when the call is sold. The seller hopes to see a decrease in the underlying asset’s price to achieve the maximum profit.

It is also possible for the seller to profit if the underlying asset price stays the same. Options prices are based on intrinsic value (the difference between the strike price and the asset price) and time value.

If the asset price remains stable, intrinsic value will also be stable. However, as the option nears expiration the time value will drop to zero due to theta decay.

Furthermore, there are two types of short calls, naked and covered calls. Short calls are “naked” when the seller does not own the underlying asset. Short calls are “covered” when the seller owns the underlying asset at the time of sale.

Short calls have a fixed maximum profit equal to the premium collected and losses are undefined. Theoretically, a stock could rise to infinity, so there is no cap on how high the value of a call option could be.

Therefore short calls can be highly risky. For this reason, traders should have a risk management plan in place when they engage in naked call selling.

Short Call Example

It’s helpful to see an example of a short call to understand the upside reward potential and downside risks involved with such a strategy.

Suppose your outlook on shares of XYZ stock is neutral to bearish. You think that the stock, currently trading at $50, will trade between $45 and $50 in the next three months.

A plausible trade to execute would be to sell the $50 strike calls expiring in three months. We’ll assume those options trade at $5. The breakeven price on a short call is the strike price plus the premium collected.

In this example, the breakeven price is thus $50 plus $5 which is $55. You profit so long as the stock is below $55 by the time the options expire but will experience losses if the stock is above $55 by expiry.

Two months pass, and the stock is at $48. The calls have dropped in value thanks to a minor share price decline and since there is less time until expiration. The drop in time value relates to decaying theta, one of the option Greeks, as they’re called. Your short calls are now valued at $2 in the market.

Fast-forward three weeks, and there are just a few days until expiration. The stock has rallied to $49, but the calls have actually fallen in value. They are now worth just $1. Time decay has eaten away at the value of the calls — more than offsetting the rise in the underlying shares. Time decay becomes quicker as expiration approaches.

You choose to buy-to-close your options in the market rather than risk a late surge in the stock price. Most options are closed out rather than left to expire (or be exercised) as closing options positions before expiration can save on transaction costs and added margin requirements. You cover your short calls at $1 and enjoy a net profit of $4 on the trade ($5 collected at the trade’s initiation and a $1 buy back to close the position).

Pros and Cons of Short Calls

Pros of Short Calls

 Cons of Short Calls

Benefits from time decay Unlimited risk if the underlying asset rises sharply
Can be used in combination with a long stock position to generate extra income (covered call) You may be required to deliver shares if the options holder exercises the call option
The underlying stock can be sideways to even slightly higher and you can still profit Reward is capped at the premium you received at the onset of the trade

Finally, user-friendly options trading is here.*

Trade options with SoFi Invest on an easy-to-use, intuitively designed online platform.

*Check out the OCC Options Disclosure Document.

What Are Long Calls?

Long calls are the opposite strategy to a short call. With a long call, the trader is bullish on the underlying asset. Once again, a key piece of the options trade is the timing aspect.

A long call benefits when the security rises in value, but it must do so before the options expire.

Long calls have unlimited upside potential and limited downside risk. A long vs short call differs in that respect since a short call has limited profit potential and unlimited risk.

A long call is a basic options strategy that is often a speculative bullish bet on an underlying asset. It’s a good options strategy for those just starting out since there is a limited loss potential and the strategy itself is not complicated.

Long Call Example

Buying a long call option is straightforward. Long calls vs short calls involve different order types. With long calls, you input a buy-to-open order and then choose the calls you wish to purchase.

You must enter the underlying asset (often a stock or ETF, but it could be an option on a futures contract such as on a commodity or currency), along with the strike price, options expiration date, and whether the order is a market or limit order.

Suppose you go long calls on XYZ shares. The stock trades at $50 and you want to profit should the stock rise dramatically over the next month. You could buy the $60 strike calls expiring one month from now. The option premium — the cost to buy the option — might be $2. Because the call is out-of-the-money, that $2 is composed entirely of extrinsic value (also known as time value).

Since you are going long the calls, you want the underlying stock price to rise above the strike price by expiration. It’s important to know your breakeven price with a long call — that is the strike price plus the premium paid. In our example, that is $60 plus $2 which is $62. If the stock is above $62 at expiration, you profit.

After three weeks, the stock has risen to $70 per share. Your calls are now worth $13.

That $13 of premium is made up of $10 of intrinsic value (the stock price minus the strike) and $3 of time value since there is still a chance the stock could keep increasing before expiry.

A few days before expiration, the shares have steadied at $69. Your $60 strike calls are worth $10. You decide to take your money and run.

You enter a sell-to-close order to exit the position. Your proceeds from the sale are $10, making for a tidy $8 profit considering your $2 premium outlay.

Pros and Cons of Long Calls

Pros of Long Calls

Cons of Long Calls

Unlimited upside potential The premium paid can be substantial
Risk is limited to the premium paid You can be correct with the directional bet and still lose money if your timing is wrong
Is a leveraged play on an underlying asset There’s a chance the calls will expire worthless

Comparing Short Calls vs Long Calls

There are important similarities and differences between a short call vs long call to consider before you embark on a trading strategy.

Similarities

Traders use options for three primary reasons:

•   Speculation — Speculators often do not take positions in the underlying stock. Investors can buy a call and hope the underlying asset rises or they can sell a call and hope the asset price drops. Either way, the investor is taking a risk and could lose their investment, or more in the case of naked short calls.

•   Hedging — Short sellers of stock may sometimes buy call options to hedge their stock positions against unexpected price movements.

•   Generate Income — Covered short calls help to generate extra income in a portfolio. The seller sells a call that is out-of-the-money, collects the premium, and hopes the stock doesn’t rise to that strike price. However, the investor can also choose a strike that they would be happy to sell at such that, if the stock rises and the option is exercised, they are happy to sell their shares.

Differences

Long calls are a bullish strategy while short calls are a neutral to bearish play.

Potential profits and possible losses are the opposite in long calls vs. short calls. A long call has unlimited upside potential and losses are limited to the premium paid. A short call has an unlimited loss potential with a max profit that is simply the premium collected at the onset of the trade.

Time decay works to the benefit of an options seller, such as when you enter a short call trade. Time decay is the enemy of those who are long options.

When implied volatility rises, the holder of a call benefits (all else equal) since the option will have more value. When implied volatility drops, options generally become less valuable, which is to the option writer’s benefit.

It’s also important to understand the moneyness of a call option. A call option is considered in-the-money when the underlying asset’s price is above the strike price. When the underlying asset’s price is below the strike, then the call option is considered out-of-the-money.

A call writer prefers when the call is more out-of-the-money while a call holder wants the calls to turn more in-the-money.

Short Calls

Long Calls

Neutral-to-bearish view Bullish view
A more advanced options play A trade that is good for options beginners
Limited reward, unlimited risk Unlimited reward, limited risk

The Takeaway

Long calls and short calls are two options trading strategies you can use to place a directional and timing wager on an underlying asset — often a stock or ETF. Buying calls is a bullish play while selling calls is a neutral to bearish strategy.

If you’re ready to try your hand at options trading online, You can set up an Active Invest account and trade options from the SoFi mobile app or through the web platform.

And if you have any questions, SoFi offers educational resources about options to learn more. SoFi doesn’t charge commissions, but some fees apply, and members have access to complimentary financial advice from a professional.

With SoFi, user-friendly options trading is finally here.

FAQ

Are long calls better than short calls?

Long calls are not necessarily better than short calls. Using one versus the other depends on your outlook on how a security will move between now and expiration.

Long calls appreciate when the underlying asset rises in value. Short calls, on the other hand, are useful if you have a neutral to bearish view on a security. Short calls drop in value as time value erodes and when the underlying asset’s price falls.

Like long calls, it is important that your directional bet and timeframe line up with the calls you look to sell short.

How do short calls and covered calls differ?

Short calls are often naked positions. That means they traded outright without having an existing long stock position. Naked short calls are risky since there is unlimited loss potential should the stock rise.

Covered calls work by owning shares of a stock, then selling calls against that long stock position. Covered calls are a common options trading strategy whereby a trader looks to enhance a portfolio’s income by collecting a premium while the underlying shares trade sideways or decline in value.

The downside of covered calls is that your shares can get called away from you if the stock price rises above the strike price. Covered calls have the benefit of protecting the trader from unlimited losses since the long stock position offsets the short calls’ unlimited loss potential.

Photo credit: iStock/Prostock-Studio

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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May
31
2023
students on stairs

How Many College Students Are in Debt?

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | Comments Off on How Many College Students Are in Debt?

American students and their parents continue to take out student loans to pay for their undergraduate and graduate degrees.

People who are attending college are paying for tuition, room and board, books, and other necessities by taking out student loans or using credit cards.

Paying for college has become more expensive as tuition costs have continued to rise each year. For the 2022-2023 academic year, the tuition for full-time in-state students attending public colleges and universities was $10,950, according to the College Board. Tuition at private colleges and universities for the 2022-2023 academic year was $39,400.

The average federal student loan debt per person in 2023 is $37,338. Private student loan debt is almost $55,000 per borrower.

Americans now owe over $1.6 trillion in student loans. More than 43 million people, both graduates and their parents, have amassed a large amount of debt to pay for higher education.

Paying Down Student Debt Faster

Borrowers can maximize their financial resources and accelerate their repayment schedule in a few different ways.

Some options might include making extra payments by creating a budget, cutting expenses, getting a part-time gig, paying down other debt, and refinancing student loans.

Budgeting Effectively

Creating a budget can help borrowers see and understand all their expenses. A budget could make someone more aware of how much they are spending on eating out or entertainment each month.

Being able to refer to a budget can come in handy when you’re paying bills each month. There are plenty of options to choose from when it comes to budgeting and tracking spending.

After you have created a budget, examine your monthly expenses. One way to do this is to look at your expenses by different categories, such as bills, daily expenses such as parking, necessities such as groceries, and non-essential items such as entertainment.

Going through each category can help a consumer decide what is a priority. It can also help remind you of expenses you’re paying each month, but not using often such as a streaming movie or TV service.

Consider negotiating with the service provider, such as an internet or cable company, to see if there are less expensive options or if they are offering special deals currently.

Making Extra Payments

Making extra payments whenever borrowers can afford can help speed up the repayment process.

Neither federal or private student loans have prepayment penalties, which means borrowers won’t be penalized for making extra payments or paying their loan off ahead of schedule.

When making over payments, check in with the loan servicer to confirm how it will be applied to the loan or loans. For example, a borrower with multiple loans may choose to spread the extra payments evenly among each loan. Others may choose to concentrate on the loan with the highest balance or the highest interest rate.

Another note, lenders may first apply overpayments to the interest accrued on the loan. Borrowers may have to request the extra payment be applied to the principal balance of the loan. The important thing is to be sure you understand exactly where the payment is going.

Focusing on High Interest Debt

When it comes to students and debt, sometimes it’s more than just student loans. Paying down other debt, such as credit cards with higher interest rates or personal loans, can also lower your overall debt.

While some people prefer to pay off their debt with the lowest balance, other people prefer to start tackling the one with the highest interest rate.

Here are some ideas that could help someone pay off their credit cards or personal loans sooner.

•   Making more than the minimum payment. Even an extra $25 or $50 a month adds up.

•   Contacting the credit card company and asking for a lower interest rate.

•   Using automatic payments to avoid missing a payment and incurring a late fee.

•   Stopping using the credit card for additional purchases.

•   Obtaining another credit card with a lower interest rate and transferring all or a portion of the balance.

Some lenders may charge a prepayment penalty for some types of loans or credit, so double check the terms to be sure.

Getting a Second Job or Side Hustle

One way to help pay down student loans faster is to obtain a second part-time job. The additional income from the second job could go towards extra payments on the loan.

Finding a second job could be accomplished by asking your friends or co-workers for referrals. They might know of a small business or person who needs a helping hand or temporary work on a short-term project.

Depending on the gig, some of the work could be completed online or during weekends.

Checking job boards, social media, and with your current network could net you some temporary gigs such as babysitting, pet sitting dogs or cats, or running errands for a professional.

Another strategy is to sell any unused items that are sitting around in your home. Cleaning out your closet or garage could help people come up with some extra income that can be used to make an extra payment or two.

Selling musical instruments, electronics, clothing, or shoes online or at a resale shop is one way to sell the items quickly. Social media is another way to sell your unwanted guitar or electronic tablet that is just collecting dust.

Recommended: 23 Ways to Make Extra Income From Home

Making Lump Sum Payments

Sometimes, making consistent extra payments on a loan isn’t an option. In that case, consider making a lump sum payment whenever you get a larger amount of money from a tax refund, birthday gift, or bonus at work.

Apply all or a portion of the extra money to a payment. Making extra payments applied to the principal can help reduce the amount of interest paid in the long term.

Refinancing Student Loans

Making changes to your budget, slashing your expenses, and getting another gig could help you pay down your student loans faster. Focus on the improvements you have made and create both short-term and longer term financial goals. Refinancing is another option that could potentially help a borrower speed up their repayment.

Student loan refinancing could help qualified borrowers secure a lower interest rate, which also means that more of the money paid each month will go towards the amount that was originally borrowed — the principal value.

This could help students and their parents finish paying off their student loans sooner. A lower interest rate could also reduce the amount of money spent in interest over the life of the loan.

Refinancing can also help make monthly payments more affordable, which could be helpful to people with a tight budget.

However, getting a lower monthly payment when refinancing could be a result of extending the repayment term, which would ultimately mean the loan costs more in the long run.

Refinancing also allows borrowers with multiple loans to combine them into a single loan. This can help streamline the repayment process, since the borrower will be repaying a single loan with a single lender, instead of making multiple payments each month, sometimes to different lenders.

A student loan refinancing calculator can help give you an idea of the amount of your new monthly payments. Any extra money saved each month could be used to pay for other debt such as credit cards or towards your savings for an emergency, a down payment for a car or house, or other goals such as a vacation.

SoFi gives people the option to refinance both federal and private loans. Before you refinance your federal student loans, consider whether keeping the repayment benefits that they offer, such as forgiveness programs or income-driven repayment plans, could be useful to you in the future. When you refinance with a private lender like SoFi, those benefits are no longer available.

The application process at SoFi can be completed easily online and there are absolutely no hidden fees.

Find out if you prequalify to refinance with SoFi, and at what rate, in just a few minutes.

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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May
31
2023
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The Differences Between Grants, Scholarships, and Loans

By | Student Loans, student_loan | No Comments

Grants, scholarships, and student loans can all help you pay for your education. But there are key differences between the three — namely, how they award funds and whether you need to repay those funds. Grants and student loans often depend on financial eligibility and need, while scholarships tend to be merit-based. And while both grants and scholarships don’t need to be repaid, student loans do.

Here’s a breakdown of how student loans, and grants vs. scholarships work, as well as some of their key differences.

Student Loans

Simply put, a student loan is money borrowed that has to be paid back (usually with interest). You can take out a loan from a bank, an online lender, a college or university, or the state or federal government. If you’re wondering about grants vs. loans, both are based on financial need, but what sets them apart is that grants don’t need to be repaid and student loans do.

So, how do student loans work? Loan terms for college can vary based on a few different factors: whether they’re federal (offered by the government) or private (offered by a financial institution), whether you choose fixed or variable interest rates, how long it takes to pay the loan back, and how much can be borrowed. Loans offered to you could be based on your credit score or the personal financial information you supply on the Free Application for Federal Student Aid (FAFSA®).

To determine your eligibility for a student loan from the federal government, you must fill out the FAFSA. States and colleges may use information from your FAFSA to determine state and school-specific aid, as will some private financial aid providers.

To fill out the FAFSA form, you’ll need a few pieces of information, including:

•   Your Social Security number or alien registration number (if you are not a U.S. citizen)

•   Your driver’s license number (if you have one)

•   Federal income tax returns, W-2s, and other records of money earned

•   Bank statements and records

•   Records of untaxed income (if applicable)

•   Information on account balances, investments, and assets

•   FSA ID for electronic signature (this is your username and password needed to access and submit your FAFSA online)

If you are applying as a dependent student, you will need all of the above information from your parent(s) as well.

What Is the Difference Between Unsubsidized and Subsidized Loans?

There are two primary types of federal student loans: subsidized loans and unsubsidized loans. The main difference between unsubsidized and subsidized loans is how the interest accumulates through the life of the loan.

What Is an Unsubsidized Loan?

Unsubsidized loans are available to undergraduate and graduate students, regardless of any financial need. An unsubsidized loan starts accruing interest as soon as the loan is dispersed.

That means if you accept an unsubsidized loan during your freshman year of college, the loan will accumulate interest throughout the rest of your time in school. Ultimately, that means the interest will capitalize — in other words, it will be added onto the principal of your student loan.

When Do I Need to Pay Back an Unsubsidized Loan?

You are responsible for starting to pay back an unsubsidized loan six months from when you graduate or if you drop below half-time enrollment. Because of the interest capitalizing on your unsubsidized loan from the day it’s disbursed, your loan balance will likely be more than what you originally borrowed if you don’t make interest payments while you’re in school.

What Is a Subsidized Loan?

A subsidized loan is a need-based loan available to undergraduate students on which interest accumulates only after you begin repayment. The government will pay the interest while you’re in school at least half-time or until you graduate and for the first six months after, as well as during a period of deferment.

When Do I Need to Pay Back a Subsidized Loan?

Like unsubsidized loans, repayment for a subsidized loan typically occurs after a six-month grace period from when you graduate or drop below half-time enrollment. You are responsible for paying back the total outstanding balance, plus interest. There are plenty of ways to pay off federal loans, from the standard 10-year repayment plan to income-based repayment plans.

Grants

A grant can be beneficial to students because it is financial aid that does not have to be repaid. That’s one main difference between a grant vs. a loan. Grants may be obtained directly from your university, the federal government, state government, or a private or nonprofit organization. It is important to note that you may be required to meet certain financial eligibility criteria, depending on the grant.

What Is a College Grant?

A college grant is financial aid money awarded to a student that does not have to be paid back. When it comes to a grant vs. a scholarship, grants are typically awarded based on need, not on academic achievement or merit. Scholarships are based on merit.

One popular type of college grant is the Pell Grant. Pell Grants are given to undergraduate students with significant financial need, which means they are typically awarded to low-income students.

Do You Have to Pay Back Grants?

In most cases, you do not need to pay back grants as long as you maintain eligibility. If, for example, you decide to drop out of school, you might be required to pay back certain grants.

You might also need to pay back grants if you withdraw early from a program in which the grant was awarded, or if you did not meet a service obligation, as is required for the Teacher Education Assistance for College and Higher Education (TEACH) Grant , for example.

Scholarships

Scholarships are a great way to finance higher education, simply because there are thousands of available scholarships based on financial need or merit. That’s the main difference between scholarship and grant: Scholarships are often merit-based. Scholarships can come from a variety of sources and typically do not need to be repaid.

It can be easy to feel overwhelmed with the amount of time it takes to hunt for scholarships — here are a few tips to help you find scholarships to apply for:

•   Start by combing scholarship databases for any scholarship that may align with your interests or background. Don’t be afraid to tell people you know that you are looking for scholarships either — your best friend or neighbor may have heard of a scholarship you could be eligible for.

•   Take a look at your academic achievements. Have you maintained a certain GPA or did you make the Dean’s List? There could be a scholarship for that. List out your community involvements and start researching whether your softball league, for example, offers scholarships.

•   Make a list of all the things that make you who you are. List out your heritage and things that your family members have been involved with over time. Perhaps your grandmother belongs to the National Corvette Club or your grandfather was a veteran, both of which could present scholarship opportunities.

Once you have your list, it helps to stay organized by adhering to deadlines and application requirements. Stick to what feels doable so you can knock out several applications in a row. Scholarship application formats vary from essay writing to creating a video to simply filling out a form.

Important documents you might need when applying for scholarships include birth certificates, SAT/ACT scores, academic transcripts, certifications, or ID cards. Be sure you have those handy prior to hitting search engines and applying for the next available scholarship you find.

Grants vs Scholarships vs Loans

Now that you have a grasp on all three forms of financial aid, let’s examine the main difference between scholarship and grant and student loans.

What Is the Difference Between a Loan and a Grant?

Here’s what makes grants vs. loans different: A student loan—whether it is unsubsidized or subsidized, federal or private — must be repaid with interest. A grant typically does not need to be repaid as long as you maintain eligibility requirements.

What Is the Difference Between a Grant and a Scholarship?

When looking at grant vs. scholarship, the primary difference between the two is that a grant is typically need-based while a scholarship is usually merit-based. You might receive a scholarship for a number of things, such as high academic achievement, organization or club involvement, or ancestry. A grant is typically awarded based on financial need and can be specific to certain degrees, students, and programs.

How Is a Student Loan Different from a Scholarship?

A student loan is different from a scholarship primarily in that a student loan must be repaid and a scholarship does not need to be repaid. Scholarships can come from a variety of sources, including nonprofit organizations, private companies, universities and colleges, and professional and social organizations. Student loans may come from private lenders, federal or state governments, or colleges and universities.

Because student loans need to be repaid, you’ll want to make your payments as manageable as possible. If you have existing student loans, student loan refinancing may be a way to help you save money.

With refinancing, you replace your existing loan with a new loan that ideally has a lower interest rate. A student loan refinance calculator can help you determine how much you might save. Just be aware that when you refinance federal student loans, they become ineligible for federal protections and programs like income-driven repayment plans.

When should you refinance your student loans? If you can qualify for a lower interest rate or better terms, and you don’t need access to federal programs and protections, refinancing may be worth it for you.

Recommended: Student Loan Refinancing Guide

When we say no fees we mean it.
No origination fees, late fees, & insufficient fund
fees when you take out a student loan with SoFi.

The Takeaway

With a good understanding of scholarships vs. grants vs. student loans under your belt, you can better determine which form of financial aid is right for your situation. Remember that you don’t necessarily have to choose just one.

Once you’ve maximized the money you can get from grants or scholarships that you likely won’t have to pay back, you may consider bridging the remaining gap by taking out a student loan. And if you currently have student loans, you may be able to refinance them for more favorable rates and terms.

As you’re exploring student loan refinancing, consider SoFi. Our student loans have no fees, and you can see if you prequalify in a matter of minutes.

Find out if SoFi student loan refinancing is right for you.

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

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

SoFi 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.


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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.

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May
31
2023
man with his dog on a computer

Factors to Consider When Choosing Pet Insurance

By | Budgeting & Goals, money | Comments Off on Factors to Consider When Choosing Pet Insurance

Pet ownership comes with an array of costs, and medical care can be one of the big ones. Does that mean you should get health insurance for your pet? Is pet insurance worth the cost?

Insurance policies for pets are more worthwhile for some pet parents than others. A policy that covers general pet wellness and preventive care may not make economic sense, but a policy that covers accidents and illness may be a good move for pet owners who would have trouble covering a hefty vet bill should their pet suddenly be injured or become sick.

But plans vary significantly on what they cover — and what they cost. Here are some key facts to consider when shopping for a pet insurance plan.

Average Cost of Pet Healthcare and Emergencies

Between food, daily care, equipment, and toys, the cost of owning a pet can be high. The cost of veterinary care can also stack up pretty fast.

Pet healthcare costs vary widely, depending on the region and what kinds of care your pet may need. But dog owners spend an average of $362 per year on routine vet visits, while cat owners shell out an annual average of $321 on routine care, according to the American Veterinary Medical Association.

Heartworm tests can tack on another $35 to $75 annually, with monthly preventive medications costing from $6 to $18 apiece. This means an annual cost that can range between $107 and $291 for heartworm prevention, while flea and tick prevention can cost from $55 to $215 per year.

Even a healthy pet may need emergency care, ranging from a few hundred dollars to thousands. Wound treatment and repair, for example, can run as high as $2,500 for a dog. Emergency surgery for a large dog can cost up to $5,000.

In fact, emergency room bills for pets can run as high as $10,000 when adding in hospitalization costs.

Recommended: Dog-Friendly Vacation Ideas

What Is Pet Insurance?

Once a niche product, pet insurance policies have been steadily gaining in popularity. Indeed, many employers now offer pet plans as part of their benefit packages. But what exactly is pet insurance — and how does it work?

Like health insurance for people, pet insurance is intended to ease some of the costs of keeping your pet healthy. You can choose from different levels of coverage, with each plan costing a monthly or annual premium based on how much coverage you choose.

Some plans cover accidents and injuries, some only cover accidents, and others include wellness and preventive care. The more comprehensive the coverage, the higher you can expect the cost to be.

As with health insurance for people, pet policies include exclusions, various levels of coverage, copays, deductibles (a certain amount you must pay out of pocket before coverage kicks in), and payment limits.

Most pet insurance policies exclude preexisting conditions and hereditary or congenital conditions. Some carriers will not accept pets younger than 8 weeks or older than 12 years, and many policies have waiting periods before benefits for injury, illness, and orthopedic care begin.

Pet insurance typically uses a reimbursement model: You pay the full amount due when you take your pet in for care, then submit a claim to the insurance company.

What Pet Insurance Covers

Pet health insurance offers several types of coverage, each with its own list of coverage options and costs. The three most common types of coverage are:

•   Accident and illness. This typically covers treatments and tests for accidents and illnesses.

•   Accident-only. This coverage generally takes care of accidental injuries, such as poisoning or ingestion of a foreign object, being hit by a car, cuts, and other physical injuries. Accident-only coverage is often preferred by owners of older pets that have aged out of comprehensive coverage.

•   Wellness plans. Wellness plans tend to cover preventive-care visits, such as checkups and routine vaccinations, and you can buy one as a stand-alone policy or as an add-on to an accident and illness policy.

Before deciding whether you want to buy a pet insurance policy, it’s a good idea to download sample policies from insurers. You can then review each policy for limitations, exceptions, and copayments. You can also reach out to a rep with questions.

What Pet Insurance Doesn’t Cover

Some pet insurance options have breed-specific exclusions, or it could cost extra to cover specific breeds.

As mentioned, just about every pet insurance policy excludes coverage of preexisting conditions.

Many plans also limit the amount you can claim, either annually or over your pet’s lifetime.

Wellness plans likely will not cover any treatments having to do with accidents, common injuries, or any other emergency treatments.

Accident-only plans will likely not cover any cost associated with illness, while accident and illness plans will likely not cover any preventive care or any care related to preexisting conditions.

An accident and illness plan with a wellness add-on provides the most comprehensive coverage. But again, it will likely not cover any care for a preexisting condition and could come with breed restrictions. That’s why it’s essential to read the fine print of every policy option before deciding which one is right for each pet.

How Much Pet Insurance Costs

The cost of pet coverage varies widely, but the average accident and illness premiums cost $640 a year for a dog and $387 for a cat, according to the North American Pet Health Insurance Association’s latest figures.

Accident-only premiums — covering things like ingestion of a foreign body, lacerations, motor vehicle accident, ligament tears, and poisoning — average $200 for a dog and $122 for a cat, the association reported.

In an Insurance.com survey of 800 pet owners who have pet insurance, 48% said the policies had saved them money. So, about half said the insurance was money-saving and half said it was not.

Costs can rise, depending on a number of factors:

•   Your pet’s breed (purebreds may cost more to insure because they are more susceptible to some hereditary conditions)

•   Age (plans tend to cost more as your pet ages)

•   Region (the higher cost of vet care in some areas is factored into your premium)

•   The coverage you choose

Keep in mind that once a pet reaches a few years old, most pet insurance providers will increase rates every year at renewal time.

Pros and Cons of Pet Insurance

Pet insurance can make pet treatments and services more affordable: As you make annual or monthly premiums, the insurance company bears the brunt of covered expenses.

Pet insurance also may help protect the emergency funds in a checking and savings account or savings account. If your pet is young or healthy, or you choose a lower tier, you can get accident and illness coverage for a fairly low cost.

But it’s important to read the details. Many plans limit the amount you can claim, either annually or over your pet’s lifetime. If your pet suffers a major medical problem, you could quickly max out your plan’s limit and find yourself paying the difference.

Depending on the cost of the premium, wellness-only plans and wellness add-ons may not be worth the price, since they can end up costing about the same as, or more than, paying out of pocket for routine care.

If pet insurance may be a possibility for your household, here are issues to consider before making a decision.

Research Which Pets Are Covered — and for What

Plans have different enrollment requirements. Typically, though, once a pet is enrolled in a plan, lifetime coverage is available — at least for as long as premiums are kept up. It’s a good idea to check to see if a plan requires a vet visit before enrollment.

Once plans have been identified that would likely accept your pet’s enrollment, find out what each of the policies covers. For plans that go beyond accident coverage, find out specifically what the benefits include. Will the policy, for example, cover ongoing treatment for a condition, or would a policyholder need to pay an add-on fee for continual care?

Investigate the Reliability of Pet Insurance Plans

Once a list of providers has been narrowed down to ones that would accept your pets, it’s a good idea to check the companies’ track records.

This includes the length of time they’ve been in business and how many policies they have in effect.

You may want to see which ones are rated by the Better Business Bureau and what those ratings are, and read online reviews. Who develops their policies? Are there veterinarians involved?

Compare Deductibles and Payout Limits

Pet policies come with deductibles. Sometimes it’s an annual deductible. Other times, it can be applied per illness or injury.

If that’s the case, then once a deductible is met for that condition, maximum reimbursements may be paid out for that particular injury or illness. If, though, a pet develops multiple conditions, a deductible would need to be met for each one individually.

If the deductible is applied per incident, monthly premiums may be lower. A low annual deductible may sound appealing but will have a higher premium than plans with a higher deductible.

Alternatives to Pet Insurance

Again, like humans, unexpected expenses can come up from time to time with a pet.

Another way a pet owner can pay for both expected and unexpected vet bills is to have an emergency fund earmarked for your pet. Stashing a little bit of cash each month into a pet care fund can slowly add up.

Whether you do or don’t spring for pet insurance, you may be able to avoid emergency care by monitoring your pet’s diet and exercise and staying up to date on vaccines and heartworm prevention treatments.

Even knowing the most common ailment associated with your pet can help keep a minor problem from turning into something major.

Finally, you may want to shop around for the lowest price on the veterinary services you need.

The Takeaway

Is pet insurance worth the cost? Pet insurance that covers accidents and illness may be a reasonable hedge against a huge vet bill. The payoff for wellness coverage is less clear. If you do decide to take out pet insurance, be aware of all of the policy’s limits and exclusions.

Life is full of unexpected events. Insurance is meant to ease the burden of paying the full cost of an accident, illness, or loss.

While SoFi can’t cover your pet, we can insure just about everything else. We’ve teamed up with some of the industry’s best insurance companies to bring you fast and reliable insurance coverage.

Learn more about reliable insurance options with SoFi Protect.

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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