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What Is Student Loan Exit Counseling?

Graduation is an incredible, busy time. In addition to taking their last set of tests, wrapping up final projects, and spending time with friends, college students will probably be applying to jobs and generally preparing for the next phase of life.

Students might even be moving cities and furnishing new apartments. (Or, like many graduates, they’ll just use camping chairs for another two years until they can afford to buy a real couch.) Another item that’ll show up on a student’s end-of-school year checklist is student loan exit counseling . Students with most federal student loan types must find some time to complete exit counseling.

When a student graduates from college, the government wants to arm them with the basics of managing their student loans. That’s because student loans can be tricky to understand; student loan repayment and general financial knowledge are not necessarily intuitive. In fact, the government requires, by law, that students go through student loan exit counseling when they leave college for any reason, including transferring schools or dropping below half-time enrollment.

Here’s what a student borrower should know about federal student loan exit counseling, why it’s important, and where to get student loan exit counseling. Additionally, we’ll discuss what’s not covered in federal student loan exit counseling but could be important for student loan borrowers nevertheless.

What to Expect with Student Loan Exit Counseling

Depending on your school, students typically complete their exit counseling online or through an in-person meeting with a counselor at the school’s financial aid office. Schools may also offer online counseling
programs
to review all of the important information regarding paying back student loans. Each student should check in with their school’s website to find out their options.

Generally, student loan exit counseling takes about 30 minutes if completed online. If the student meets with a counselor or has specific questions, it might take longer. Although no one usually loves sitting through a presentation about financial planning, it’s a great idea to take advantage of the learning and soak up as much knowledge as possible.

Before student loan counseling, the student must prepare some information. First, they should know the outstanding balances on their current federal student loans. You can find that here at the Federal Student Aid website .

Also, the student should gather the names, addresses, email addresses, and phone numbers for a close relative, two references that live in the United States, and their employer, if they have one. The Department of Education requires this information in the event that a borrower defaults on their loans and cannot be contacted.

During the online student loan exit counseling the student will also spend some time mapping out their potential salary and living expenses such as rent and utilities, so that they can create an expected budget.

Major Topics Covered in Student Loan Exit Counseling

Here are some of the topics you’ll encounter in student loan exit counseling:

Understanding Your Loans

During this portion of student loan exit counseling, the student receives a summary of their student loans, including total balance, terms and conditions, and the date that the first payment is due.

Next, they’ll cover the interest rates on student loans. Each loan has a set interest rate that depends on the loan type (subsidized, unsubsidized, PLUS, etc.) and the year they’re dispersed; students may want to write these interest rates down so that they can calculate their monthly payments in a later section.

Plans to Repay

This is a very important section. Here, student borrowers will learn all about the rules of student loan repayment. Borrowers typically have control over the repayment plan that they choose, so it is wise to understand the pros and cons of all options. For example, income-driven repayment plans may lower the borrower’s monthly bill (in accordance with their income) but could cost a borrower more over time in interest. Keep an eye out for the major trade-offs between plans.

In this section of student loan exit counseling, borrowers are provided with a number of helpful student loan repayment calculations . Most students going through student loan exit counseling will see calculations that show how expensive it can be to utilize a grace period, because as the interest accrues on a student loan, it is capitalized, which means it is added to the balance of the loan. Yet another calculator shows the borrower how much can be saved by making additional payments.

Here, student borrowers are also provided with logistical repayment information, like who to contact and in what scenarios you should contact your loan service provider.

Avoiding Default

Not paying loans on time and allowing student loans to fall into delinquency could have consequences in many areas of a borrower’s life. Therefore, during student loan exit counseling, there is a large focus on borrowers avoiding default on their student loans. This section will discuss the consequences for both a borrower’s federal loans (such as loss of deferment options) and for career and future income (such as wage garnishment and impact to credit scores).

It will also cover options in the event that a borrower cannot make payments, such as deferment and forbearance, and the pros and cons of each of these options.

This section will also explain federal loan consolidation, student loan forgiveness programs, loan discharge for the permanently disabled, and how to settle student loan disputes.

Prioritizing Financial Planning

The next section is dedicated to financial planning. Here, a borrower’s counselor or online program should discuss budgeting, credit management, identity theft, and other basics of money management. Borrowers are encouraged to consider their short-term and long-term financial goals.

Though very important, the advice and education in this section are typically somewhat light. It might be a good idea for students to make note of the concepts they don’t understand and do some additional work outside of student loan exit counseling.

Repayment Information

Last, a borrower would choose a repayment plan, enter in their new contact information, employer or future employer’s information, and provide the names and contact information of references. The borrower’s loan servicer then reviews the information and provides the borrower with a repayment plan.

According to Federal Student Aid , the borrower is told to list their preferred repayment options, at which point their loan service will make a final decision and assign the borrower a repayment plan.

What Your Exit Counselor Doesn’t Tell You

Student loan exit counseling is necessary and important. It is required of all students with federal student loans. But overall, the program to be pretty light and quick.

Think about it: Some borrowers could have tens of thousands or even hundreds of thousands of dollars to pay back and get just 20 minutes of guidance as they click through some online slides. This information very easily could be part of a full multi-credit course at a university.

Also, there is some important information that a borrower just won’t receive in exit counseling, and that’s information on how to handle their private student loans. While there are some similarities, private student loans will have many of their own nuances that are imperative to understand.

For example, private loans determine their own repayment plans and generally don’t offer deferment or forbearance options, and they may or may not allow for advance prepayment on a loan.

Federal student loan exit counselors and programs generally do not cover student loan refinancing. Refinancing is the process of paying off student loans—both federal and private—with a new loan, ideally at a lower rate of interest.

Refinancing could help potentially lower borrowers’ interest rates and consolidate multiple loan payments into one. Compare this to federal loan consolidation, a program offered through the government that simply takes a weighted average of the existing loans’ interest rates.

With refinancing, the borrower pays off your government loans with a private loan, so refinanced loans are not eligible for federal repayment programs such as income-driven repayment, deferment, and public service loan forgiveness.

For borrowers who have no plans to use these programs, it may be worth considering refinancing. You may qualify for a better interest rate through refinancing if your credit score or financial situation has improved since you initially took out your loans as a student.

Regardless, it is a great idea to go into student loans exit counseling with a clear head, ready to lap up as much information as possible. Paying back your loans is no small feat, so it will be so worth it to do some hard work up-front to make the rest of the process as smooth as possible.

See what rates you qualify for with SoFi student loan refinancing. It costs nothing to check and takes as little as two minutes.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.
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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When Do You Have to Pay Back a Direct Stafford Loan?

Direct Stafford Loan repayment can be one of the first harsh realities of modern adult life. But don’t worry, there are options that can help make your student loan repayment just a little less painful. First, let’s get some semantics straightened out: the name of your loans may not make much of a difference, but they can get confusing. In this case, the term “Direct Stafford Loans” and “Direct Loans” are used interchangeably.

Direct Stafford Loans were originally called the Federal Guaranteed Student Loan Program, but in 1988 they were renamed in honor of U.S. Senator Robert Stafford of Vermont, for his work on furthering the cause of higher education.

You have to repay your Direct Stafford Loan no matter what version of the loan you choose (more about this soon). Perhaps the most notable difference between the loan types is how you’ll be required to repay the interest (we’re going to show you).

So, When Do You Have to Pay Back Your Direct Stafford Loan?

The most direct answer is: after the grace period. We’ll explain: with each Direct Stafford Loan repayment plan, you are granted a little bit of time to sort out your life and get your act together. This stretch of rejuvenation, self-realization, and rebirth is perhaps euphemistically called a grace period.

The grace period for Direct Stafford Loan repayment begins the day you officially leave school. Also, if you change your student status to less than half-time enrollment, that earns you a grace period too.

Take note: educational institutions define “half-time enrollment” in different ways. The status is usually, but not always, based on the number of hours and credits in which you’re enrolled. Check with your school’s student aid office to make sure you are in sync with their official definition. Make sure everybody is on the same page before you assume that you are entitled to a grace period. The total timeframe of the Direct Stafford Loan repayment grace period: six months, and not a day more (with a handful of exceptions ).

Another thing to keep in mind about that grace period: you may want make the most of it by starting to pay back that loan in whatever way that you can. Even though grace periods are meant to give you time to reconfigure, the interest you’re being charged is still “capitalizing.” That means interest is still being added to the loan principal all during your grace period, and that’s not very graceful.

One quick thing to keep in mind while on the subject of grace periods: Make sure you know who your student loan servicer is in case you need to reach out to them. You don’t get to choose your own loan servicer. They’re assigned to you by the Department of Education to handle billing and other services. If you have questions regarding your loan, consider contacting your loan servicer.

What Are Direct Stafford Loans?

Direct Stafford Loans are divided into two types:

Subsidized Direct Stafford Loans

These loans are only available to undergraduate students and based on financial need. The government covers the interest payments during your time at school. During your six-month grace period or if you request a deferment, the government will also cover the interest accrued on the subsidized Direct Stafford Loan .

Calculating financial need can get tricky. Once your status is officially figured out, it’s called your “demonstrated financial need,” and it’s defined as the difference between total college costs and your family’s ability to pay. Ultimately, the final number is the amount of money your family needs for you to attend college.

Unsubsidized Direct Stafford Loans

These student loans are offered to undergraduate, graduate, and professional candidates, and are not based on financial need. So if you’re keeping score at home, this is in contrast to the subsidized Direct Stafford Loans, which are available to undergraduates only and based on financial need.

For Unsubsidized Direct Stafford Loans, the government does not cover your interest while you are in school, or if you request a deferment. During your six-month grace period, interest will continue to accrue, and you’ll be responsible for paying it once the grace period ends. As we mentioned earlier, you can also opt to pay the interest during this time, which will help reduce the debt of the loan later.

As with all Direct Stafford Loans, interest rates are fixed, which means that they stay at the same rate for the entire life of the loan. This could be a good thing, but it really depends on what the interest rate is at the time of signing the loan. Interest rates go up and down, so how “good” your rate is depends on how high or low the interest rate happens to be at the time you sign up for the loan.

Direct Stafford Loan Repayment Options

Here’s where you can get a handle on the whole Direct Stafford Loan repayment situation. The most important thing to remember is this: You. Have. Options. So don’t panic if your grace period is coming to an end.

One of your options is to refinance your student loans, which may be appealing if you’re in a financially stable place. Keep in mind that you can’t directly refinance government loans. However, you can refinance your Direct Stafford Loan by taking out a new loan with a private loan company at a hopefully lower interest rate. Doing this may give you some flexible repayment options.

Before you do, know the difference between refinancing and consolidating your loans. You can distinguish them as (broadly) two different strategies: completely starting over (refinancing) as opposed to merely reconfiguring (consolidation).

Refinancing lets you pay off the loans you already have with a brand-new loan from a private lender. This can be done with both federal and private loans. When you refinance, your existing loans get paid off completely, and you put those original creditors behind you forever. The new loan from a private company may allow you to breathe easier with better interest rates and repayment terms. You can also pick the private lender with the terms that best suit your needs. Don’t be afraid to comparison shop—and don’t forget that SoFi has no prepayment penalties or origination fees!

Consolidating student loans is simply gathering up all of the loans you currently have and piling them into one loan. You can typically only consolidate federal loans, and you do so with a Direct Consolidation Loan. With a Direct Consolidation Loan, your new interest rate is the weighted average of all your interest rates combined (rounded to the nearest eighth of 1%).
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Thinking of skipping a few student loan payments? Not a good idea. Your credit score may take a hit, and this could disqualify you from an opportunity to get a credit card, a car, or a mortgage. The days that pass before your loan goes into default: 270 . That may sound like a long time, but it can go by in a flash.

If you’re thinking about refinancing your Direct Stafford Loans with a private loan, you can shop around for the best rates and repayment terms, and choose the loan company that makes the most sense to you. Refinancing can be done with both federal and private loans.

Benefits of refinancing your Direct Stafford Loans could include lower monthly payments or lowering your interest rate. Your interest rate and refinancing terms will vary, based on your financial situation and credit history. If refinancing results in a lower monthly payment, you might have greater flexibility in your monthly budget, such as more savings or redirecting the additional cash to other debts.

You can also discover more options for refinancing your Direct Stafford loans with SoFi.


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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.
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How Much Debt is Too Much to Buy a House?

Perhaps you’ve found your dream home, or maybe you’re still in the exciting stages of looking for the house you want. In either case, you’re likely thinking about getting a mortgage loan—and you may be wondering if the amount of debt you currently have will become a stumbling block to qualifying for a mortgage.

To qualify for a mortgage, a lender needs to be confident that you can responsibly manage the amount of debt that you’re currently carrying along with a mortgage payment. The formula used to determine that is called a debt-to-income (DTI) ratio.

More specifically, a DTI ratio is the percentage of your qualifying monthly income, before taxes, that is needed to cover ongoing debts. This could include student loan payments, a car payment, credit card payments, and so forth. If the DTI ratio is too high, then a lender may see you as a higher risk.

This post will describe DTI in more detail, including how to calculate yours, what lenders typically like to see, and what might be too much debt to buy a house. We’ll also share strategies to manage your debt and lower your DTI ratio to help you qualify for the house of your dreams.

Understanding How Your DTI Ratio Can Affect Your Mortgage Options

The DTI formula is pretty simple. First, make a list of all your debts with recurring payments. Then, if you’re a W2 earner, take your pre-tax monthly income and divide your monthly expenses by this amount. That percentage is your DTI ratio .

Note that, with a mortgage, to calculate your DTI ratio, you’ll need to have a reasonable estimate of monthly property taxes on the home, insurance (homeowners, for sure, and PMI and flood insurance, if applicable), and HOA dues, if applicable. Even if you wouldn’t necessarily pay those bills on a monthly basis, you’ll need the bill broken down into a monthly amount for DTI calculation purposes. (And remember these are just examples. Your actual DTI, as calculated by a lending professional, may differ.)

If your debt-to-income ratio is too high, it can impact the type of mortgage you’ll qualify for. Each mortgage lender will have their own preferred DTI ratio, of course, and lenders can and do make exceptions based on your unique financial situation. Here’s an explainer on desirable debt-to-income ratios from the Consumer Financial Protection Bureau.

Preparing for When You Need a Mortgage

If you know you’ll want to buy a house within, say, the next year or two, it can be beneficial for you to understand how much home you can afford. This will give you time to manage your finances to make getting a mortgage approval easier. Perhaps you can’t pay off all your debt in that time frame, but there are strategic moves to make to position yourself better when mortgage time is upon you. In addition, consider reviewing our home buyers guide to get a better understanding of everything you need to prepare for your mortgage.

First, be careful. There are plenty of debt-related myths, but let’s address two debt-related realities:

1. Having a lot of debt in relation to your income and assets can work against you when applying for a mortgage.
2. If you are consistently late on debt payments, lenders may question your ability to pay your mortgage on time.

Here are a few tips that can help with some of the most common debt challenges:

Student Loan Debt

If you’re looking to take control of your student loan debt, consider refinancing your student loans into one new student loan with a potentially lower interest rate.

This can make paying back your loans easier, because there is just one monthly payment to make. Plus, with a (hopefully) lower interest rate, you can pay back less interest, overall. And, if you’re concerned about your monthly DTI ratio being too high when you go to apply for a mortgage, you may be able to refinance your student loan to a longer term for lower monthly payments, to reduce your current monthly DTI ratio. (Keep in mind, though, that extending your loan term may mean paying more interest over the life of your loan.)

When you refinance at SoFi, you can combine federal loans with private ones, something not many lenders permit. Request a quote online to see what you can save. Note that SoFi does not have any application fees or prepayment penalties, and there are no hidden fees.

Credit Card Debt

When you have a significant amount of credit card debt, the monthly payments can negatively impact your DTI ratio.

If you’re concerned about managing credit card debt payments while paying a mortgage, you could even consider focusing your efforts on getting out of credit card debt before you start the homebuying process.

To manage your credit card debt, and ultimately eliminate it, here are a few debt payoff methods to consider

•  The snowball method. List your credit cards from the one with the lowest balance to the one with the highest. Then, focus on paying off the one with the smallest balance first, while still making minimum payments on the rest. When that first card is paid off, focus on the next one on your list and so forth.

•  Tackling high-interest debt first. Using this method, you list your credit cards from the one with the most interest to the one with the least. Then, focus on paying off the credit card with the highest interest while making minimum payments on the rest. Then tackle the next one, and then the next one.

•  Consolidating credit card debt using a personal loan before you apply for a mortgage loan. When you do this, you’ll have just one loan, and personal loans typically have lower interest rates than credit cards (if you qualify). Ideally, keep credit cards open while only using them to the degree that you can pay off in full each billing cycle. And as with all debt payments, make all personal loan payments on time.

By reducing and managing your credit card debt, you can better position yourself for a mortgage loan on the house of your dreams.

Consolidating Your Credit Card Debt with a Personal Loan

Ready to consolidate credit card debt into a personal loan? SoFi makes it fast and easy, and it only takes minutes to apply. Plus, our personal loans have the following perks:

•  Low rates

•  No fees

•  Access to live customer support seven days a week

•  Community benefits; ask about how, if you lose your job, we can temporarily pause your personal loan payments and help you to find a new job

We look forward to helping you achieve your financial goals and dreams. Learn how a personal loan from SoFi can 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.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.
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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The Growing Average Credit Card Debt in America

Hard as this may be to imagine, 75 years ago, we didn’t have anything like today’s modern credit cards. Nowadays, studies are conducted annually to monitor the rising average credit card debt in our country, and this figure is seen as an indicator of the economy and of people’s individual spending habits.

It wasn’t as easy to buy what you needed in the pre-credit card era, and this form of payment has important benefits, including giving users a short window of time to make purchases on credit without paying interest on the balance.

But, the ease of credit card use also makes it ultra-easy to build up a mountain of debt, and the credit card debt spiral can be especially challenging to break. We’ll share more about why that’s so, later on in this post, along with tried-and-true methods to get out of this unwanted spiral of debt.

First, though, we’ll answer two commonly asked questions:

•  What is the average credit card debt this year?

•  How can I get out of credit card debt?

What is the Average Credit Card Debt This Year?

BusinessInsider.com reported on a 2018 study that shared how more than 40% of households in the United States have credit card debt, with the average household having a balance of $5,700. This average varies by where exactly you live in the country.

On the one hand, the percentage of Americans who have credit card debts has been decreasing for the past 10 years. On the other hand, when looking at people who do have this kind of debt, the average amount has been increasing.

Related: What is the Average Debt by Age?

From an economic standpoint, this is useful information to have. This data can also be helpful in allowing you to place your own financial situation into context. And if you’re unhappy with the amount of debt you’re carrying, the real question is how to get out of credit card debt. Fortunately, we’ve got plenty of insights and solutions to share.

First, let’s take a closer look at that average amount of credit card debt: $5,700. This takes into account every household, about 40% of which are in debt. However, if you just count the households in debt that don’t pay off their balances every month, that average debt increases to $9,333.

If you don’t have the means to pay the debt balance off all at once, then as you’re making payments interest keeps accruing, often compounding daily. So, it can be challenging to pay down that debt, especially if you’re making minimum payments or an amount that’s not significantly more than the minimum.

Here are a few more credit card facts to consider:

•  About one in every five adults in the United States has a credit card balance that’s higher than the amount of funds in their emergency savings accounts.

•  Men have, on average, higher credit card balances than women do, about 22% more.

•  About 68% of Americans have credit card debt when they die, on average $4,531. Compare that to the number of people who have mortgage loans when they pass away (37%) and those who have car loans (25%), and you can see how prevalent credit card really is.

Rising credit card debt can be exacerbated when there isn’t an emergency savings account to fall back on, and our cultural climate of consumerism, one where more is always better, doesn’t help.

If you no longer want to be average in the amount of your credit card debt, meaning you want to get out from underneath your debt, there are solutions.

Tips to Get Out of Credit Card Debt

To break the cycle of debt, it’s important to reverse engineer how it works and understand what makes it so challenging to get out of. Credit card companies typically compound interest, which means that interest accrues on the debt, and then you also pay interest on the interest.

Related: What is the Average Credit Card Debt for a 30-Year Old?

To make the situation even more challenging, interest is sometimes compounded daily, and so it’s easy to see how interest can quickly add up. This is true especially when you make minimum payments. It’s even true if you pay more than what’s owed as a minimum payment, but still have a remaining balance. If you’re late on a payment, you’re often charged a late fee, which is added to your balance—and then you’ll owe interest on that new total amount, as well.

So, What Can You Do?

Here are four methods to consider to ultimately pay off your high-interest credit card debt. You can choose the strategy that fits your financial philosophy and needs best, continue paying on all your debts, and then focus on not adding to your credit card debt as you pay down what you currently owe.

Choices include:

•  Debt snowball method: Using this method, you’d rank your credit card debts by outstanding balances. Then, focus on paying off your smallest debt first, and use the sense of accomplishment you’ll feel to fuel your motivation going forward. Then, pay off the smallest of your remaining debts, continuing until you’ve paid off your credit card debt entirely. A Harvard Business Review study showed that people using this method tend to pay off their credit card debts the quickest.

•  Debt avalanche method: In this method, you’d rank your credit cards by the interest rate charged. Then, focus on paying off the card with the highest interest rate first, and then the next highest and so forth. This is also known as the debt-stacking or ladder method.

•  Debt snowflake method: As a different strategy, you can use any extra money collected—from gathering change to a side gig—to pay down your credit card balances.

•  Debt consolidation method: Using this method, you would consolidate your credit cards into one debt, with a low-rate personal loan. You can potentially reduce your interest rate by using a personal loan and streamline the number of bills you need to pay monthly.

Here’s another idea to consider. What has been billed to your credit cards that you don’t really need? It’s pretty common to subscribe to a service you think you’ll need but don’t use, or one that you’ll need for a short period of time only.

Yet, until you cancel that service/subscription, the monthly charge will keep getting added to your credit card balance. So, review those monthly charges and consider tools that help identify places you can cut back on expenses.

Personal Loans with SoFi

If, as part of your financial plan, you’ve decided to apply for a low-rate personal loan to consolidate your credit card debt, there are numerous reasons why SoFi could be a great choice. This includes:

•  We don’t charge an origination fee.

•  We don’t charge any prepayment penalties.

•  We make it fast, easy, and convenient to apply for your personal loan online.

•  Live customer service support is available every day of the week.

•  If you lose your job, we can temporarily pause your payments—and even help you find a new job.

•  You can find your rate in just two minutes’ time!

Ready to get started? Apply for your personal loan at SoFi today!


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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the
FTC’s website on credit.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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Living in the Now vs Saving for the Future

Life is filled with tough decisions, including the mother of all: do I live in the now, or save for tomorrow?

It’s tough because this is the decision that generally seals our fate. Most of us would rather not think that far ahead; after all, retirement is decades from now. We often feel that we can’t afford to do both. And the expression “you only live once” (YOLO) is a temptation to put off tomorrow while you live in the moment.

Other ways we put off saving for our future — and this is where it gets heavy — could be the blame game: our parents, our government, the banks, the system. The feeling that everything is already rigged against us makes it easy to live life without an end plan.

If you would like to change your way of thinking, try this splash of cold water: imagine yourself at age 65. Where will you be living? How would you be paying for food, heat and electricity? Will you be existing solely on Social Security (if it’s still around)?

We’re not trying to scare you, even though the thought is scary. In fact, there are solutions to this dilemma that you can put into action today. We’re going to show you that there is a way to have your cake and eat it too. You can save for the future while living your current life to the fullest.

Follow these simple steps to live in the now while saving money for the future.

Start With a Clear Eye

Get a bird’s eye view of your situation and the way you roll by devising a list of questions that get to the heart of the matter. Give serious consideration to the quality of your crib, your wheels, your wardrobe, and other materialistic matters. Don’t forget to asses the even more important stuff, like the degree of your happiness and spirituality, your romantic life, your circle of friends, and so on. You don’t have to share this list with anyone, so don’t be afraid to get really honest.

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!


Divide Your Goals into Categories

Distinguish the goals that address your wants from the goals that will take care of your needs. All of this should be based on your income and financial standing as it is at this moment. Try your list this way:

Bucket list

Write down all the things you want to do before you die, and get busy checking them off. Parasailing? Learning French? Cooking a multi-course meal? No goal should be out of reach. The idea is that, eventually, you will have the satisfaction of having lived your life to the absolute fullest.

Retirement

Make a list of the ways you want to spend your golden years. Will you have the money to cover these goals? What must you do now in order to reach those financial goals? For some perspective, see if your on track for the retirement you want with our retirement calculator.

Budget

Take a cold, hard look at what you’re spending, and where. Include your rent/mortgage, utilities, transportation-related payments, groceries, wardrobe, eating out, and other assorted obligations. See where you can make cuts or reductions, and where you can redirect that spending into a retirement or emergency fund.

You don’t have to cut your budget so close to the bone that you’re life becomes dull; it may take a while to figure out just the right balance between living in the now and saving for the future. It could mean something as simple as brown-bagging your lunch or taking the bus to work instead of your car. You also don’t have to fix any spending that isn’t broken. If it’s working for you, keep it.

Current Income and Savings

To get a good understanding of where you can go from here, make a list of all your sources of monthly income. This includes your take-home pay (after taxes!), your retirement and savings accounts, Flexible Spending Accounts (FSA), and your emergency fund and vacation fund.

Debt

Create a detailed list of what you owe to creditors and lenders every month, including credit cards, school loans, and any other loans. Once organized, you can start deciding on a debt repayment plan that best suits your situation.

Evaluate Your Financial Situation

Be brutal in your estimation of where you stand. Ask yourself if you think you are saving enough for retirement, if you are paying your bills on time, if you are happy with your credit score, and if you have enough disposable income to have the fun you want to have (after your responsibilities are met).

Review and Revise

Once you discover your weak links, you’ll need to figure out how to change, adjust or alter your lifestyle. The emphasis for improvement should be more on the things you need. Once you take care of that, the things you want will be easier to achieve.

Start On Your Spending Cuts

Now that your entire financial life is laid out before you and you’ve realized your priorities, it’s time to get the scalpel. See what you can cut out completely, or at least reduce; see if there is a way to pay off your debt faster.

Adjust Your Plan Where Needed

The closer you watch your spending and the the more proactive you get with monitoring and switching up your budget, the more cash you may see become available for your future. It may take some trial and error, but don’t give up and don’t allow yourself to fall short of your goals. Always keep them in front of you, and understand that sometimes painful changes in your current situation can lead to incredible improvements in your life and your future.

Start an Account to Start Saving Money

Rather than use credit cards for the things you want now (vacations, tech, wardrobe, etc.), open separate savings accounts dedicated to each individual goal. For instance, label one savings account “Trip To France.” Label the next one “My New Laptop.” Even if you can only contribute a few dollars a week, your goal will get nearer with each deposit, and you’ll be able to pay for your goal in sweet cash. That saves you from getting deeper into debt and paying more interest, and helps you save for the future more effectively.

SoFi Checking and Savings®, a checking and savings account, may be able to help you see this through. SoFi Checking and Savings earns you 0.20% Annual Percentage Yield on all your cash and has no account fees.

We work hard to give you high interest and charge zero account fees. With that in mind, our interest rate and fee structure is subject to change at any time.”

Introducing SoFi Checking and Savings®

Sometimes a plan like this can feel overwhelming and even hopeless. It’s a common feeling, but don’t let it get the best of you. Consider getting some help without it costing you a penny. SoFi Checking and Savings can help you track your spending in your weekly dashboard all within the app.

SoFi Checking and Savings is a checking and savings account where you can spend, save, and earn all in one place. Once you are able to stick to your goals and your budget with the help of SoFi Checking and Savings, your lifestyle can change for the better and your financial situation can improve.

Get started with SoFi Checking and Savings!


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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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