Oct
01
2023
Is Getting an MBA Worth It_780x440: Getting an MBA won’t be right for everyone, but it could be one way to advance your career.

Is Getting an MBA Worth It?

By | Debt Payoff, Student Loans, student_loan | Comments Off on Is Getting an MBA Worth It?

The question of whether it’s worthwhile to obtain a Master’s in Business Administration—an advanced and versatile degree that can help people ascend into management analysis and/or strategy roles—is a highly personal one without a real single objective answer. As usual with financial and personal decisions, the answer tends to be “it depends.”

The last decade has seen the MBA go from becoming the most popular master’s degree in the U.S. to “being in crisis,” with overall applications declining. The COVID-19 pandemic resulted in many schools expanding their policies and modalities for distance learning, so it’s still anyone’s guess what impact that will have on the MBA’s popularity and employer demand. Either way, it’s never a bad idea to consider betting on your future—and an MBA is still a big commitment. Here are some things to consider when deciding to pursue an MBA.

The Pros and Cons of Getting an MBA

Getting an MBA won’t be right for everyone, but it could be one way to advance your career. Here are some things to consider as you weigh the pros and cons of getting an MBA.

Pros to Consider

Improved earning potential. The average anticipated salary for MBA graduates entering the workforce is $79,043 according to the National Association of Colleges and Employers. A recent grad’s expected salary may be even higher depending on where a student gets their MBA. According to US News & World Report, the average salary for 2019 MBA graduates at the top 129 full-time MBA programs was $106,757. For top 10 programs, the average salary and bonus was $173,960.

But if you’re wondering if it’s worth getting an MBA from a lower tier school, consider that the average MBA salary for graduates with a degree from the 10 schools where compensation was lowest was just $52,720 .

Expanded Network. Business school can be a great opportunity to make friends and network with like-minded individuals. In addition to your peers in the program, you’ll engage with faculty and be introduced to a (hopefully robust) alumni network.

Career Acceleration or Transition. Successful completion of an MBA program can improve an individual’s career mobility. Coursework is often designed to encourage management skills, critical thinking, and other specialized skills, which can help prepare people for the workforce.

Cons to Consider

The cost. According to US News & World Report , in 2020 the average cost of the top 10 business schools in the United States was over $140,000 for tuition in a two-year MBA program. The most recent data available from the National Center of Education Statistics indicates that during the 2015-16 school year, the average MBA student loan debt was $66,300 at the time of graduation.

There are ways to mitigate the cost or to at least lower sticker shock out of the gate by pursuing part-time programs or staggering your course load over a longer period of time so you can still be drawing a salary to offset the costs while you’re studying.

Time commitment. Getting an MBA in a full-time program can take two years. There are some accelerated programs that may allow students to complete their coursework in 12 to 16 months. Beyond the length of the program, MBA classes are no joke. The coursework requires commitment and diligence, so be sure you have the time to dedicate to classes.

Consider factoring in the application process when evaluating both time and cost. To apply, schools may require GMAT™ scores, letters of recommendation, and more. Meeting the application requirements may take both time and money if you still need to take the required standardized tests.

How to Decide If an MBA Is Worth It for You

While an MBA can offer great potential for career growth, it’s definitely not the right choice for everyone. Be honest with yourself about why you want to pursue an MBA. It can be an excellent opportunity for students who are interested in career growth but it can be a huge time and monetary commitment.

Take the time to really evaluate whether getting an MBA is in line with your career and personal goals. Also understand the types of schools you may be able to get into, as the earning potential for someone who attended a top-tier school isn’t the same as someone who is enrolled in a lower-tier program.

When sitting down to crunch the numbers and assess your goals, pay particular attention to long-term salary projections among graduates from the program you have in mind—assuming future earning potential is a primary motivator for getting an MBA. Debt may be offset by future salary. But because signing on for grad school is a big and expensive decision overall, it’s worth considering all angles.

How to Pay for an MBA

One approach to college programs is to first seek fellowships, scholarships, and grants—and to then pay for costs out of pocket or to seek a loan as a last resort. Unlike undergraduate scholarships, which may be based on financial needs, MBA fellowships and grants are often awarded on merit. That means rather than taking financial need into account, oftentimes programs will be looking at a student’s achievements, talents, abilities, and performance in spite of hardship.

Generally speaking, when trying for a merit-based award, it helps to apply early, really ponder how you’re distinct from your competition, and push yourself to craft your application specifically for the program. Admissions folks and fellowship committees spend a lot of time reading a ton of applications and can tell instantly when an essay has been rubber-stamped—spell check, read your application over repeatedly, and don’t rush any aspect of it.

When in doubt, consider calling the admissions office for guidance or for information on programs and awards that may not be fully described online. But many MBA programs, including, for example NYU Stern, clearly indicates that “about 20-25% of admitted full-time two-year MBA students receive a merit-based scholarship.” NYU Stern’s website runs down many of the possible scholarships and fellowships prospective students can try for and what’s required.

Review fellowship opportunities available at the college or university you are interested in attending. Fellowships can be highly competitive and rare but offer a chance to attend a program, earn a degree, and avoid incurring the full cost of tuition. Not all schools offer them, but the University of Florida’s Warrington College of Business and Arizona State University’s W.P. Carey School of Business are just two examples of ones that do.

It might sound like an incredible long shot to earn a full free ride or even a considerably discounted one via aid—but it’s always worth pursuing because you may be closer than you think.

Recommended: How To Pay For Grad School

Student Loans for Graduate School

Student loans are another option students can use to pay for graduate school. To apply for federal aid, students will need to fill out the Free Application for Federal Aid. It’s important to note that the federal loans available for graduate students vs undergraduate students are different. Importantly, graduate students are not eligible for subsidized loans.

While your search for aid often starts with the university’s website and making contact with real humans there—not just going off what’s online—it’s also worth getting on the phone to lenders and finance companies to shop around and get the lay of the land. SoFi offers options to help students refinance existing student loans or to take out a new one. According to The Fed, there is currently over $1.7T in student loan debt . Chances are anyone thinking about school would like to avoid personally contributing to that statistic. Note that refinancing eliminates federal loans from borrower protections like deferment or forbearance.

Recommended: The Lifetime Cost of an MBA Degree

Employer Tuition Reimbursement Programs

In addition to getting on the horn with the schools you’re considering, it’s worth talking to your employer. Some employers have programs where they will pay for all or part of your MBA if you commit to returning and staying with the company for a set number of years after you earn the degree.

A 2019 survey from the Graduate Management Admission Council found that 40% of companies offer education sponsorship . If you’re among the current majority of the 60% other companies, there may still be tuition reimbursement programs—it’s worth at least asking about.

You can also explore business school assistantship programs as a way to offset the cost of tuition. These are jobs that may require you to help school faculty with tasks like conducting research or grading papers, and can also help provide you with a stipend as well to help with personal expenses outside of the debt owed to the school you’re working to erode. Contact your school’s employment office for details—but know that like with every other option to minimize the bill for a degree, the competition is likely to be fierce.

Recommended: How Does Tuition Reimbursement Work?

The Takeaway

Even if you don’t have a few dream graduate schools in mind yet, it’s a good bet you know it’s a pricey proposition and not one to be pursued on a whim. In addition to this article, it would be worth reading our content on how today people are taking on a larger amount of debt for master’s, MBA, law, and medical programs than ever before.

Compared to undergrads, grad students are taking on more debt, taking out loans that come with higher interest rates, and there’s the additional opportunity cost of just time invested in your own life—later in life—that comes with pursuing another degree.

That doesn’t mean it isn’t worth getting an MBA necessarily, it just means before making the final decision about pursuing it, it’s helpful—necessary even—to sit down, do your homework, and really think it through to develop a strategy and identify where compromises might also be called for.

Like a Bachelor’s, an MBA is not a guarantee of anything in your future. Obtaining an MBA will not magically earn you a better salary, grant you access to a better network, or help you figure out your path in life. Like any degree, an MBA is a tool that might help you quickly pivot your career or “check a box” for earning a promotion with your current employer. Whether that’s worth it depends on your own specific situation and set of goals.

Learn more about student loan refinancing with SoFi.


IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS, PLEASE BE AWARE THAT THE WHITE HOUSE HAS ANNOUNCED UP TO $20,000 OF STUDENT LOAN FORGIVENESS FOR PELL GRANT RECIPIENTS AND $10,000 FOR QUALIFYING BORROWERS WHOSE STUDENT LOANS ARE FEDERALLY HELD. ADDITIONALLY, THE FEDERAL STUDENT LOAN PAYMENT PAUSE AND INTEREST HOLIDAY HAS BEEN EXTENDED TO DEC. 31, 2022. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE THE AMOUNT OR PORTION OF YOUR FEDERAL STUDENT DEBT THAT YOU REFINANCE WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.

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


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

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
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SOSL21002

Read more
Sep
29
2023
How Time-Weighted Rate of Return Measures Your Investment Gains

How Time-Weighted Rate of Return Measures Your Investment Gains

By | Growing Wealth, invest, Investing | Comments Off on How Time-Weighted Rate of Return Measures Your Investment Gains

One of the most important and most common methods investors use to measure their returns is the time weighted rate of return formula. That’s because the time-weighted rate of return measures a compound rate of growth.

The time-weighted rate of return incorporates the impact of transactions such as portfolios rebalancing, contributions, and withdrawals. That leaves investors with a clearer picture of their portfolio’s overall performance.

What Is the Time-Weighted Rate of Return?

Starting with the basics, a return on investment (ROI) is a measure of how much money investments earn, or how much they’ve grown in value. Returns can be positive or negative (if a stock loses value following its purchase, for example). But obviously, investors make decisions with the goal of earning positive returns.

A rate of return, then, is a measure of the pace at which investments are accruing value, expressed as a percentage. The higher the rate of return, the better. Essentially, it’s a measure of a portfolio’s or investment’s performance over time. Rates of return can be calculated for certain time periods, such as a month or a year, and can be helpful when comparing different types of investments.

But investment portfolios are rarely static. Many investors make contributions or withdrawals to their portfolios on a regular basis. Many people contribute to their 401(k) with each paycheck, for example, or rebalance when market moves throw their asset allocation out of whack.

During these transactions, investors are buying and selling investments at different prices and times based on their investing strategy. That can make it more difficult and complicated to calculate a portfolio’s overall rate of return.

That’s where the time-weighted rate of return formula becomes useful. In short, the time-weighted rate of return formula takes into account a portfolio’s cash flows, and bakes in their effect on the portfolio’s overall returns. That gives investors a better, more accurate assessment of their portfolio’s performance.

That’s why the time-weighted rate of return calculation is, for many in the financial industry, the standard formula for gauging performance, over both the short- and the long-term.

▶️
Video: What is Rate of Return (RoR)?
Learn the basics in under 1 minute.
Watch Now

The Time-Weighted Rate of Return Formula

The time-weighted rate of return formula can look intimidating for even seasoned investors, but it’s an important step in building and maintaining an investment portfolio. But like many other financial formulas, once the variables are identified, it’s a matter of plug-and-play to run through the calculation.

First, let’s take a look at the basic portfolio return calculation:

Basic portfolio return = (Current value of portfolio – initial value of portfolio) ÷ initial value

While this formula provides a value, it assumes that an investor made one investment and simply left their money in-place to grow. But again, investors tend to make numerous investments over several time periods, limiting this calculation’s ability to tell an investor much about their strategy’s effectiveness.

That’s where the time-weighted rate of return comes in. In essence, the time-weighted formula calculates returns for a number of different time periods — usually additional purchases, withdrawals, or sales of the investment.

It then “weights” each time period (assigns them all roughly equal importance, regardless of how much was invested or withdrawn during a given period). Then, the performance of each period is included in the formula to get an overall rate of return for a specified period.

Calculating the time-weighted rate of return over the course of a year, for instance, would include the performance from each individual month. And, yes, that’s a lot of math. Computers and software programs can help, but it’s also doable the old-fashioned way.

This is what the time-weighted rate of return formula looks like:

Time-weighted return = [(1 + RTP1)(1 + RTP2)(1 + RTPn)] – 1

There are variables needed to calculate the equation:

n = Number of time periods, or months
RTP = Return for time period (month) = (End value – initial value + cash flow) ÷ (initial value + cash flow)
RTPn = Return for the time period “n”, depending on how many time periods there are

Let’s break it down again, and assume we’re trying to calculate the time-weighted return over three months. That would involve calculating the return for each individual month, three in all. Then, multiplying those returns together — “weighting” them — to arrive at an overall, time-weighted return.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

How to Calculate Time-Weighted Rate of Return

To run through an example, assume we want to calculate a three-month, time-weighted return. An investor invests $100 in their portfolio on January 31. On February 15, the portfolio has a value of $102, and the investor makes an additional deposit of $5. At the end of the three-month period on April 30, the portfolio contains $115.

For this calculation, we wouldn’t think of our time periods as merely months. Instead, the time periods would be split in two — one for when a new deposit was made. So, there was the initial $100 deposit that would constitute a time period that ends on February 15. Then a second time period, when the $5 deposit was made, which constitutes a second time period.

With this information, we can make the calculation. That includes calculating the return for each time period during our three-month stretch. So, for time period one, the basic formula looks like this:

Return for time period = (End value – initial value + cash flow) ÷ (initial value + cash flow)

Now, we plug in our variables and calculate. Remember, there was no additional cash flow during this first period, so that won’t be included in this first calculation.

Time period 1:
($102 – $100) ÷ $100 = 0.02, or 2%

Then, do the same to calculate time period two’s return:

Time period 2:
[$115 – ($102 + $5)] ÷ ($102 + $5) = 0.074, or 7.4%

Now, take the returns from these two time periods and use them in the time-weighted rate of return formula:

Time-weighted return = [(1 + RTP1)(1 + RTP2)(1 + RTPn) – 1

With the variables — remember to properly use percentages!

TWR = [(1 + 0.02) x (1 + 0.074)] – 1 = 0.95, or 9.5%

So, the time-weighted return over this three-month stretch (which included two time periods for our calculation), is 9.5%. If we had simply done a basic return calculation, we’d reach a different number:

Basic portfolio return = (Current value of portfolio – initial value of portfolio) ÷ initial value
$115 – $100 ÷ $100 = 0.15, or 15%

That 15% figure is too high, because it doesn’t account for cash flow. In this case, that was a $5 deposit made in mid-February. The basic return formula folds that into the overall return figure. The time-weighted calculation gives us a more accurate return percentage, and one that accounts for that mid-February deposit.

Other calculations

While the time-weighted rate of return is an important measurement, it’s not the only way to look at a portfolio’s returns. Some investors may also choose to evaluate a portfolio or investment based on its money-weighted rate of return. That calculation is similar to the time-weighted rate of return because it incorporates inflows and outflows, but it does not break the overall investment period into smaller intervals.

Another common measure is the compound annual growth rate, (CAGR), which measures an investment’s annual growth rate over time and does not include the impact of inflows and outflows.

The Takeaway

Having an accurate, timely view of a portfolio’s performance is critical for understanding current investments, planning future investments, and considering changes to your asset allocation. While other rate of return calculations can be useful, it’s important to understand their limitations.

The time-weighted rate of return formula is helpful because it takes into account the numerous inflows and outflows of money over various time periods. Armed with that insight, investors can adjust their strategy to try to increase their rate of return. That may mean reallocating or rebalancing their portfolio to include more aggressive investments or less risky securities.

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

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

Photo credit: iStock/MicroStockHub

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.

¹Claw Promotion: Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

SOIN0623024

Read more
Sep
25
2023

You Can Still Put Off Repaying Your Student Loans. Should You?

By | Fresh Out of School, Student Loans, student_loan | Comments Off on You Can Still Put Off Repaying Your Student Loans. Should You?

After years of paused federal student loan payments in response to the COVID-19 emergency, payments are starting up again. Interest charges started accruing in September, with first payments due in October.

While some borrowers are financially prepared to make their payments, not all are. If you’re worried about your upcoming federal student loan payment, you have options. A couple of student loan relief programs — the SAVE Plan and on-ramp period — are available to help eligible borrowers ease back into their payment obligations.

SAVE Plan

The Saving on a Valuable Education (SAVE) Plan is a new income-driven repayment (IDR) option that offers the lowest monthly payments among all IDR plans to a wider group of borrowers. In fact, under this repayment plan, more borrowers qualify for a $0 monthly payment.

It replaces the existing Revised Pay As You Earn (REPAYE) Plan and those who are on REPAYE will automatically be transferred to SAVE.

How Does the SAVE Plan Work?

The SAVE Plan offers various benefits that offer immediate relief, although the full advantages of SAVE rolls out in two parts. The second wave of benefits is expected to go into effect in July 2024.

Like all IDR plans, SAVE calculates borrowers’ monthly payments, based on their income and family size. The main advantage of SAVE, however, is its increased income exemption for the payment calculation.

Other IDR plans determine your discretionary income by calculating the difference between your annual income and 100- or 150-percent of your state’s poverty guideline for your family size. The SAVE Plan raises the exemption from REPAYE’s 150 percent of the poverty line to 225 percent. This results in more eligible borrowers having a calculated monthly payment of $0.

If you qualify for a $0 monthly SAVE payment, you’ll need to recertify your income and family size. The SAVE Plan lasts 20 or 25 years, depending on whether you have undergraduate or graduate debt. After the plan term ends, your remaining balance is forgiven.

Other SAVE Plan features

•   Any unpaid interest accrued each month is entirely subsidized by the Department of Education.

•   Married borrowers can also now exclude their spouse’s income from the plan’s payment calculation. Not having to report your spouse’s income improves your chances at a lower payment.

Some borrowers who are enrolled in SAVE can also look forward to even lower payments 2024 when the remaining benefits are enacted.

Firstly, the program provides a fast track toward student loan forgiveness which also goes into effect. For example, borrowers whose original principal balance was $12,000 or less and have made 10 years of payments will have any remaining balance forgiven.

Other benefits include being automatically enrolled in IDR after 75 days of non-payment thus avoiding delinquency, and receiving credit for past months of non-payment, like during forbearance, which usually don’t count toward forgiveness.

SAVE Plan Eligibility

The only eligibility requirement for enrolling in the SAVE Plan is that you must have eligible student loans, and the loans can’t have been a parent PLUS Loan.

Eligible loans include Direct subsidized and unsubsidized loans, graduate or professional PLUS loans, and Direct Consolidation Loans that don’t include parent PLUS Loans.

If you choose to undergo a Direct Consolidation Loan first, the following federal loans might also be eligible:

•   Federal Perkins Loans

•   Subsidized and unsubsidised Stafford Loans via FFEL Program

•   Graduate or professional FFEL PLUS Program Loans

•   FFEL Consolidation Loans that didn’t include parent PLUS Loans

SAVE Plan: Pros and Cons

Generally, the SAVE Plan is expected to be the most advantageous of all income-driven repayment plans. Although there are a handful of benefits, there are still some potential downsides to consider.

Pros

•   Offers lowest or $0 payment option. SAVE’s new poverty line adjustment broadens the exemption for borrowers who can qualify for a zero-dollar monthly payment.

•   Caps interest. Interest in excess of a borrower’s calculated payment will not be charged, preventing your loan balance from growing.

•   Faster progress toward loan forgiveness. The new approach to how past non-qualifying payments and non-payments are counted toward forgiveness helps borrowers get out of debt faster.

•   Helps avoid delinquency or default. The SAVE Plan offers a long-term solution for low or no payments to avoid the impact of delinquency or default.

Cons

•   Only the lowest income earners get $0 payment. Not all borrowers qualify for $0 payments. Payment amounts are based on income and family size; for example, a single borrower who earns $32,800 or less won’t have a payment requirement, but your payment amount increases as you earn more.

•   Requires annual recertification. Like all IDR plans, you must recertify your income and family size each year, and if you don’t, you’ll be removed from the plan. (Note, however, that auto-recertification will be available starting in July 2024, saving plan participants from having to manually re-submit their income every year.) As with any IDR plan, the result of the recertification may be that your monthly payment amount may change if your income increases over time. If your income rises enough, it may transpire that SAVE no longer offers the lowest monthly payment as compared to other repayment plans or refinancing options.

•   Faces political opposition. Critics of the SAVE Plan argue that the new repayment option is unfair and is an overreach of presidential powers. With the SAVE Plan still in its infancy, there’s no telling where it will land in the following months.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

On-Ramp Repayment Program

As a way to ease student loan borrowers out of the payment pause, the Department of Administration is implementing what it calls the “on-ramp repayment program”. This timeframe temporarily gives borrowers more time to sort out their financial situation before the negative consequences of non-payment takes effect.

How Does The On-Ramp Work?

The Department of Education’s on-ramp program spans 12 months. It begins on October 1, 2023 and is in effect through September 30, 2024. During this one-year period, any borrower who misses a payment, whether the first one that’s due in October or in the middle of the on-ramp, won’t be considered delinquent.

This means that the non-payment won’t be reported to the credit bureaus, and it won’t affect your credit score and ability to borrow other consumer loans or lines of credit. And if you continue to not make your monthly payments during the entirety of the on-ramp, your loan won’t go into default status. This means you can avoid debt collections and federal payouts, like Social Security benefits and tax refunds, won’t be withheld by a treasury offset.

It’s important to understand that although you’ll get short-term respite from the major consequences of non-payment, payments are still technically due and interest still accrues during this forbearance.

On-ramp program eligibility

The on-ramp repayment program is available to any borrower with unpaid federal student loans held by the Department of Education. It’s an automatic warming-up period that doesn’t require any additional steps to participate in.

The Administration advises that those who can afford to pay their student loan payments in October should plan to do so.

On-Ramp Program: Pros and Cons

The on-ramp forbearance offers an extended reprieve from making a student loan payment, if you’re not in a financial position to do so. However, there are considerations to be aware of before missing a payment.

Pros

•   Interest charges won’t capitalize. Any interest charges that are unpaid won’t be added to your principal balance after the on-ramp. This prevents your unpaid loan balance from ballooning.

•   Account status won’t affect credit. The non-payment data won’t be reported to credit bureaus or debt collection agencies. Taking advantage of the on-ramp timeline, won’t adversely affect your credit score or influence treasury offsets.

•   Avoids delinquency or default. The on-ramp lets you keep your loan in a status that doesn’t require monthly payments, but also avoids the negative repercussions of missing payments, like debt collection and credit-related penalties.

Cons

•   Interest continues accruing. Although the on-ramp forbearance defers your payment requirement, interest is still charged each month. While the interest won’t capitalize, it will still need to be paid off when the on-ramp ends.

•   No progress toward forgiveness. Months of non-payment don’t earn you credit toward loan forgiveness. The on-ramp further prolongs your timeline toward having your debt forgiven.

•   Account becomes delinquent after on-ramp. When the on-ramp period expires, the missed payments are still due. In addition to not moving the needle forward, accounts with missed payments after the on-ramp are considered delinquent and can affect your credit.

What To Do If You’re Worried About Payments Due In October

There’s no one federal student loan repayment solution that works for everyone. Whether you’re exploring your options because you can’t afford payments or are hoping to earn loan forgiveness along the way, everyone’s situation is different.

If the impending restart of student loan payments is looming over your shoulders, contact your loan servicer immediately. Discuss where your finances are and the relief options available to you. Addressing your student loans head on can keep your debt in good standing while avoiding more severe outcomes later.

Student Loan Refinancing

Refinancing your federal student loans is another option for student loan borrowers to consider, especially if your existing loans carry a high interest rate. If you don’t qualify for the low monthly payments of the SAVE Plan, refinancing could be another avenue to a lower monthly payment (though you may pay more interest over the life of the loan if you refinance with an extended term). It’s also important to be aware that refinancing replaces your federal student loan with a private one, which means that you’ll lose access to income-driven repayment and other federal benefits.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

Photo credit: iStock/Ridofranz

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
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

SOSL0923053

Read more
Sep
25
2023

Who’s Eligible for the Nurse Corps Loan Repayment Program?

By | Debt Payoff, Student Loans, student_loan | No Comments

Working as a nurse can be a fulfilling career with plenty of job opportunities. However, working as a nurse also requires you to meet specific educational and certification requirements, which could mean taking on student loan debt.

Fortunately, the federal government anticipated this issue, and it’s trying to put nurses in places with the most need while helping them get out of debt. If you commit to working in a high-need or shortage area for a certain period of time, you could qualify for forgiveness of your student loan debt.

The Nurse Corps Loan Repayment Program , one of the student loan forgiveness programs for nurses, can be a great help for nurses who find themselves overwhelmed by student loan debt . Read on to learn how the program works, including how much loan forgiveness it offers and how to qualify.

Requirements for the Nurse Corps Loan Repayment Program

To be considered for the Nurse Corps Loan Repayment program, there are some key requirements you have to meet. Checking off as many of the eligibility requirements as possible will give you the best chance of success.

So, what are the requirements? They include:

•   Being a U.S. citizen, U.S. national, or permanent resident who is licensed as a registered nurse.

•   Working full-time at one of the Critical Shortage Facilities the government recognizes in an underserved area or at a nursing school.

•   Graduating with a nursing degree from an accredited nursing school in the U.S. or its territories.

Since the program is so competitive, the government gives preference to nurses with the greatest financial need. For nurse faculty applicants, it gives preference to those who work in a school where at least 50% of the students are from a disadvantaged background.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Nurse Corps Loan Repayment Program Service Commitment

Many U.S. residents go without needed treatment because there’s a shortage of healthcare workers where they live. By participating in the Nurse Corps Loan Repayment program, you can realize your passion for providing care to people who really need it.

Specifically, you must commit to working in a Critical Shortage Facility full-time for two years. In some cases, nurses can elect to continue for an additional year.

Once your service commitment to the Nurse Corp Loan Repayment Program is complete, the program will pay 60% of your unpaid nursing debt. If you can get a one-year extension, the government will pay back 25% of the original loan balance. Keep in mind you’ll have to pay taxes on the amount of the loan repayment you receive.

Are There Other Loan Repayment Options for Nurses?

As a nurse, there are other repayment options worth exploring that could help you manage your student debt. Here are a few options to check out:

•   National Health Service Corps Loan Repayment Program: If you’re a nurse practitioner, you can tap into this program. In exchange for working two-years at an approved site , the National Health Service Corps Loan Repayment Program provides up to $50,000 in loan repayment to full-time workers and up to $25,000 to half-time workers. If you’re selected to continue past the service term, you can get more debt paid off.

•   Apply for income-driven repayment. If you’re having trouble keeping up with payments on your federal student loans, consider applying for an income-driven plan like the SAVE Plan. These plans adjust your monthly payments to a percentage of your discretionary income while extending your loan terms. If you still owe a balance at the end of your term, it will be forgiven.

•   Consolidate your federal loans. Federal Direct loan consolidation involves combining your federal loans into one new loan with a new interest rate. You can also choose a new repayment plan and may qualify for terms as long as 30 years, depending on your loan amount.

Another Option: Refinancing

With competition so high for loan repayment programs, many applicants won’t be selected. And if you’re not working at a Critical Shortage Facility, you’re not going to qualify. Others may complete their service commitment, but still struggle with student loan debt. But there’s another option to consider that can help you manage student loan debt beyond the Nurse Corps Loan Payment Program or the National Health Service Corps Loan Repayment Program.

Refinancing your student loans can make sense for borrowers who are established in their careers and have built up a solid credit rating. Depending on your credit score and other factors, you could qualify for a lower interest rate than you have now.

You also have the option of choosing a fixed-rate loan or a variable-rate loan. If you like the idea of having a set payment amount, month after month, a fixed-rate loan fits the bill. If you can live with flexibility, a variable-rate loan follows the market, which means it could start lower but then rise. Of course, when rates rise, so does your payment amount.

All that said, refinancing federal student loans can have a major downside. If you refinance federal loans with a private lender, you’ll lose eligibility for federal programs, including income-driven repayment and federal loan forgiveness programs. Make sure you’re not relying on any federal benefits before refinancing federal loans, since you can’t reverse the process after it’s done.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.


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.


SOSL0823021

Read more
Sep
14
2023
Pros and Cons of Paper Trading

Pros and Cons of Paper Trading

By | Financial Independence, Growing Wealth, invest, Investing | Comments Off on Pros and Cons of Paper Trading

Paper trading is simulated trading, done for practice without real money. It’s a way to test different trading strategies without the risk of losing money, before an investor starts trading with real capital.

The practice gets its name from how investors would once mark down their hypothetical stock purchases and sales — and track their returns and losses — on paper. But today, investors typically use digital platforms to virtually test out hypothetical investment portfolios, day-trading tactics, and broader investing strategies.

How do Paper Trades Work?

What is paper trading? In its most basic form, paper trading involves selecting a stock, group of stocks, or a sector, then writing down the ticker or tickers and choosing a time to buy the stock. The paper trader then writes down the purchase price or prices.

When they sell the stock or stocks, they write down that price as well, and tally up their return.

Pros and Cons of Paper Trading

Paper trading has both benefits and drawbacks. Here are a few factors to consider before you try paper trading.

The Pros of Paper Trading

Build skills: Paper trading is a way to learn and build trading skills in either a bear or a bull market. For new traders, a virtual trading platform offers a way to make rookie mistakes without risking real money. It’s a method to get comfortable with the process of buying and selling stocks, and making sure you don’t enter a limit order when you mean to place a market order.

Test out strategies: Paper stock trading allows for experimentation. For example, an investor might hear about shorting a stock. But they may not know how the process works, and what it actually pays out. Paper trading permits investors to learn how these trades work in practical terms. Or, they might want to try out other strategies, such as swing trading.

Learn about strengths and weaknesses: Paper trading is also a way for investors to learn about their own strengths and weaknesses. Traders lose money in the markets for a number of personal reasons. Some stick to their guns too long, while others give up too soon when the market is down. Some lose money because they panic, while others lose money because they ignore clear warning signs. Paper trading is a way for investors to learn their own tendencies and weaknesses without paying for the lesson.

Keep emotions out of it: Finally, paper trading can help teach investors to keep their emotions in check while the markets are going up and down. Investing with hypothetical dollars can be good practice in the valuable art of making rational decisions in stressful situations and allow investors to find risk management techniques that work best for them.

The Cons of Paper Trading

It’s not real: The biggest drawback of paper trading is that it’s not real. An investor can’t keep the returns they earn paper trading. And those paper returns can lead the investor to have an unrealistic sense of confidence, and a false sense of security. Paper trading also doesn’t account for real-life situations that might require an investor to withdraw money from the market for personal reasons or the impact of an unexpected recession.

The emotional impact is hard to gauge: Paper trading does limit the impact of emotions, but once an investor’s real, actual money is in play, it may be more difficult to reign in emotions. That money represents a month’s salary, or a semester’s tuition, or a house payment, and so forth, so it can be hard to remain calm and keep perspective when the market plunges over the course of a trading day.

Could be misleading: While paper trading offers important lessons, it can also mislead investors in other ways. If a paper trading strategy focuses on just a few stocks, or using one trading strategy, they can easily lose sight of how broader market conditions actually drive the performance of those stocks, including stock volatility, or their strategy, or have an inflated confidence in their ability to time the markets. They need to realize their holdings or strategy may offer very different results in a real-world scenario.

Doesn’t involve the true costs of trading: Another danger with paper-trading is that traders may overlook the cost of slippage and commissions. These two factors are a reality of actual trading, and they erode an investor’s returns. Slippage is the difference between the price of a trade at the time the trader decides to execute it and the price they actually pay or receive for a given stock.

Especially during periods of high volatility, slippage can make a significant impact on the profitability of a trade. Any difference, up or down, counts as slippage, so slippage can be good news at times. Since brokerage commissions and other fees always come out of a trader’s bottom line, paper traders should include them in their model.


💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Live Trading vs Paper Money

When an investor uses live trading, they are using real money to buy and/or sell stocks or other securities. They will confront market fluctuations and need to make decisions, sometimes quickly, about what to do. Live trading can be very stressful, but it does offer the opportunity for an investor to earn money. However, it also comes with the very real risk of losing money.

With paper trading, there is no money involved to lose. But once again, it’s not “real,” so while it may teach you some basics, paper trading does have limits and drawbacks, as detailed above.

Paper Trading in the Digital Age

Wondering how to paper trade? There are different ways to do it. Some investors swear by a tangible notebook-and-paper approach to paper trading, others keep a spreadsheet, which allows them to track other factors involved in the investment, including the exact time of the purchase and sale, volume, holding period, index direction, overall market volatility, and other factors they may be studying.

But while paper or spreadsheets are valuable tools, most investors testing out their trading chops or portfolio-construction skills now prefer virtual trading platforms, which pit a hypothetical portfolio or strategy against real markets. These platforms mimic the look and feel of an actual trading platform, but deal only in hypothetical assets. Understanding a platform can make it easier to transition to real-life trading in the future.

On these platforms, an investor will start with fake money and begin trading. As they do, they can track the fluctuations in an account’s value, along with profit and loss, and other key metrics. Many trading simulators offered by online brokerages allow investors to virtually trade in real-time during live markets without risking their money. For some investors, this can be a valuable experience before they dive in with real money–and the potential for real losses.

Recommended: Managing the Common Risks of Day Trading

How to start paper trading

If you’d like to try paper trading, be sure to research your investments, just like you would if you were investing for real, and use the same amount of paper money you would use in real life. This will help mimic the actual experience.

If you choose to paper trade with a pencil and paper, you can simply choose a stock or group of stocks, write down the ticker, and pick a time to buy the stock. You then write down the purchase price, or prices. When you sell the stock you record that price and then figure out your up their return.

If you decide to use a virtual trading platform, you’ll need to choose a platform. There are many free platforms available. You may want to look for one that has live market feeds so that you can practice trading without delays.

Setting up a Paper Trading Account

Once you’ve selected a virtual trading platform, you’ll set up an account. Simply log onto the platform and follow the prompts to set up an account. Once you’ve done that, there should be a “paper trading” option you can click on.You’ll need to select a balance and then you should be able to start simulating trading.

The Takeaway

Paper trading can be a way to learn about investing. By keeping track of all trades, and the losses or gains they generate, it creates a low-stress practice for examining why certain stocks, and certain trades, perform the way they do. That can be invaluable later, when there’s real money on the line.

However, remember that paper trading isn’t real. In real-life trading with an investment account, you’ll have the potential for gains, but also for losses. Make sure you are comfortable taking that risk.

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


Invest with as little as $5 with a SoFi Active Investing account.

FAQ

Do you make money from paper trading?

No. With paper trading, there is no real money involved, so there is no opportunity to make (or lose) money. Paper trading is a way to learn about trading without risking money.

How realistic is paper trading?

Paper trading involves using real trading strategies and simulates a real market experience. However there are no real losses or gains since no real money is involved. Because of that, it doesn’t convey a fully realistic experience.

Is paper trading good for beginners?

Paper trading can be a way to learn the basics of investing. A beginner could build their skills and test different strategies without risking loss. However, paper trading can be misleading because there is no real risk involved. An investor might be tempted to take more risks than they would in a real life investing scenario, for instance.

Why is paper trading important?

Paper trading could be important because it allows beginning investors to practice trades, build their skills, and test different market strategies, without the risk of losing money. However, it can’t replicate the experience of real trading with actual money and the potential to possibly lose money, which someone who tries paper trading should keep in mind.

Photo credit: iStock/fizkes

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.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

SOIN0723122

Read more
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

©2025 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender