InvestSLR Archives

Feb

2026

When Should You Start Saving for Retirement?

By Melanie Mannarino | Budgeting & Goals, Growing Wealth, invest, Preparing for Retirement | No Comments

If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.

It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.

Key Points

• Starting to save for retirement in your 20s is ideal, as it gives your money more time to potentially grow and benefit from compounding. Compounding occurs when any earnings received are added to your principal balance, so future earnings are calculated on this updated, larger amount.

• Assessing personal financial situations and retirement goals is crucial when determining how much to save for retirement, regardless of age.

• Individuals in their 30s, 40s, 50s, or 60s can still successfully start saving for retirement, with different strategies tailored to each age group.

• Regular contributions and taking advantage of employer-sponsored plans are key steps in building a solid retirement savings strategy at any age.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.

What Is the Ideal Age to Start Saving for Retirement?

Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.

Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.

The #1 Reason to Start Early: Compound Interest

If you start saving early, you could reap the benefits of compound interest.

CFP^®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”

Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.

Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.

Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.

The sooner you start saving and investing, the more time compounding has to do its work.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.

Age	Annual Return	Savings
25	8%	$2,129,704.66
35	8%	$939,494.76

As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.

Starting Retirement Savings During Different Life Stages

Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.

Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.

As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:

• Age you are now

• Age you’d like to retire

• Your income

• Your expenses

• Where you’d like to live after retirement (location and type of home)

• The kind of lifestyle you envision in retirement (hobbies, travel, etc.)

To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.

Starting in Your 20s

Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.

As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.

Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.

Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?

Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.

If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). In 2025, you can contribute up to $23,500 in a 401(k), and in 2026, you can contribute up to $24,500.

One benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)

Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.

Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.

Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.

Starting in Your 50s

In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.

Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2025, and an extra $8,000 in 401(k) savings, and an extra $1,100 in IRA savings for 2026. (Note that in 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 to a 401(k), instead of $7,500 or $8,000.)

Also, under a new law that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth account. With Roth accounts, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.

Starting in Your 60s

It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).

In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.

The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is 20 years enough to save for retirement?

It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.

Is 25 too late to start saving for retirement?

It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.

Is 30 too old to start investing?

No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.

Should I prioritize paying off debt over saving for retirement?

Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.

And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.

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Feb

2026

How to Save for Retirement

By Pam O’Brien | Budgeting & Goals, invest, Preparing for Retirement | No Comments

Between paying for your regular expenses including groceries, rent or mortgage, student loans, and bills, it can seem nearly impossible to find a few dollars left over for saving for retirement — especially when that might be decades away. However, building up a nest egg isn’t just important, it’s urgent. The sooner you start, the more financially secure you should be by the time retirement rolls around.

So, how to save for retirement? Finding a solid retirement plan to suit your needs may be easier than you think. Here are 10 ways to save for retirement to help make those golden years feel, well, golden.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.

Assess Your Retirement Goals and Needs

When it comes to saving for retirement, first do an inventory of your current financial situation. This includes your income, savings, and investments, as well as your expenses and debts. That way you’ll know how much you have now.

Next, figure out what you want your retirement to look like. Are you wondering how to retire early? Do you plan to travel? Move to a different location? Pursue hobbies like tennis, golf, or biking? Go back to school? Start a business?

You may not be able to answer these questions quickly or easily, but it’s important to think about them to determine your retirement goals. Deciding what you want your lifestyle to look like is key because it will affect how much money you’ll need for retirement saving.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Determine How Much You’ll Need to Retire

Now the big question: How much money will it take for you to retire comfortably? You may also be wondering, when can I retire? There are several retirement savings formulas that can help you estimate the amount of your nest egg. And there are various calculators that can help generate an estimate as well.

While using a ballpark figure may not sound scientific, it’s a good exercise that can help lay the foundation for the amount you want to save. And it may inspire you to save more, or rethink your investment strategy thus far.

As an example, you can use the following basic formula to gauge the amount you might need to save, assuming your retirement expenses are similar to your present ones. Start with your current annual income, subtract your estimated annual Social Security benefits, and divide by 0.04.

Example

Let’s say your income today is $100,000, and you went on the Social Security website using your MySSA account (the digital dashboard for benefits) to find out what your monthly benefits are likely to be when you retire: $2,000 per month, or $24,000 per year.

$100,000 – $24,000 = $76,000 / 0.04 = $1.9 million

That’s the target amount of retirement savings you would need, theoretically, to cover your expenses based on current levels. Bear in mind, however, that you may not need to replace 100% of your current income, as your expenses in retirement could be lower. And you may even be contemplating working after retirement. But this is one way to start doing the math.

10 Ways to Save For Retirement

So, how to save money for retirement? Consider the following 10 options part of your retirement savings toolkit.

1. Leverage the Power of Time

Giving your money as much time to grow as you possibly can is one of the most important ways to boost retirement savings. The reason: Compounding returns.

Let’s say you invest $500 in a mutual fund in your retirement account, and in a year the fund gained 5%. Now you would have $525 (minus any investment or account fees). While there are no guarantees that the money would continue to gain 5% every year — investments can also lose money — historically, the average stock market return of the S&P 500 is about 10% per year.

That might mean 0% one year, 10% another year, 3% the year after, and so on. But over time your principal would likely continue to grow, and the earnings on that principal would also grow. That’s compound growth.

2. Create and Stick to a Budget

Another important step in saving for retirement is to create a budget and stick to it. Calculating your own monthly budget can be simple — just follow these steps.

• Gather your documents. Gather up all your bills including credit cards, loans, mortgage or rent, so that you can document every penny coming out of your pocket each month.

• List all of your income. Find your pay stubs and add up any extra cash you make on the side using your after-tax take-home pay.

• List all of your current savings. From here, you can see how far you have to go until you reach your retirement goals.

• Calculate your retirement spending. Decide how much money you need to live comfortably in retirement so that you can establish a retirement budget. If you’re unsure of what your ideal retirement number is, plug your numbers into the formula mentioned above, or use a retirement calculator to get a better idea of what your retirement budget will be.

• Adjust accordingly. Every few months take a look at your budget and make sure you’re staying on track. If a new bill comes up, an expensive life event occurs, or if you gain new income, adjust your budgets and keep saving what you can.

3. Take Advantage of Employer-Sponsored Retirement Plans

Preparing for retirement should begin the moment you start your first job — or any job that offers a company retirement plan. There are many advantages to contributing to a 401(k) program (if you work at a for-profit company) or a 403(b) plan (if you work for a nonprofit), or a 457(b) plan (if you work for the government).

In many cases, your employer can automatically deduct your contributions from your paycheck, so you don’t have to think about it. This can help you save more, effortlessly. And in some cases your employer may offer a matching contribution: e.g. up to 3% of the amount you save.

Starting a 401(k) savings program early in life can really add up in the future thanks to compound growth over time. In addition, starting earlier can help your portfolio weather changes in the market.

On the other hand, if you happen to start your retirement savings plan later in life, you can always take advantage of catch-up contributions that go beyond the 2025 annual contribution limit of $23,500 and the 2026 annual contribution limit of $24,500. Individuals 50 and older are allowed to contribute an additional $7,500 to a 401(k) in 2025 and $8,000 in 2026 to help them save a bit more before hitting retirement age. Those aged 60 to 63 may contribute an additional $11,250 in 2025 and 2026 (instead of $7,500 and $8,000, respectively) thanks to SECURE 2.0.

If you have a 403(b) retirement plan, it’s similar to a 401(k) in terms of the contribution limit and automatic deductions from your paycheck. Your employer may or may not match your contributions. However, the range of investment options you have to choose from may be more limited than those offered in a 401(k).

With a 457(b) plan, the contribution limit is similar to that of a 403(b). But employers don’t have to provide matching contributions for a 457(b) plan, and again, the investment options may be narrower than the options in a 401(k).

4. Add an Individual Retirement Account (IRA) to the Mix

Another strategy for how to save for retirement, especially if you’re one of the many freelancers or contract workers in the American workforce, is to open an IRA account.

Like a 401(k), an IRA allows you to put away money for your retirement. However, the maximum contribution you can put into your IRA caps at $7,000 ($8,000 for those 50 and older) in 2025, and $7,500 ($8,600 for those 50-plus) in 2026.

Both the traditional IRA and 401(k) offer tax-deductible contributions. Roth IRAs are another option: With a Roth IRA, your contributions are taxed, which means your withdrawals in retirement will be tax free.

You control your IRA, not a larger company, so you can decide which financial institution you want to go with, how much you want to contribute each month, how to invest your money, and if you want to go Roth or traditional.

For those who can afford to invest money in both an IRA and a 401(k), and who meet the necessary criteria, that’s also an option that can boost retirement savings.

5. Deal With Debt

Should you save for retirement or pay off debt? And, more specifically, if you’re dealing with student loans, you may be wondering, should I save for retirement or pay off student loans? That is a financial conundrum for modern times. A good solution to this problem is to do both.

Just as it can be helpful to create a budget and stick to it, it can be helpful to create a loan repayment plan as well. Add those payments to your monthly budgeting expenses and if you still have dollars left over after accounting for all your bills, start socking that away for retirement.

If your student loan debt feels out of control, as it does for many Americans, you may want to look into student loan refinancing. By refinancing your student loan, you could significantly lower your interest rate and potentially pay off your debt faster. Once the loan is paid off, you will be able to reallocate that money to save for retirement.

6. Add Income With a Side Hustle

Working a side gig in your spare time can seriously pay off in the future, especially when you consider that the average side hustle can bring in several hundred dollars a month, according to one survey.

There are several things to consider when thinking of adding an extra job to your résumé, including evaluating what you’re willing to give up in order to make time for more work. But, if you can put your skills to use — such as copy editing, photography, design, or consulting — you can think about this as less of a side hustle and more of a way to hone your client list.

A side hustle should be one way to save for retirement that you’ll enjoy doing. And it could help if you find yourself dealing with a higher cost of living and retirement at some point.

7. Consider Putting Your Money in the Market

There’s no one best way to save for retirement — sometimes a multi-pronged approach can work best. If you already have a budget and an emergency savings account, and you’re maxing out your contributions to your 401(k), 403(b), 457, or IRA, then investing in the market could be another way to diversify your portfolio and potentially help build your nest egg. For instance, historically, stocks have been proven to be one of the best ways to help build wealth.

Putting your money in the market means you’ll have a variety of options to choose from. There are stocks, of course, but also mutual funds, exchange-traded funds, and even real estate investment trusts (REITs), which pool investor assets to purchase or finance a portfolio of properties.

However, investing in any of these assets, and in the market in general, comes with risk. So you’ll want to keep that in mind as you choose what to invest in. Consider what your risk tolerance is, how much you’re investing, when you’ll need the money, and how you might diversify your portfolio. Carefully weighing your priorities, needs, and comfort level, can help you make informed selections.

Once you have your asset allocation, be sure to evaluate it, and possibly rebalance it, to stay in line with your goals each year.

8. Automate Your Savings

Setting up automated savings accounts takes the thought and effort out of saving your money because it happens automatically. It could also help you hit your financial goals faster, because you don’t have to decide to save (or agonize over giving in to a spending temptation) and then do the manual work of putting the money into an account. It just happens like clockwork.

Enrolling in a 401(k), 403(b), or 457 at work is one way to automate savings for retirement. Another way to do it is to set up direct deposit for your paychecks. You could even choose to have a portion of your pay deposited into a high-interest savings account to help increase your returns.

9. Downsize and Cut Costs

To help save more and spend less, pull out that monthly budget you created. When you look at your current bills vs. income, how much is left over for retirement savings? Are there areas you can be spending less, such as getting rid of an expensive gym membership or streaming service, dialing back your takeout habit, or shopping a bit less?

This is when you need to be very honest with yourself and decide what you’re willing to give up to help you hit that target retirement number. Finding little ways to save for retirement can have a big impact down the road.

10. Take Advantage of Catch-Up Contributions

If you’re getting closer to retirement and you haven’t started saving yet, it’s not too late! In fact, the government allows catch-up contributions for those age 50 and older.

A catch-up contribution is a contribution to a retirement savings account that is made beyond the regular contribution maximum. Catch-up contributions can be made on either a pre-tax or after-tax basis.

For 2025, catch-up contributions of up to $7,500 are permitted on a 401(k), 403(b), or 457(b). Those age 60 to 63 may contribute an additional $11,250 (instead of $7,500). For 2026, catch-up contributions of up to $8,000 are permitted; those age 60 to 63 may contribute an additional $11,250 (instead of $8,000).

Under a new law that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k), 403(b), or 457(b) catch-up contributions into a Roth account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.

💡 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.

Common Retirement Savings Mistakes to Avoid

These are some of the biggest retirement pitfalls to watch out for.

• Not having a retirement plan in place. Neglecting to make any kind of plan means you’ll likely be unprepared for retirement and won’t have enough money for your golden years.

• Failing to take advantage of employer-sponsored plans. If you haven’t enrolled in one of these plans, you’re potentially leaving free money on the table. Sign up for a 401(k), 403(b), or 457(b) to tap into employer-matching contributions, when available.

• Underestimating how much money you’ll need for retirement. Financial specialists typically advise having enough savings to last you for 25 to 30 years after you retire.

• Accumulating too much debt. Try to avoid taking on too much debt as you get closer to retirement. And work on paying down the debt you do have so you won’t be saddled with it when you retire.

• Taking Social Security too early. It’s possible to file for Social Security at age 62, but the longer you wait (up until age 70), the higher your benefit will be — approximately 32% higher, in fact.

The Takeaway

It’s never too early to start planning for retirement. And there are many ways to start saving, and set up a system so that you’re saving steadily over time. You can contribute to a retirement plan that your employer offers; you can set up your own retirement plan (e.g. an IRA); and you can choose your own investments.

The most important thing to remember is that you have more control than you think. While your retirement vision may change over time, starting to save and invest your nest egg now will give you a head start.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

What is the fastest way to save for retirement?

Take a two-pronged approach: First, invest as much as you can in your employer-sponsored retirement account like a 401(k). You’ll likely get some matching contributions from your employer, as well as tax advantages.

For 2025, the standard 401(k) contribution limit for employees is $23,500. Those age 50 to 59, or 64 or older, are able to contribute up to $31,000; those 60 to 63 are able to contribute up to $34,750.

For 2026, the standard 401(k) contribution limit for employees is $24,500. Those age 50 to 59, or 64 or older are able to contribute up to $32,500; those 60 to 63 are able to contribute up to $35,750.

Second, if you qualify, you can also set up and invest in a Roth IRA. For 2025, the Roth IRA contribution limit is $7,000 ($8,000 for those 50 and older). For 2026, the limit is $7,500 ($8,600 for those 50 and older). These limits may be further reduced based on your modified adjusted gross income (MAGI).

How much do I need to save for retirement?

To estimate how much you need to save for retirement, use this retirement savings formula: Start with your current income, subtract your estimated Social Security benefits, and divide by 0.04. That’s the approximate amount of total retirement savings you’ll need, based on your current income and expenses. You can try other calculators or formulas that might indicate that you’ll need less in retirement. It all depends.

Financial professionals typically advise having enough savings for 25 to 30 years’ worth of retirement.

How do I save for retirement without a 401(k)?

If you don’t have a 401(k), you can set up another type of tax-advantaged account for retirement, such as a traditional IRA and/or a Roth IRA. With a traditional IRA, the money grows tax free and is taxed when you withdraw it during retirement.

A Roth IRA, on the other hand, doesn’t provide a tax break up front, but the funds you withdraw after age 59 ½ are tax-free, as long as you’ve had the Roth IRA account for at least five years.

What is the average monthly income for a person who is retired?

The average monthly retirement income for a person who is retired, adjusted for inflation, is $4,381, according to a 2022 U.S. Census report.

How do taxes affect retirement income?

You will need to pay taxes on any withdrawals you make from tax-deferred investments like a 401(k) or traditional IRA. You will also have to pay federal taxes on a pension, if you have one. At the state level, some states tax pensions and some don’t. Additionally, you might have to pay tax on a portion of your Social Security benefits, depending on your overall income.

How can I supplement my income in retirement?

In addition to any retirement plans and pensions you have plus Social Security, you can supplement your retirement income with such strategies as: making investments generally considered to be safe, like investing in CDs (certificate of deposit), getting a part-time job or starting a small business, or renting out any additional property you might own, such as a vacation cabin, to make some extra money.

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.

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

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

SoFi Student Loan Refinance
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).

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Feb

2026

A woman in a striped top uses a tablet to check a digital calendar, perhaps tracking how student loans are disbursed.

What Is Student Loan Disbursement? Meaning & Common Questions

By Rochel Maday | Budgeting & Goals, Student Loans, student_loan | Comments Off

Table of Contents

The Lowdown on Student Loans
Types of Student Loans: Federal and Private
How Long Does It Take to Get Student Loans Disbursed?
How Are Student Loans Disbursed?
Common Student Loan Disbursement Issues
How to Track the Status of Your Student Loan Disbursement
Final Tips
FAQ

Student loans can be confusing, especially when it comes to how and when the money is actually released. Many borrowers expect funds to arrive all at once or directly in their bank account, only to discover the process works differently than anticipated.

Generally speaking, both federal and private student loans are disbursed directly to the school to pay for things like tuition, fees, and room and board. Keep reading to learn more on the disbursement timeline, who receives the funds first, and what happens to any remaining money after school charges are paid.

Key Points

• Student loans are typically disbursed directly to the educational institution to cover tuition, fees, and other costs.

• Any excess funds from the loan after covering direct educational costs are usually paid to the student.

• Disbursement generally occurs around the start of the academic semester.

• The exact timing of loan disbursement can vary based on the type of loan and the school’s financial aid policies.

• Students should consult their financial aid office for specific details about the disbursement schedule and process.

The Lowdown on Student Loans

Student loans are designed to help college students absorb the many costs of postsecondary education.

The average price of tuition for the 2025-26 school year is $11,950 for an in-state undergraduate student at a public college and $45,000 for a private college student, according to the College Board.

Because of this cost, many students rely on student loans to help pay for college. Student loans typically cover up to the cost of attendance, which may include:

• Tuition and fees

• Housing

• Meals

• Transportation

• Books and supplies

• Computers

A rule of thumb suggests that only required materials and needs can be paid for with a loan. When in doubt about whether an item can be purchased with student loan funding or not, it’s best to speak directly to the loan provider or college financial aid department.

And remember, student loan money is borrowed money and will have to be repaid, with interest.

Recommended: Are Student Loans Secured or Unsecured?

Types of Student Loans: Federal and Private

The two main types of student loans are federal student loans and private student loans. Federal loans are provided by the U.S. government, while private loans are issued by financial institutions. Federal student loans include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Direct Subsidized Federal Loan

A Direct Subsidized Loan is a federal student loan available to undergraduate students who demonstrate financial need. The U.S. Department of Education pays the interest while you’re enrolled at least half-time, during the grace period, and during approved deferment periods, helping keep overall borrowing costs lower.

Direct Unsubsidized Federal Loan

A Direct Unsubsidized Loan is a federal student loan available to undergraduate, graduate, and professional students, regardless of financial need. Interest begins accruing as soon as the loan is disbursed, including while you’re in school, during the grace period, and during deferment or forbearance.

Direct PLUS Loan

A Direct PLUS Loan is a federal student loan available to graduate or professional students and to parents of dependent undergraduate students. It requires a credit check, has higher interest rates than other federal loans, and interest begins accruing as soon as the loan is disbursed.

Under Trump’s One Big Beautiful Bill, no new Federal Direct PLUS Loans for graduate students will originate after July 1, 2026. Current borrowers who received a Grad PLUS loan before June 30, 2026 can continue borrowing under current terms through the 2028-29 academic year.

Direct Consolidated Loan

A Direct Consolidation Loan is a federal loan that combines multiple eligible federal student loans into a single loan with one monthly payment. It can simplify repayment and may extend the repayment term, but it does not lower the interest rate, which is a weighted average of the consolidated loans.

Recommended: Consolidate vs. Refinance Student Loans

Private Student Loan

Private student loans are education loans offered by banks, credit unions, and online lenders rather than the federal government. They can be used to cover gaps in college costs after scholarships, grants, and federal aid are applied. Interest rates may be fixed or variable and are based on the borrower’s credit history, income, and overall financial profile, often requiring a creditworthy cosigner for students.

Unlike federal student loans, private student loans do not offer standardized repayment plans or borrower protections set by law. Terms vary by lender and may include fewer options for deferment, forbearance, or loan forgiveness. Because of these differences, borrowers should carefully compare rates, fees, repayment terms, and flexibility before choosing a private loan.

How Long Does It Take to Get Student Loans Disbursed?

Disbursement is a term that describes when a loan is actually paid out. Disbursement timelines may vary depending on whether the loan is a federal or private student loan.

Federal Student Loan Disbursement

To get a federal student loan, interested students must fill out the Free Application for Federal Student Aid, otherwise known as the FAFSA®. Information provided on this form will be used to determine how much federal financial aid and what types a student will qualify for — including federal student loans.

Applications are typically reviewed within three days to three weeks of submission. Federal student loans are generally disbursed directly to the school at the start of each semester. Each school determines when they will pay out any leftover aid to use for additional living and educational expenses.

Private Student Loan Disbursement

The application for a private student loan will be conducted with the individual lender. Each lender will have its own policies for applications and approvals. Generally speaking, it may take between two and 10 weeks to process a private student loan.

Private student loans are also generally disbursed directly to your school. The disbursement date may be timed to the start of the school year, though, this may vary depending on when you apply for and are approved for a private student loan.

How Are Student Loans Disbursed?

Whether a student chooses to accept multiple federal loans, a private loan, or a combination of the two, the money is often distributed the same way. As briefly mentioned, the loan amount is sent directly to the attending school, where it is held in the student’s account before being applied to covered costs, including tuition, fees, and room and board.

When there is leftover money in a student’s account, the excess is paid directly to the student to be used for additional expenses. These payouts tend to take place once per term and vary by school. If students receive leftover funding, they can use it as they see fit or even begin to pay back the loan early.

Keep in mind that all universities have their own policies on loans and disbursement. Questions about how a specific school handles student loans should be directed to the financial aid office.

Overage funds tend to be awarded to the holder of the loan. If a student’s parents hold a loan with overage, they’re more likely to receive the leftover money.

Also, disbursements may be held for 30 days after the first day of enrollment, especially if the student is a freshman and first-time borrower, according to the Federal Student Aid office.

What Happens if Your Disbursement Is Delayed?

If your student loan disbursement is delayed, it can affect your ability to pay tuition, fees, housing, or other education expenses on time. Schools may place temporary holds on your account or assess late fees until funds arrive. In the meantime, you may need to contact your financial aid office, request a short-term payment extension, or use alternative funds while the issue is resolved.

Common Student Loan Disbursement Issues

It’s possible for issues to crop up that could impact your disbursement. These include:

• Missing application deadlines. Applying for a private student loan or filing the FAFSA too late could impact when your student loan is disbursed. To avoid any late disbursements, be sure to submit your FAFSA before state or school-specific deadlines.

• Making mistakes on the application. If there are errors on the FAFSA or a private student loan application, this could impact your approval or potentially delay the disbursement date as you fix errors and resubmit the application.

• Forgetting to complete entrance counseling for federal student loans. You must complete the entrance counseling required for federal student loans before they are disbursed. Be sure to read the terms of all loans closely and fill out all paperwork properly to ensure timely disbursement.

How to Track the Status of Your Student Loan Disbursement

You can track the status of your student loan disbursement by regularly checking your school’s student portal and your lender or loan servicer’s online account. These platforms typically show when funds are scheduled, processed, and applied to your balance. If information is unclear or delayed, contacting your financial aid office can help clarify timelines and resolve issues.

Final Tips

The world of student loans can be intimidating at first, but it’s not impossible to learn how to navigate the financial waters of postsecondary education. These final tips may help:

• Compare all options. It’s better to have too many loan options and turn some down than face uncertainty about how to pay for everything.

• Apply early. This ensures there’s time to make corrections if necessary. There are rules and requirements unique to all types of loans.

• Avoid overborrowing. Try to calculate overall expenses and keep loan amounts as close as possible to the estimate. Being approved for a large loan doesn’t mean the total amount has to be accepted.

• Get a part-time job. A part-time job may help to alleviate the stress that loan payments can add.

The Takeaway

Student loan disbursement is a critical step in the borrowing process, as it determines when and how your loan funds are delivered to cover education costs. Understanding the timing, method, and potential delays of disbursement can help you plan ahead, avoid surprises, and manage your finances more confidently throughout the school year.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Do student loans get deposited into your bank account?

Typically, student loans do not get deposited in your bank account. Instead, the loans are disbursed directly to the school, where they are applied to tuition payments and room and board. If there is any money leftover after paying for tuition, the money will then be distributed to the student. These payouts tend to take place once per term and vary by school.

How long do student loans take to deposit?

After applying through the FAFSA, it may take up to 10 days to find out what types of aid — including student loans — you are eligible for. If approved for a federal student loan, this money will be disbursed directly to the school. Typically, this will happen within the first 30 days of the start of term.

What does disbursement mean?

Disbursement is when the loan amount is paid out to the borrower. In the case of student loans, the loan is typically disbursed directly to the student borrower’s school.

Can you use a student loan to pay a tuition bill that is past due?

Yes, you can use a private student loan to pay off an outstanding tuition balance. Each lender determines how far in the past a loan can be used to pay an overdue balance, but many will allow loans to cover past-due balances that are six to 12 months outstanding.

Can I use leftover student loan money for personal expenses?

Yes, leftover student loan funds can be used for approved education-related expenses, such as housing, food, transportation, books, and supplies. However, they should not be used for nonessential or luxury purchases. Using excess funds responsibly can help cover living costs while minimizing unnecessary debt.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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.

SOISL-Q126-014

Jan

2026

How to Pay for Grad School

By Kayla McCormack | Budgeting & Goals, Fresh Out of School, Student Loans, student_loan | No Comments

Table of Contents

Ways to Pay for Grad School Without Taking on Debt
How to Pay for Grad School With Student Loans
Steps to Take Before Applying to Graduate School
The Takeaway

Students who graduate with a master’s degree carry an average debt of $69,140, according to the Education Data Initiative. Fortunately, there are many ways to pay for grad school, including options that don’t require borrowing.

Keep reading to learn more on how to pay for grad school in 2025, including how to take out graduate student loans, how to qualify for scholarships and grants, and other ways to reduce your total tuition.

Key Points

• When it comes to financing grad school, filling out the Free Application for Federal Student Aid (FAFSA) is required to determine eligibility for federal financial assistance, including grants and loans.

• Investigate grants, scholarships, and fellowships offered by your chosen university’s financial aid office, as these can significantly reduce tuition costs.

• Some employers provide tuition reimbursement programs to support employees pursuing further education. Review your company’s policies to see if this benefit is available.

• Seek out scholarships and grants from private organizations, nonprofits, and government agencies, which can provide additional funding without the need for repayment.

• After exhausting grants and scholarships, explore federal student loans, which often have favorable terms. If additional funding is needed, private student loans are also an option, though they may come with higher interest rates.

Ways to Pay for Grad School Without Taking on Debt

You can pay for grad school without taking on debt by filling out the FAFSA, applying for scholarships and grants, or working for an employer who offers tuition reimbursement. Continue reading for even more strategies to pay for grad school without taking on debt.

1. Fill Out the FAFSA

The first step to seeing if you qualify for financial aid is to fill out the Free Application for Federal Student Aid, or FAFSA®.

Your FAFSA will determine your eligibility for federal student loans, federal work-study, and federal grants. In addition, your college may use your FAFSA to determine your eligibility for aid from the school itself. Here’s a closer look at federal grants and federal work-study programs.

Federal Grants

Unlike student loans, federal grants do not need to be repaid. Grants for college for grad students include TEACH Grants and Fulbright Grants.

The TEACH Grant, or Teacher Education Assistance for College and Higher Education Grant, has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduating.

The Fulbright Grant offers funding for international educational exchanges. Sponsored by the U.S. government, it supports students, scholars, teachers, and professionals to study, research, or teach abroad.

Federal Work-Study Program

Federal work-study for grad students provides part-time jobs to help cover educational expenses. These positions are often related to a student’s field of study or serve the community. Eligibility is based on financial need, and earnings are exempt from being counted as income on the FAFSA, maximizing financial aid opportunities.

2. Figure Out What Your University Can Offer You

After narrowing down your federal options, make sure to consider what university-specific funding might be available. Many schools offer their own grants, scholarships, and fellowships. Your school’s financial aid office likely has a specific program or contact person for graduate students who are applying for institutional assistance.

Many schools will use the FAFSA to determine what, if anything, the school can offer you, but some schools use their own applications.

Although another deadline is the last thing you need, seeking out and applying for school-specific aid can be one of the most successful ways to pay for grad school. Awards can range from a small grant to full tuition remission.

3. Employer Tuition Reimbursement

It might sound too good to be true, but some employers are happy to reimburse employees for a portion of their grad school costs. Employers that have tuition reimbursement plans set their own requirements and application processes.

Make sure to consider any constraints your employer puts on their tuition reimbursement program, including things like staying at the company for a certain number of years after graduation or only funding certain types of degree programs.

4. Become an In-State Resident

If you’re applying for graduate school after taking a few years off to work, you might be surprised to find how costs have changed since your undergraduate days. Graduate students interested in a public university can save tens of thousands of dollars by considering a university in the state they already live in.

Each state has different requirements for determining residency. If you are planning on relocating to attend grad school, be sure to look into the requirements for the state of the school you are planning to attend.

Certain states require only one year of full-time residency before you can qualify for in-state tuition, while others require three years. During that time, you could work as much as possible to save money for graduate school. More savings could mean fewer loans.

Recommended: 6 Ways to Save Money for Grad School

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.

5. Become a Resident Advisor (RA)

Resident Advisors (RAs) help you get settled into your dorm room, show you how to get to the nearest dining hall, and yell at you for breaking quiet hours.

RAs may be underappreciated, but they’re often compensated handsomely for their duties. Students are typically compensated for a portion or all of their room and board, and some schools may even include a meal plan, reduced tuition, or a stipend. The compensation you receive will depend on the school you are attending, so check with your residential life office to see what the current RA salary is at your school.

Serious savings. Save thousands of dollars

thanks to flexible terms and low fixed or variable rates.

6. Find a Teaching Assistant Position

If you’re a graduate student, you can often find a position as a Teaching Assistant (TA) or Research Assistant (RA) for a professor. The position will be related to your undergrad or graduate studies and often requires grading papers, conducting research, organizing labs, or prepping for class.

TAs can be paid with a stipend or through reduced tuition, depending on which school you attend. Not only can the job help you to potentially avoid student loans, but it also gives you networking experience with people in your field.

The professor you work with can recommend you for a job, bring you to conferences, and serve as a reference. Being a TA may help boost your resume, especially if you apply for a Ph.D. program or want to be a professor someday. According to ZipRecruiter, the average TA earns $15.66 an hour, as of November 2025.

Recommended: How to Become a Graduate Assistant

7. Apply for Grants and Scholarships

Applying for grants and graduate scholarships is a smart way to fund graduate school without accumulating debt. Start by researching opportunities specific to your field, school, or demographics. Many scholarships focus on academic achievements, leadership, or community involvement, while grants often emphasize financial need.

An easy way to search for scholarships is through one of the many websites that gather and tag scholarships by criteria. Keeping all your grad school and FAFSA materials handy means that you’ll have easy access to the information you’ll need for scholarship applications.

8. Utilize Military Education Benefits (If Eligible)

Military education benefits can significantly reduce or even eliminate the cost of graduate school for qualifying service members, veterans, and sometimes their families. Programs like the GI Bill® and the Yellow Ribbon Program can cover tuition, fees, and even housing costs at many institutions. Additionally, some branches offer tuition assistance while on active duty, enabling students to pursue advanced degrees with little to no out-of-pocket expenses.

How to Pay for Grad School With Student Loans

Grad students may rely on a combination of financing to pay for their education. Student loans are often a part of this plan. Like undergraduate loans, graduate students have both federal and private student loan options available to them.

Federal Loans for Graduate School

There are different types of federal student loans, and each type has varying eligibility requirements and maximum borrowing amounts. Graduate students may be eligible for the following types of federal student loans:

• Direct Unsubsidized Loans. Eligibility for this loan type is not based on financial need.

• Direct PLUS Loans. Eligibility for this loan type is not based on financial need; however, a credit check is required to qualify for this type of loan. As of July 1, 2026, Grad PLUS Loans will no longer be available (Parent PLUS Loans will still be available, however).

• Direct Consolidation Loans. This is a type of loan that allows you to combine your existing federal loans into a single federal loan.

Federal Student Loan Forgiveness Programs

Federal student loan forgiveness programs either assist with monthly loan payments or can discharge a remaining federal student loan balance after a certain number of qualifying payments.

One such program is the Public Service Loan Forgiveness (or PSLF) program. The PSLF program allows qualifying federal student loan borrowers who work in certain public interest fields to discharge their loans after 120 monthly, on-time, qualifying payments.

Additionally, some employers offer loan repayment assistance to help with high monthly payments. While loan forgiveness programs don’t help with the upfront cost of paying for grad school, they may offer a meaningful solution for federal student loan repayment. (Unfortunately, private student loans don’t qualify for these federal programs.)

Private Loans for Graduate School

If you’re not eligible for scholarships or grants, or you’ve maxed out how much you can borrow using federal student loans, you can apply for a private graduate student loan to help cover the cost of grad school.

Private loan interest rates and terms will vary by lender, and some private loans have variable interest rates, which means they can fluctuate over time. Doing your research with any private lender you’re considering is worth it to ensure you know exactly what a loan with them would look like.

Also, keep in mind that private student loans do not offer the same benefits and protections as federal student loans. It’s best to use all federal funding first before relying on private funding.

Comparing Federal vs. Private Loan Options

Understanding the differences between federal vs private student loans is important when considering grad school loans. Each option offers unique benefits, eligibility rules, and repayment features that can impact long-term costs.

• Federal loans: These loans are funded by the government and typically offer more borrower protections, such as fixed interest rates, income-driven repayment plans, and potential for deferment, forbearance, or loan forgiveness programs. They usually don’t require a cosigner and are often based on financial need.

• Private loans: Offered by banks, credit unions, and other private lenders, these loans often have variable interest rates that can be higher than federal loans. They usually require a strong credit history or a cosigner, and their repayment terms and borrower benefits are generally less flexible than federal options.

Recommended: Private Medical School Loans

Steps to Take Before Applying to Graduate School

Before applying to graduate school, it’s important to consider the earning potential offered by the degree in comparison to the cost. At the end of the day, only you can decide if pursuing a specific graduate degree is worth it. Here are a few steps to take before applying to grad school.

1. Research Potential Earnings by Degree

Perhaps you are already committed to one degree path, like getting your JD to become a lawyer. In that case, you should have a good idea of what the earning potential could be post-graduation.

If you’re considering a few different graduate degrees, weigh the cost of the degree in contrast to the earning potential for that career path. This could help you weigh which program offers the best return.

2. Complete the FAFSA

Regardless of the educational path you choose, filling out the FAFSA is a smart move. It’s completely free to fill out and you may qualify for aid including grants, work-study, or federal student loans. Federal loans have benefits and protections not offered to private loans, so they are generally prioritized first.

3. Estimate Your Cost of Attendance

Estimating your cost of attendance will help you understand the full financial commitment beyond just tuition. This estimate should include fees, textbooks, housing, transportation, and personal expenses, as well as potential increases in tuition over time. By creating a detailed budget upfront, you can compare programs more accurately, anticipate funding needs, and avoid surprises once you enroll.

4. Explore Financing Options

As mentioned, you may need to rely on a combination of financing options to pay for grad school. When scholarships, grants, and federal student loans aren’t enough, private loans can help you fill in the gaps.

When comparing private lenders, be sure to review the loan terms closely — including factors like the interest rate, whether the loan is fixed or variable, and any other fees. Review a lender’s customer service reputation and any other benefits they may offer, too.

The Takeaway

Grad school is a big investment in your education, but the good news is there are grants and scholarships that you won’t have to pay back. Some employers may also offer tuition reimbursement benefits, or you could find work as a Resident Advisor to supplement your tuition costs. If you need more funding to finance grad school, there are federal and private student loans.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Does FAFSA give money for grad school?

FAFSA provides access to federal financial aid for graduate school, including Direct Unsubsidized Loans and Grad PLUS Loans (through July 1, 2026). Graduate students may not qualify for federal grants but can explore assistantships, scholarships, and work-study opportunities through FAFSA to help cover their educational expenses.

Does Pell Grant cover a master’s degree?

No, the Pell Grant does not cover master’s degree programs. It is a federal grant specifically designed for undergraduate students with financial need. Graduate students must explore other funding options like scholarships, assistantships, and federal loans to finance their education.

Is it worth paying for grad school?

Paying for grad school can be worth it if the degree significantly boosts your career prospects, earning potential, or personal goals. Consider the return on investment, including salary increases and opportunities. Research funding options and weigh potential debt against long-term benefits to determine if grad school aligns with your financial future.

What are the best student loans for graduate school?

The best student loans for graduate school often start with federal options, like Direct Unsubsidized Loans, because they offer fixed rates, borrower protections, and forgiveness eligibility. Private student loans can be a good alternative for borrowers with strong credit who may qualify for lower interest rates and flexible terms.

Can I get scholarships for graduate school?

Yes, you can get scholarships for graduate school. Many universities, private organizations, professional associations, and foundations offer merit-based, need-based, and field-specific awards. You can apply before or during your program, and using scholarship databases or your school’s financial aid office can help you find opportunities that match your background and goals.

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

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

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOISL-Q425-047

Jan

2026

What Is a Debt Repayment Plan?

By Julia Califano | Debt Payoff, personal_loan | No Comments

Debt can feel like a pair of handcuffs, keeping you from doing what you want to do and adding stress to your life. To pay it all off and get yourself free takes focus, work, and patience. The right debt reduction plan can help you start paying down your balances, stay on track with your budget, and work towards your future financial goals. Here are some options to get you started.

Table of Contents

How Does a Debt Reduction Plan Work?
Pros and Cons of Debt Repayment Plans
How to Create a Debt Repayment Plan
The Takeaway

Key Points

• A debt repayment plan is a strategy to systematically pay off debts, aiming to reduce financial stress and achieve debt freedom.

• To find more funds for debt repayment, assess your current spending and look for places to cut back.

• Listing all debts, including balances, interest rates, and minimum payments, can help your identify the best payoff plan.

• Consider a DIY repayment plan (like snowball or avalanche), negotiating with creditors, credit counseling, or debt consolidation.

• Regularly track progress and adjust the plan to stay on track.

• Borrowers can often save on interest by sweeping their credit card debt into a lower rate personal loan.

How Does a Debt Reduction Plan Work?

A debt repayment plan is a structured strategy for paying off debts over time. Whether you’re dealing with credit card balances, student loans, or medical bills, a repayment plan helps you systematically tackle your obligations. The primary goal is to regain control of your finances, reduce financial stress, and ultimately become debt-free.

Debt repayment plans can vary widely depending on individual circumstances. In some cases, a debt repayment plan might include negotiating lower interest rates, consolidating debts into a single loan (such as a personal loan), or even working with a credit counseling agency to create a structured program with lower fees. These steps can help you pay off your debt faster and reduce the total amount of interest you pay over time.

Ultimately, a debt reduction plan is about making consistent progress. Even small monthly improvements can lead to significant financial relief over time.

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Pros and Cons of Debt Repayment Plans

As with most financial choices, debt repayment plans come with both benefits and risks. Here are some potential pros and cons to keep in mind as you weigh your repayment options.

Pros

• Improved financial organization: A debt repayment plan allows you to clearly see what you owe, how much interest you’re paying, and what your monthly commitments are. This clarity makes it easier to budget and avoid missing payments.

• Reduced financial stress: Having a clear plan can reduce anxiety about money. Instead of feeling overwhelmed, you’ll have a roadmap to follow and milestones to celebrate along the way.

• Potentially lower costs: Depending on the debt payoff strategy or assistance program you use, a repayment plan might help reduce your interest rates, consolidate debt into a lower-interest loan, or eliminate late fees and penalties.

• Faster debt elimination: If you’re able to lower your interest rates or step up your monthly payments, you may be able to significantly reduce your repayment timeline.

• May help build credit: Making on-time payments consistently and reducing your credit utilization ratio can have a positive impact on your credit profile.

Cons

• Requires discipline and commitment: A debt repayment plan isn’t a quick fix. It requires you to stick to your budget, avoid new debts, and stay motivated, sometimes for months or even years.

• Might include fees or restrictions: If you enroll in a third-party repayment program, such as through a credit counseling agency, you may be subject to administrative fees or restrictions on using your credit cards.

• Impact on lifestyle: To allocate more money toward debt, you may need to reduce discretionary spending, which could mean fewer luxuries, trips, or nice dinners out.

• Not a one-size-fits-all solution: What works for one person might not work for another. A plan that focuses on high-interest debts might be frustrating for someone who needs quick wins to stay motivated.

How to Create a Debt Repayment Plan

Creating a debt repayment plan starts with assessing your current financial situation and making intentional choices. These tips can help you start — and stick with — a program.

Prioritize Expenses

A good first step is to assess your current cash flow — what’s coming in and what’s going out. You can do this by gathering the last few months of financial statements and using them to assess your average monthly income and spending.

If your income doesn’t cover all your expenses and debts, you’ll want to find areas to cut back. Dining out, subscription services, and nonessential shopping are common places to start. Any money you free up can then be funneled toward debt repayment.

Next, list all your debts, including:

• The total balance

• The interest rate

• The minimum monthly payment

This will help you decide which repayment method to follow.

Consider a DIY Plan

Some ways to tackle high-interest debt on your own include:

• The debt snowball method: With this approach, you funnel extra payments to the debt with the smallest balance, while paying the minimum on the rest. Once that debt is paid off, you direct the extra money towards the next-smallest balance, and so on. This approach can boost motivation by offering quick psychological wins.

• The debt avalanche method: Here, you make extra payments on the debt with the highest interest rate, while paying the minimum on the rest. When that debt is paid off, you target the debt with the next-highest rate, and so on. This method can save money long-term.

Negotiate With Creditors

If you’re really struggling to make your debt payments, consider reaching out to your creditors and explaining your situation. They may be willing to offer relief, such as reducing interest rates, pausing payments, or extending loan terms. Keep in mind that some of these options may increase costs in the long run and/or impact your credit.

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Another option is to work with a nonprofit credit counseling agency. For a small fee, they will negotiate with your creditors on your behalf and set up a debt management plan. This typically involves closing your credit accounts and making one monthly payment to the agency; the agency distributes payments to your creditors.

Use Personal Loans

Another debt payoff strategy you might consider is refinancing your debt. This involves taking out a personal loan (often called a debt consolidation loan) and using it to pay off your balances. Personal loans typically have lower interest rates than credit cards, so this option could reduce costs. It can also simplify repayment by rolling multiple monthly payments into one.

If you’re interested in exploring this option, see if you can prequalify for debt consolidation loans online. This will give you an idea of what rate you are likely to qualify for and only involves a soft credit pull, which won’t impact your credit. You can then run the numbers using a debt consolidation calculator to see how much you could potentially save.

💡 Quick Tip: There is a lot of debate around credit card interest caps. For consumers carrying high-interest credit card balances, however, one of the shortest paths to debt relief is switching to a lower-interest personal loan. With a SoFi credit card consolidation loan, every payment brings you closer to financial freedom.

Tracking Progress and Staying Motivated

Debt repayment is a marathon, not a sprint. To avoid burnout, it’s important to track your progress and celebrate small wins. These strategies can help:

• Use budgeting apps or spreadsheets to track balances and payment history.

• Set mini-goals, such as paying off one credit card or reducing your total debt by 10%.

• Visualize your progress with debt payoff charts or graphs.

• Reward yourself when you hit milestones — just make sure rewards don’t derail your plan financially.

Accountability also helps. Consider sharing your goals with a trusted friend or join online communities focused on debt-free living. Knowing others are on the same journey can keep you going.

Adjusting Your Plan as Changes Occur

Life is unpredictable. Job changes, unexpected expenses, or even positive developments like getting a raise can all affect your debt repayment plan.

It’s important to check in with your budget regularly (say, monthly or quarterly) and adjust as needed. If your income increases, consider allocating more to your debt payments. If expenses rise or emergencies come up, you may need to pause or reevaluate your plan.

Flexibility doesn’t mean failure. The key is to stay engaged with your finances and continue working toward your goal, even if the timeline shifts.

The Takeaway

Having a debt reduction plan can help you pay off the money you owe and feel less stressed about your finances. By understanding how debt repayment works, weighing the pros and cons, and following a structured plan tailored to your situation, you can make steady progress toward becoming debt-free.

Whether you’re starting small with the snowball method, consolidating debts with a personal loan, or simply prioritizing consistent payments each month, the most important step is getting started. Success is within reach — you just need a clear plan and the commitment to follow through.

Credit cards have an average APR of 20%–25%, and your balance can sit for years with almost no principal reduction. Personal loan interest rates average 12%, with a guaranteed payoff date in 2 to 7 years. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. See your rate in minutes.

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FAQ

How can I make a debt reduction plan?

To make a debt reduction plan, start by listing all your debts, including balances, interest rates, and minimum payments. Next, choose a repayment strategy, such as the debt snowball (paying off smallest debts first) or debt avalanche (tackling highest-interest debts first). It’s also important to adjust your budget to free up money for extra debt payments. For best results, avoid taking on new debt and track your progress monthly. Alternatively, you can work with a credit counselor for guidance and support.

Can I create my own debt reduction plan?

Yes, you can create your own debt reduction plan. Begin by organizing your debts and choosing a repayment strategy that suits your financial situation, such as the snowball or avalanche method. Next, develop a monthly budget to ensure you’re spending less than you earn, allowing extra money to go toward debt. Set milestones to stay motivated and regularly track your progress. With discipline and planning, a DIY approach can be both effective and empowering.

Is debt relief a good idea?

It depends on your situation and the debt relief program you use. Nonprofit credit counseling agencies offer debt management plans for a low fee that allow you to pay your debt in full, but often at a reduced interest rate or with fees waived. Just keep in mind that you’ll likely have to live without credit until you complete the plan.
When looking for debt relief, be wary of for-profit debt settlement companies that charge high fees or make unrealistic promises.

What’s the difference between debt reduction and debt consolidation?

Debt reduction involves lowering the total amount you owe, often through negotiation, settlements, or bankruptcy. It’s typically used when you’re unable to pay your debts in full. Debt consolidation, on the other hand, combines multiple debts into one new loan (ideally with a lower interest rate) making repayment more manageable. Consolidation doesn’t reduce your total debt but can simplify payments and save money on interest. Choosing between the two depends on your financial goals and ability to repay.

How long does it take to pay off debt with a structured plan?

The time it takes to pay off debt with a structured plan varies based on your total debt, repayment strategy, and how much extra you can pay monthly. Using a formal debt management plan offered by a credit counseling agency, many people become debt-free in two to five years. Larger debts may take longer, especially if you’re only making minimum payments.

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.

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 .

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