Oct
24
2023
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How Is Income-Driven Repayment Calculated?

By | Building Your Career, Fresh Out of School, Student Loans | No Comments
Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

After graduation and your six-month federal student loan grace period, it’ll be time to start paying your dues. If you are on the Standard Repayment Plan, you’ll pay at least $50 a month for 10 years. But there are other ways to pay back your student loans: through income-driven repayment plans.

Not all of these plans have the same repayment strategy, and not all federal loans qualify for income-driven repayment. We’ll help you find the one that aligns with your financial situation before you commit.

How Does Income-Driven Repayment Work?

The U.S. Department of Education offers four income-driven repayment (IDR) plans for holders of federal student loans:

•   Income-Based Repayment (IBR)

•   Income-Contingent Repayment (ICR)

•   Pay As You Earn (PAYE) Plan

•   Saving on a Valuable Education (SAVE) Plan

For most IDR plans, your monthly payment is calculated as a portion of your discretionary income. The Department of Education defines discretionary income as your adjusted gross income in excess of a protected amount.

Discretionary income under the SAVE Plan, for example, is any adjusted gross income you have above 225% of the federal poverty guideline appropriate to your family size. You’ll have a $0 monthly payment under the SAVE Plan if your annual income doesn’t exceed the protected amount of $32,805 for a single borrower and $67,500 for a family of four in 2023.

If you don’t qualify for a $0 monthly payment on the SAVE Plan, your monthly payment beginning in July 2024 will be set at 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average if you have both.

On the IBR plan, your monthly payment is typically set at 10% to 15% of your discretionary income above 150% of the federal poverty guideline appropriate to your family size. But unlike the SAVE Plan, a borrower’s monthly payment on the IBR plan will never be more than what you would have paid through the Standard Repayment Plan.

IDR Loan Forgiveness

All federal IDR plans can end with your remaining loan balance being forgiven after 20 or 25 years, but some borrowers may receive forgiveness sooner under the SAVE Plan. Beginning in July 2024, federal student loan borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments on the SAVE Plan.

For more details on federal IDR debt relief benefits, check out our Guide to Student Loan Forgiveness.

Your personal circumstances and goals may dictate which student loan repayment plan is right for you. You can estimate how much your monthly payments will be through the federal Loan Simulator calculator.

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The Difference Between Income-Driven Repayment Plans

Deciding which IDR plan is right for you (and that you may qualify for) depends on your financial situation and your loan type(s). Here’s what they all mean:

•   IBR (Income-Based Repayment). This plan is based on your income and family size. The potential IBR payment must be less than what you would pay under the Standard Repayment Plan to qualify. Any remaining balance is forgiven after 20 or 25 years.

•   ICR (Income-Contingent Repayment). Under this plan, your monthly payment is adjusted based on your income (sometimes set at 20% of your discretionary income above 100% of the federal poverty guideline appropriate to your family size). It might not lower your payments as much as other plans, but it’s the only IDR plan that allows Parent PLUS Loans. Any remaining balance is forgiven after 25 years.

•   PAYE (Pay As You Earn). With this plan, you’ll never pay more than the fixed Standard Repayment Plan amount. Payments are typically set at 10% of your discretionary income above 150% of the federal poverty guideline appropriate to your family size. Any remaining balance after 20 years of payments is forgiven.

•   SAVE (Saving on a Valuable Education). This IDR plan replaced the former REPAYE Plan. Anyone with qualifying student loans can enroll into the SAVE Plan. However, you could end up paying more per month under this plan than the Standard Repayment Plan. You’ll have a $0 monthly payment under the SAVE Plan if your annual income falls below 225% of the federal poverty guideline appropriate to your family size.

Alternatives to Income-Driven Repayment Plans

The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1, 2023, and payments to resume in October 2023.

Aside from the Standard Repayment Plan, there are a few options to consider instead of IDR:

Consolidation

If you have federal student loans, you can get a Direct Consolidation Loan. This will move all your eligible federal student loans into one monthly payment. Your new interest rate is the weighted average of all your loans, rounded up to the nearest eighth of a percent.

This can be helpful if you have many smaller loans that each have a minimum monthly payment. It typically won’t lower your monthly payment, however, but it can make it manageable and easier to keep track of. Only federal loans are eligible for a Direct Consolidation Loan.

Refinancing

Refinancing is similar to consolidation. You get one loan to replace all of your other loans, but it’s a new loan with a new interest rate from a private lender or bank. Your credit report and other personal financial factors are considered to see if you’re a responsible borrower. If you previously had a co-borrower, such as a parent, you can look into refinancing without a cosigner.

Many lenders allow you to refinance all of your student loans, not just federal student loans. So if you have a mix of private student loans and federal student loans, refinancing will create one new loan with one payment to replace them.

If you qualify for a lower interest rate and a shorter term, it could reduce the amount of money paid in interest over the life of the loan. You may pay more interest over the life of the loan if you refinance with an extended term. You can explore different scenarios with our Student Loan Refinance Calculator.

You may ask, “Should I refinance my federal student loans?” Refinancing federal student loans with a private lender forfeits your access to Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, and federal IDR plans. You can weigh the pros and cons when determining whether student loan refinancing is right for you.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

How Do You Calculate Income for an Income-Driven Plan?

The Department of Education considers three different components when calculating a borrower’s income. While this may seem needlessly complicated, it actually benefits borrowers:

Annual Income

Any income that’s taxable counts toward the Education Department’s calculation. That means regular wages, plus interest and dividends from savings and investments, unemployment benefits, etc. On the flip side, any income that isn’t taxed doesn’t count: gifts and inheritances, cash rebates from retailers, child support payments, and so on.

Spouse’s Income

If you and your spouse file a joint tax return, then their income must also be factored in. If you file separately, only your income counts.

Family Size

Your family size is the number of people who live with you and receive more than half their support from you. This includes children but also dependent adults, such as an older parent.

The Takeaway

There are four income-driven repayment plans for federal student loan holders, including IBR, ICR, PAYE, and SAVE. No new PAYE enrollments will occur after July 1, 2024, although current PAYE enrollees can remain on the plan after that date.

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
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

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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Oct
20
2023
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Smarter Ways to Get a Car Loan

By | Life & Career, personal_loan | No Comments

For most of us, a car is the second biggest purchase we’ll make, next to a home. The average price of a new car in July 2022 was $48,182, according to Kelley Blue Book®, up 12% over last year. But sticker price isn’t the only thing to consider when budgeting for new wheels. There’s also insurance, maintenance, gas, and depreciation.

Depreciation may not be front of mind for many car buyers. But in fact it’s a major factor in determining how to finance a new car. We’ll explain why, review different loan options, and recommend steps you can take to help you get a great deal.

How To Assess the Value of a Car

You may already know what you want in a new car: the gas mileage, capacity, features. Just as important, you know what you can afford. Or do you? Before heading to a dealership, you’ll want to extensively research the cars you’re interested in.

Once you have an idea of the makes and models you want to test drive, there are a number of services that can offer a baseline estimate for the car’s worth. Edmunds offers a True Market Value (TMV®) guide; Kelley Blue Book provides suggested price ranges based on things like year, model, condition, and mileage (particularly useful for used cars). The National Automobile Dealers Association’s guide focuses on dealers’ sticker prices, and Consumer Reports provides detailed reviews and reports about specific cars.

None of these resources will necessarily tell you the exact price you’ll get, but they can give you some context. It may be helpful to look at listed prices for similar cars in your area. You can even call around for price quotes from dealerships and private sellers, so you’re better equipped by the time you walk onto the car lot.

Got a car to trade in? Here’s how to find out how much your car is worth.

How the Value of Your Car Changes Over Time

A car’s value changes almost from the moment you purchase it: This is called depreciation. Generally, the cost of depreciation is spread over a five-year period. A new car can lose, on average, 60% of its value in the first five years, or about 12% each year.

Some models depreciate more than others. For instance, cars typically depreciate faster than trucks, and midsize cars depreciate more quickly than smaller cars. It’s smart to research the projected depreciation on the makes and models you’re interested in. Lower depreciation could become a deciding factor when all else is equal.

Recommended: SoFi’s Personal Loan Calculator

Car Financing Options

One of the biggest car-related costs is the loan itself. Car loans can come either from a traditional bank or through a dealership. Here are a few car financing options:

Car Loan

Car loans can be offered directly from a bank or online lender, or can be arranged through the car dealer. The average five-year (60-month) loan for a new car had a 4.07% interest rate in 2022, and the average loan amount was $39,340. A strong credit score, along with a solid financial history, can help borrowers qualify for a competitive interest rate. Learn how to check out your credit score for free.

Car loans are “secured” by the car, which means that the car is used as collateral on the loan. Until it’s paid off in full, you don’t own the car outright. So if you default, the lender can seize the car. The qualification process can also be difficult because banks must verify the collateral (think: more paperwork).

Dealer-Arranged Financing

When getting a loan through the dealership, the dealer typically collects your information and takes it to prospective lenders to find you a financing offer. Car dealerships are good at helping customers get a car loan quickly, sometimes even without great credit. You may be able to sign a loan and drive off in your new car the same day.

Auto Loan from a Private Lender

Banks, on the other hand, may offer more competitive interest rates or more favorable terms when applying with them directly. However, the application process can be more involved and take longer. Usually, borrowers getting financing from a bank or credit union will get pre-approved for a car loan prior to heading to the dealer.

Personal Loan

Another option is to skip car loans entirely and take out an unsecured personal loan. Common uses for personal loans include home repairs, debt consolidation, and other large purchases. On the flip side, a car loan can only be used to pay for a car.

Usually, buying a car with a personal loan is not the best course of action. But there are rare circumstances where it may make sense, such as if you plan on restoring an old car as a passion project. Cars in need of repair can be difficult to finance with a traditional auto loan.

For most car buyers, however, interest rates on any type of personal loan are typically higher than on car loans. Another thing to consider is the repayment period. In general, car loans extend over seven years, whereas a personal loan is repaid in three to five years.

Getting your personal loan approved can take time, but pre-qualification is available. Many people get pre-qualified before going into the dealership, so they have an idea of how much buying power they have.

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Strategies for Getting a Car Loan

As you look for a car loan that meets your needs, here are some strategies that can help.

Do Some Research

Before heading to the dealer, shop around for loans to see the interest rates and terms you may qualify for. Lenders review factors like a borrower’s credit score and financial history to inform their borrowing decisions. So part of your research will go into understanding (and maybe boosting) your credit score.

Recommended: What Credit Score Do You Need to Buy a Car

Prepare a Down Payment

A larger down payment can save you money on your loan. Down payments reduce the amount you have to borrow, which reduces what you spend on interest over time. Trading in a vehicle of substantial value accomplishes the same thing, while reducing the down payment you need to put up.

A higher down payment is helpful for another reason: It’ll help you avoid a situation down the road where, due to depreciation, the balance of your loan is greater than the value of your car. This is variously called negative equity, being underwater, or an upside-down loan. To avoid this situation, run the numbers to make sure your down payment (or trade-in) is high enough to offset the expected depreciation on your vehicle.

That said, negative equity isn’t usually a bad thing. It only becomes a problem if your car is stolen or totaled, and the payout from your insurance company isn’t enough to pay off your loan balance. (Gap insurance is designed to cover your remaining debt.) Some drivers are comfortable with being upside-down for a short period, while others prefer not to take a chance.

Consider Getting Pre-qualified for a Loan

Getting pre-qualified for a car loan helps the borrower understand what kind of car payment they can afford. Pre-qualification can also be used as a tool in negotiations with the dealer. In some cases, the dealer may be willing to offer a more competitive financing option.

Just keep in mind that pre-qualification isn’t a done deal: The loan offer is still subject to change.

The Takeaway

For many people, buying a car outright with cash isn’t an option. With an auto loan, the car acts as collateral to secure the loan. A higher down payment can save you money on interest over the life of the loan. It can also help you avoid “negative equity” down the road — where the value of the car is less than the balance of your loan. However, this is only a problem if your car is stolen or totaled, and your insurance company’s payout doesn’t cover your loan obligation. In some circumstances, it’s possible to use an unsecured personal loan to purchase a car, such as when you’re looking for a vintage car to fix up as a passion project.

Why get a SoFi Personal Loan? Borrow up to $100K for a low fixed rate for those who qualify. The online application process is simple, with live customer support available 24/7. And if you lose your job, we’ll temporarily modify your payments.

Learn more about SoFi’s Personal Loans.

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.

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.

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Oct
18
2023

Income-Contingent Repayment Plan, Explained

By | Debt Payoff, Student Loans, student_loan | Comments Off on Income-Contingent Repayment Plan, Explained

Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

Income-contingent payment (ICR) plans are one kind of Income-driven repayment plan, which can help make federal student loan payments more affordable. The income-contingent repayment plan allows you to extend your loan repayment period while reducing monthly payments to help them better align with your income. Any remaining loan amounts due at the end of your ICR plan term may be forgiven.

An ICR may be a good fit if you’re just starting your career and aren’t earning a lot of money. You may also consider an income-contingent repayment plan if you’re hoping to qualify for federal Public Service Loan Forgiveness (PSLF).

But is an ICR plan right for you? And what are the pros and cons of income-contingent repayment? Weighing the benefits alongside the potential downsides can help you decide if it’s an option worth pursuing managing your student loan debt.

What Is Income-Contingent Repayment (ICR)?

Income-driven repayment plans, including ICR, determine your monthly payment amount based on your household size and income. Depending on how much you make and how many people there are in your household, it’s possible that you could have no monthly payment at all.

Like other income-driven repayment plans offered by the Department of Education (DOE), an ICR plan aims to make it easier to keep up with federal student loan payments.

With income-contingent repayment, your monthly payments are capped at the lesser of:

•   20% of your discretionary income

•   What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted for your income

Of the four income-driven repayment options, income-contingent repayment is the oldest plan, and it is the only one that sets the payment cap at 20% of a borrower’s discretionary income. With income-based repayment (IBR) and Pay as You Earn (PAYE), monthly student loan payments max out at 10% of your discretionary income. The Department of Education recently introduced a new IDR plan called Saving on a Valuable Education (SAVE), and starting in July 2024, borrowers on the SAVE plan could see their payments reduced from 10% to 5% of income above 225% of the poverty line.

The interest rate for an ICR plan stays the same for the entire repayment term. The rate would be whatever you’re currently paying for any loans you’ve consolidated or the weighted average of all loans you haven’t consolidated.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

How an ICR Plan Works

Income-contingent repayment can reduce your federal student loan payments, allowing you to pay 20% of your discretionary income each month or commit to making fixed payments based on a 12-year loan term.

You have up to 25 years to repay all loans enrolled in the plan. If you still have remaining payments after 25 years of monthly payments, the DOE will forgive the balance. But while you may not owe any more payments on the loan, the IRS considers student loan debts forgiven through ICR or another income-driven repayment plan to be taxable income, so you may owe taxes on it.

Income-contingent repayment plans base your monthly payment on your income and family size. This means that if your income, or your family size, changes over time, your monthly payments could change as well. With all of the federal IDR plans, borrowers must recertify their loan every year to show any changes to your income or family size.

If you’re enrolled in the 10-year Standard Repayment Plan, your monthly payments would be the same for the entire repayment term, and you never have to recertify your loan.

Here’s an example of what your payments might look like on an ICR plan versus a Standard Repayment plan, assuming you’re single, make $50,000 a year, get 3.5% annual raises, and owe $35,000 in federal loans at a weighted interest rate of 5.7%.

Standard

 ICR Plan

 Savings
First month’s payment $383 $319 $64
Last month’s payment $383 $336 $47
Total payments $45,960 $49,092 -$3,132
Repayment term 10 years 12.4 years -2.4 years

As you can see, an income-contingent repayment plan would lower your monthly payments. But it will take you longer to pay your loans off and you pay more than $3,000 in additional interest charges over the life of the loan. If you start earning more while you’re on the ICR plan, your payments could also increase.

If you get married, and you and your spouse file your taxes jointly, your loan servicer will use your joint income to determine your loan payment. If you file separately or are separated from your spouse, you’ll only owe based on your individual income.

Recommended: How is Income Based Repayment Calculated?

Who Is Eligible for an Income-Contingent Repayment Plan?

Anyone with an eligible federal student loan can apply for the income-contingent repayment plan. Eligible loans include:

•   Direct student loans (subsidized or unsubsidized)

•   Direct consolidation loans

•   Direct PLUS loans made to graduate or professional students

Other types of federal student loans may also be enrolled in income-contingent repayment plans if you consolidate them into a Direct loan first. For example, you could use an ICR plan to repay consolidated:

•   Federal Stafford loans (subsidized or unsubsidized)

•   Federal Perkins loans

•   Federal Family Education Loan (FFEL) PLUS loans

•   FFEL consolidation loans

•   Direct PLUS loans for parents

The income-contingent repayment is the only income-driven repayment plan option that includes loans taken out by parents. So if you borrowed federal loans to help your child pay for college, you could enroll in an ICR plan (after consolidating your loans) to make the payments more manageable.

Two types of loans are not eligible for income-contingent repayment or any other income-driven repayment plan:

•   Private student loans

•   Federal student loans in default

If you’ve defaulted on your federal student loans you must first get them out of default before you can enroll in an income-driven repayment plan. The DOE allows you to do this through loan consolidation and/or loan rehabilitation. Either one can help you get caught up with loan payments and loan rehabilitation will also remove the default from your credit history.

Pros and Cons of ICR Plans

Income-contingent repayment is just one option for paying off student loans, and it may not be right for everyone. It’s important to look at both the advantages and potential disadvantages before enrolling in an ICR plan.

Pros of income-contingent repayment:

•   Can lower your monthly payments

•   Parent loans are eligible for income-contingent repayment, after consolidation

•   Extends the loan term to 25 years to repay student loans

•   Remaining loan balances are forgivable

•   Qualifying repayment plan for PSLF

Cons of income-contingent repayment:

•   Other income-driven repayment plans like PAYE or SAVE base monthly payments on 5 to 10% of your discretionary income

•   Taking longer to repay loans means paying more in interest

•   If your income changes, your payments could increase

•   Enrolling certain loans requires consolidation first

•   Forgiven loan amounts are taxable

If you’re interested in an income-driven repayment plan, it may be helpful to do the math first to see how much you might pay with different plans. An income-based repayment option, for example, might lower your payments even more than ICR so it’s worth running the numbers through a student loan repayment calculator.

The Takeaway

Income-contingent repayment plans are something you might consider if you have federal student loans. With an ICR plan, your monthly payments may be lower than they are with the Standard Loan Repayment Plan, allowing you more money for other bills.

You won’t receive a lower interest rate when you sign up for an income-driven repayment plan. The only way to change your interest rate is through student loan refinancing. But if you refinance your federal loans, you will lose access to benefits like ICR and other income-driven repayment plans.

When you refinance student loans, you take out a new loan to pay off your existing ones. If you’re able to secure a lower interest rate on the new loan and don’t extend the term length of the loan, you could pay less in total interest over the life of the loan while having lower monthly payments. This could give you more breathing room in your budget. If you have both federal and private loans, you may choose to place the federal loans in an income-driven repayment plan and then refinance the private loans.

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
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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

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

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

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Oct
16
2023
How to Make Money on YouTube

12 Ways to Make Money on YouTube

By | Budgeting & Goals, Financial Independence, money | Comments Off on 12 Ways to Make Money on YouTube

Wondering how to get paid on YouTube? Nearly 400,000 people have made YouTube a full-time job, and 51 million channels now exist across the video platform. From ads to affiliate marketing to content licensing, average Americans have ample opportunities to make money off their YouTube videos.

Not sure how to make money off YouTube though? This guide contains 12 ways to generate revenue from your video content — plus helpful tips for getting started.

The Popularity of Content Creation

The internet has enabled anyone and everyone to become content creators. Brands now rely on content creators and influencers to advertise products across industries, and sites like YouTube, TikTok, and Instagram have enabled people with something to say to earn income just for posting photos, videos, and reviews.

YouTube’s continued popularity (it’s the second most visited website in the world) and TikTok’s recent explosion underscore that content creation plays an important role in our culture. And if you know how to make good content on YouTube in particular, you could make a lot of money.

Recommended: Active vs. Passive Income

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12 Ways to Get Paid on YouTube

YouTube offers creators an opportunity to make good money, but how exactly? It actually takes a lot of hard work, fresh ideas, and regular posting, but if you’ve got a knack for it, it could be an easy way to make money through social media.

Here are 12 YouTube monetization ideas to get you started:

1. Joining the YouTube Partner Program

The most common way to make money off YouTube is by joining the YouTube Partner Program. Doing so allows you to run ads on your videos — before, during, and after — as you see fit.

At one time, YouTubers could count on $1 per 1,000 views, give or take, but it’s a little more complicated today. There’s really no guarantee how much money you’ll make by running ads on your videos, though the average YouTuber now sees $3 to $5 per 1,000 video views.

According to social media management company Sprout Social, your revenue can vary depending on:

•   Your target demographic (there are some strict regulations about ads on videos intended for children)

•   How relevant the ad content is to your video

•   What kind of content you produce.

Recommended: 39 Passive Income Ideas

How Does the YouTube Partner Program Work?

Not every content creator can slap ads onto the front of their videos. To run ads, you have to qualify for the YouTube Partner Program. Requirements include:

•   1,000 subscribers

•   4,000+ valid public watch hours in the last year

•   A linked Google AdSense account.

Your video content must also abide by all Community Guidelines, and you must live in a country where the program is available.

And here’s the kicker: You’ve got to stay active. YouTube can turn off monetization for channels that haven’t put out new content in the last six months.

Recommended: Ways to Make Money from Home

2. Sending Viewers to Your Blog

If you have a blog with ads, you can encourage your viewers to check it out during your video and include a link to it in your video description. YouTube video descriptions can be up to 5,000 characters (roughly 800 words), though shorter descriptions tend to perform better.

By steering viewers to your ad-optimized blog site, you can earn additional ad revenue with every pageview. Common examples where this make sense include:

•   Recipe videos paired with your recipe website

•   Travel product review videos paired with your travel blog

•   Car maintenance instructional videos paired with your how-to blog content.

Though blogs can be a good revenue source, don’t forget to factor in the cost to run a blog.

3. Sending Viewers to Your Commerce Site

There are other similar ideas for how to get paid on YouTube. For instance, you can use your YouTube video description to link viewers to your commerce site. If your channel is popular enough to warrant branded merch, this could be a good way to generate additional revenue. Alternatively, if you run your own shop selling goods like artwork, candles, or apparel, you may want to create product videos on YouTube that send viewers to your site.

If you don’t have your own merch site but instead sell items on Amazon, Etsy, or eBay, you can also send viewers there.

Recommended: Places to Sell Your Stuff

4. Using Lead Magnets

Lead magnets are another idea for how to get paid on YouTube, though it’s a more indirect way of making money.

Your YouTube video description might send viewers to a free resource that you’ve created, like an ebook, template, or online course. When the viewer signs up for or downloads their freebie, you can collect their contact information for a newsletter and future sale alerts, which can in turn grow your business and earnings.

5. Starting a Channel Membership

YouTube has another great built-in feature for popular content creators: channel memberships. This enables creators to charge a monthly membership fee. In return for the fee, your viewers will expect certain perks like badges.

Channel membership usually only makes sense if you post content everyday, especially YouTube livestreams. You must be a part of the YouTube Partner Program to offer channel memberships.

Recommended: How to Build an Online Community

6. Encouraging the Use of Super Chat and Super Stickers

Content creators who are part of the YouTube Partner Program can also encourage viewers to utilize Super Chat and Super Stickers during live streams. How does this help to get paid off YouTube videos? To access these features, viewers pay a small fee to pin their comments and stickers to the top of a live chat feed.

7. Encouraging YouTube Premium

While you won’t get money directly for encouraging a subscriber to sign up for YouTube Premium, you will get a cut of a viewer’s monthly membership fee when they watch your videos. If your subscribers are loyal and watch your videos regularly, encouraging them to become YouTube Premium members could put more money in your pocket.

Note: YouTube Premium members don’t see ads. If your viewers are increasingly Premium members, your ad revenue may go down.

Recommended: How to Save Money on Streaming Services

8. Crowdfunding

Here’s another way that many YouTube creators make money: by crowdfunding. What is crowdfunding? It’s a process by which many people contribute small amounts of money, often to help an entrepreneur reach a particular business goal. Patreon is a popular choice for YouTubers, though there are plenty of crowdfunding sites to use. If you have loyal viewers who are willing to donate toward a specific goal or project, crowdfunding could be lucrative for you.

9. Using Affiliate Links in the Description

Links in video descriptions don’t just have to go to your own site. You can also add affiliate links to relevant products. For example, if your video talks about the 10 best ways to save money on a vacation, you can include affiliate links to any products or services in the description. For every viewer who clicks the link and purchases the item, you’ll earn a commission.

10. Getting Brand Sponsorships

YouTubers may also work directly with brand sponsors. For example, a recipe video for a dessert may be sponsored by a specific brand of cake mix. The YouTuber will mention the cake mix directly in the video and may even offer a code to get a discount on the product, and the brand will pay the YouTuber for the exposure.

It’s a good idea to thoroughly vet a sponsor to ensure their brand aligns with your values — and makes sense alongside your video content. Always be transparent with viewers by letting them know in the video and the description that this is a paid sponsorship.

Recommended: 13 Online Shopping Trends

11. Publishing Product Reviews

Similarly, YouTubers may review a specific product in a video. In these instances, the brand may specify talking points for the reviewer to discuss. These kinds of videos are common in the beauty, health, and fitness industries. Proceed carefully, though; they may be off-putting to viewers who view the content as inauthentic.

12. Licensing Content to the Media

If one of your videos goes viral, news outlets may want to report on it and show it to their audiences. Legally, they cannot do this without paying you. Thus, media companies often approach YouTube content creators to license their content.

Just make sure your contact info is clear on your channel so that members of the media know how to find you. You could profit from this as another way to earn money off YouTube.

Tips for Starting Your Own YouTube Channel

Ready to start making money on YouTube? Here are a few tips for starting a YouTube channel:

•   Follow YouTube’s guidelines and best practices for setting up an account. YouTube will walk you through all the major steps so you don’t miss anything. You can also search the web for tips on optimizing your channel as well.

•   Think about your target audience. Creating content for the sake of creating content may be fun for you. However, if you want to make money, you should focus on content that your target audience actually wants.

•   Invest in the right equipment. Depending on the level of quality you’re aiming for, you may need to invest in high-quality light equipment, an external microphone, a video camera, and video editing software.

•   Know how to optimize your videos. There’s a science to YouTube. Research everything from writing strong video titles and descriptions to popular video trends to creating click-worthy thumbnails to optimizing videos for search.

•   Don’t quit your day job just yet. YouTube has 51 million channels, but less than 1% of those have 100,000 or more subscribers. Subscribers will be key to your success. If you can, build up your channel and subscribers while relying on income from another avenue — until you’re confident you can make the leap.

Recommended: Tips for Spending Money Wisely

The Takeaway

YouTube is a source of entertainment for viewers, but it also can create real revenue opportunities to content creators. There are plenty of ways to make money on YouTube, but it requires hard work, dedication, fresh ideas, and a bit of luck.

3 Money Tips

1.    If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.

2.    If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% towards saving for your long-term goals.

3.    If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How many people make money on YouTube?

In October 2021, YouTube released a report stating that 394,000 people in the U.S. alone were working (at least) a traditional 40-hour work week to generate video content for YouTube. But even more people could be making passive income off a few videos on YouTube, even if they have other full-time jobs.

How many people are on YouTube?

YouTube has more than 51 million channels with more than 2 billion monthly active users consuming content. In fact, YouTube is the second largest search engine in the world behind Google; the video search engine generates more search queries than Yahoo, Bing, Ask, and AOL combined.

On average, how much do YouTubers make per year?

With AdSense, YouTube content creators can expect to make between $0.01 and $0.03 per ad view; the average content creator earns $18 for every 1,000 ad views and $3 to $5 per 1,000 video views. Calculating an annual salary largely depends on how many views a content creator can amass.

For YouTubers with at least one million subscribers, the average salary is $60,000. But only 29,000 YouTube channels actually have more than one million subscribers.

How can you make money on YouTube without making videos?

Though it’s technically possible to make money on YouTube without making videos, it may be a much more challenging path to financial success. However, you might be able to generate revenue on a YouTube channel by reposting reels or TikToks as YouTube Shorts, uploading your Twitch streams or Instagram Lives to the YouTube platform, or even transforming an existing webinar or slideshow presentation to a video format on YouTube.

In all of these cases, you’re still technically creating video content — but you’re using content optimized for another platform and recycled for YouTube, so you may be less successful.

Photo credit: iStock/mapodile

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 members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

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

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Can You Use A Credit Card To Pay Off Your Student Loans_780x440

Can You Use a Credit Card to Pay Your Student Loans?

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

Making student loan payments with a credit card can be tempting. After all, if your credit card offers you rewards like points or miles, by putting your student loan payments on your card, you could be cashing in on points and scoring a free flight to Vegas, right?

On the flip side, you might be looking for a way to make your monthly student loan payment during a month when your checking account isn’t quite as full as you’d like.

So is it even possible to pay down your student loans with a credit card? The short answer is that it’s not possible to do so on federal student loans, though there may be ways to do so on some private student loans.

Can I Make a Student Loan Payment With My Credit Card?

Federal student loan servicers, as a rule, do not allow credit card payments directly. In order to pay student loans with a credit card, payments have to go through a third-party platform for a fee – which would usually negate any points you might have earned from using your card to pay off your loans. And if you’re keeping a balance rather than paying off your credit card bill immediately, you’ll have to contend with high credit card interest rates.

You may be able to pay off a private student loan with a credit card. To find out if student loan payment with your credit card is an option, consider calling your student loan servicer to find out. Some allow credit card payments in certain situations, such as if it’s the last day before your payment becomes overdue.


💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

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Is Using a Credit Card to Pay on a Student Loan a Good Idea?

Even if your student loan servicer accepts credit card payments, the practice could have downsides.

As previously mentioned, there may be additional fees to use a credit card to pay student loans. Paying additional fees could offset the benefit of earning any additional points or miles on your credit card.

Another factor is that credit card interest rates are generally higher than your student loans. If you’re unable to make monthly payments in full on your credit card, you might end up paying significantly more interest by using your credit card instead of a modest interest often associated with student loans. Simply put, making a student loan payment on a credit card, especially a high yield one, can cost you much more.

So while racking up those credit card points can seem enticing, they might not be such a great deal if you’re paying more on your student loans in the long run.

How Paying Student Loans With a Credit Card Can Affect Your Credit

You might want to also consider your credit score. Your credit usage makes up 30% of your FICO® score. Typically, you don’t want to use more than a third of the credit available to you. If you put a large student loan payment on your credit card, you might use a bigger chunk of your available credit, which could potentially bring down your credit score.

If you’re unable to keep up with your student loan or credit card payments, you could end up with both student loan and credit card debt.

Both the mix of credit and length of credit history are two factors that inform your credit score. Paying off your student loans may result in a temporary dip in your credit score because you have closed the loan.

Is There a Better Way to Manage Student Loan Debt?

If you feel like you’re going to fall behind on student loan payments, using a credit card isn’t your only option.

Income-Driven Repayment Plans

If you’re experiencing long-term financial difficulty, federal student loan borrowers may consider switching to an income-driven repayment plan (IDR). These plans are based on your discretionary income, are intended to make payments more affordable, and have terms that allow for loan forgiveness after a set amount of years. Here are the four IDR with their respective payment terms:

•   Pay As You Earn (PAYE) Plan: Borrowers typically pay 10 % of their discretionary income but not more than the 10-year Standard Repayment Plan. Remaining balances are forgiven after 20 years of payment with this plan.

•   Saving on a Valuable Education (SAVE) Plan: Borrowers typically pay 10 % of their discretionary income over the course of 20 years for loans for undergraduate study or 25 years for graduate or professional school loans. However, the repayment period can be as little as 10 years for undergraduate borrowers with balances under $12,000. And the minimum payment will fall to 5% of discretionary income starting in July 2024.

•   Income-Based Repayment (IBR) Plan: Student loan holders typically pay 10 % or 15% of their discretionary income but not more than the 10-year Standard Repayment Plan. After 20 or 25 years, depending on when the loan was first received, any remaining balance will be forgiven.

•   Income-Contingent Repayment (ICR) Plan: As a new borrower, student loan holders typically pay the lesser of these two: 20% of their discretionary income or a fixed payment over the course of 12 years. Any remaining balance will be forgiven after 25 years with this plan.

Consolidating Student Loans

A Direct Consolidation Loan could lower your monthly payment by giving you up to 30 years to repay your federal student loans.

If you’re not able to make your monthly payments, you could ask your loan servicer about forbearance or deferment, both of which pause payments until your financial situation improves. Student loan borrowers with both federal and private loans can consolidate their loans via private student loan refinancing. It’s important to note that consolidating the federal loans will release the borrower from federal loan forgiveness programs.

Refinancing Student Loans

You could also consider refinancing your student loans with a private lender. Refinancing combines existing student loans into a new loan, one ideally with a lower interest rate and a more favorable loan term, which may mean lower, more affordable monthly payments. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.) To determine your interest rate, private lenders will generally conduct a credit check, evaluate your credit score, and income among other factors.

Recommended: 7 Tips to Lower Your Student Loan Payment

The Takeaway

Can you pay student loans with a credit card? In short, it’s possible, but may require the use of a third-party app or paying additional fees to the lender. These fees can outweigh the benefits of earned credit card points or miles. If you’re using a credit card because you’re struggling to make monthly payments on your student loan, you’re probably better off refinancing or using an income-driven repayment plan.

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.

FAQ

Can I pay student loans with a debit card?

Generally, paying student loans with a debit card is not permitted. It may be possible, but there may be fees associated. For the most part, student loan servicers prefer payments made electronically from your bank account. Most lenders will allow borrowers to enroll in automatic payments, where the loan payment is automatically debited from the checking account each month.

Can you pay off student loans all at once?

It is possible to make a lump sum payment to pay off all of your loans at once. Your lender should be able to provide a payoff quote if you are interested in this option.

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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 Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


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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