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A pass/fail grading system allows a student to receive either a grade of “P” (pass) or “F” (fail) for a particular class instead of the usual letter grading system. Many colleges offer this option in order to encourage students to explore new academic areas without having to worry about it affecting their transcripts.

However, the pass/fail grading system comes with some limitations, including restrictions on which and how many classes you can take pass/fail each year. And, in some cases, taking a class pass/fail can still have an impact on your academic record.

Read on to learn exactly what pass/fail means, what a passing (and failing) grade is, and when to consider a pass/fail option.

How Pass/Fail Grading Works

The traditional grading system was initially established centuries ago by English universities like Oxford and Cambridge as a way of encouraging students to work harder. While letter grades may still be the dominant system in American universities, some schools have deviated from this structure, establishing their own ways of evaluating students largely based on the pass/fail system.

Reed College in Portland, Oregon has a unique style of grading that encourages students to “focus on learning, not on grades.” While students are still assigned grades for each course, these grades are not distributed to students. Instead, students are given lengthy comments and reports on their academic performance. Reed does not have a dean’s list or honor roll either.

At Brown University students can take an unlimited number of classes “satisfactory/no credit (S/NC),” and GPAs are not calculated. They also do not name student’s to a Dean’s list.

Some schools, including Swarthmore College and MIT, have students take all classes pass/fail in the first semester of their freshman years. Swarthmore’s policy is meant to encourage students to stretch themselves and take risks, and is aligned with their policy of collaboration as opposed to competition with classmates, while MIT’s policy is designed to help students adjust to increased workloads and variations in academic preparation and teaching methods.

In both cases, taking the emphasis off grades is meant to improve students’ experiences of higher education, helping them to take full advantage of their time on campus.

Of course, most schools emphasize letter grades more than Brown and Reed, as it allows them to distinguish high achievers and highlight specific areas where students excel or may need to improve.

It’s common, however, for colleges to allow students to take one class pass/fail per semester. Typically, this is only offered for elective (not core) classes. Often, a grade of “P” is equal to a grade of D- or higher, but has no impact on the student’s overall grade point average. A grade of “F,” however, will usually have the same effect on the grade point average as a traditional failure.


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What Are The Benefits of Pass/Fail?

While college can be a rewarding and stimulating time for students, it also has its challenges, including constant pressure to keep up your grades. The beauty of taking a class pass/fail is the sense of freedom it gives you — once the stress of getting a perfect grade is removed, you are at liberty to fully embrace the kind of intellectual curiosity that should be at the heart of a college experience.

Maybe you’re a pre-med student and want to take a painting class, or perhaps you’re majoring in sociology and want to dabble in art history. These options can lead you down unexpected paths, opening creative doors you might have avoided if you were solely focusing on your GPA.

Recommended: How Grades Affect Your Student Loans

The Limits to Pass/Fail

The pass/fail system also has some potential downsides. One is that should you end up doing really well in the class, you generally can’t change your mind and ask to take the class for a grade rather than pass/fail. By the same token, if you do poorly in a class, you can’t make a belated request for a pass/fail.

In addition, pass/fail grades generally don’t count toward a major or minor, which limits your options when deciding whether or not to go this route.

While it’s hard to know for sure, some students feel that taking a higher number of pass/fail classes could reflect poorly on their college academic record and be a strike against them when applying for a job or to graduate school. However, it’s also possible that a potential employer or an admissions officer might be impressed by a student’s breadth of study and sense of initiative in studying “outside the box.”


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The Takeaway

Taking a few of your classes pass/fail can be a great way to explore new academic areas of interest during college, and is unlikely to adversely impact your post-grad opportunities, including summer internships, employment, and graduate school.

While employers and graduate school admissions officers generally prefer to see quality grades over pass/fail grades, they will typically review applications holistically, and grades are just one of many ways you can show your skills, knowledge, and leadership potential. Indeed, taking a few pass/fail classes that are outside your major can show intellectual curiosity.

Whether you take a class pass/fail or for a letter grade won’t have any impact on how many credits you get from the course — or the cost of tuition. If you’re concerned about how you’ll cover the cost of your education, keep in mind that you have a range of options — including savings, scholarships, grants, work-study programs, and federal or private student loans.

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.

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

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One of the most important things you can do in your 30s is to start prioritizing retirement savings if you haven’t done so already.

Building retirement savings at 30 is not always an easy task, even if you’re earning a higher salary. Financial responsibilities often increase at this time, but it’s important to keep retirement in mind even as you hit other milestones such as buying a house or starting a family.

To save for retirement in your 30s, you’ll need to balance your daily spending with your long-term goals. The sooner you can begin saving for retirement the better.

How to Start Saving for Retirement at 30

You can set yourself on a path to healthy retirement savings by using the following strategies. First up, putting money into a designated retirement plan.

1. Contribute to a 401(k)

Saving in tax-advantaged retirement accounts available through work, such as a 401(k), is one of the best things you can do to start saving for retirement. Your 401(k) allows you to contribute up to $22,500 a year in 2023, up from $20,500 per year in 2022. Contributions come directly from your paycheck with pre-tax dollars, which lowers your taxable income in the year you make them.

Regular, automatic contributions, coupled with the benefits of compounding returns, can help your savings grow even faster. Starting a 401(k) at 30 gives you several decades for your funds to grow over time.

Also, 401(k)s allow employers to contribute to your retirement, and many will offer matching funds as part of your compensation package. Aim to save at least as much as is required to receive your employer’s match. Work toward maxing out your 401(k) contributions, especially as your salary grows over time.

You can access the funds penalty-free once you reach age 59 ½, but you will owe taxes on the money at that time.


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2. Open an IRA

An IRA is a retirement account, which anyone with earned income can open. If you don’t have a 401(k) at work, opening an IRA can give you access to a tax-advantaged account to save for retirement. Even if you already have a 401(k), opening an IRA can be a good way to save even more, though you won’t get to write off your contributions.

For 2023, contribution limits to IRAs are $6,500 per year, up for $6,000 in 2022.

IRAs come in two different types: traditional and Roth IRAs. If you don’t have a 401(k), you can make contributions to traditional IRAs with pre-tax dollars. Like a 401(k), money in these accounts grows tax-deferred, and you’ll pay the taxes on it when you make withdrawals in retirement.

If you meet certain income restrictions, you may be able to contribute to a Roth IRA instead. In that case, you’ll make the contributions with after-tax dollars, but your money will grow tax-free inside the account and you do not have to pay taxes when you make withdrawals.

Recommended: Traditional vs. Roth IRA: How to Choose the Right Plan

3. Plan Your Asset Allocation

Diversification is the act of spreading your money across different asset classes. To minimize risk from a decline from one type of asset, it typically makes sense to create a diversified portfolio, including a mix of asset classes, such as stocks, bonds and other assets.

Your asset allocation refers to the proportion of each asset class that you hold. Your asset allocations will reflect your goals, risk tolerance, and time horizon. Given the relatively long period until your retirement, you might consider a relatively aggressive portfolio consisting mostly of stocks in your retirement account.

Stocks typically provide the most potential for growth, but they also fluctuate more than some other asset classes. Since you have three decades or more before you retire, you have time to ride out the natural ups and downs of the market.

Bonds, which tend to be less volatile than stocks but also offer lower returns, may balance out the riskier equity allocation. As you approach retirement, you may consider rebalancing your asset allocation to include more conservative investments to help protect the income you will need to draw upon soon.

Target-date funds are a type of mutual fund that automatically readjusts your portfolio as you near your target date, often the year in which you wish to retire.

4. Diversify within Asset Classes

Just as a portfolio with different types of assets offers some downside protection, so too, does diversification within those asset classes. If you invest the entire stock portion of your portfolio shares in just one company and share prices in that company drop, the value of your entire portfolio drops as well.

Now imagine that you own shares in 500 different companies. When one stock fares poorly, it will have a relatively small effect on the rest of your portfolio. Diversification helps limit the negative effects that any asset class, sector, or company could have on your portfolio.

You can further diversify your portfolio by including companies from different sectors and of all sizes from different parts of the globe. This same idea is true for other asset classes. For example, you could hold a mix of government and corporate bonds, and the corporate bonds could represent companies from various sectors and locations.

One way to add diversification to your portfolio is by investing in mutual funds, exchange-traded funds (ETFs), and index funds that invest in a diversified basket of stocks. For example, if you buy shares in an ETF that tracks the S&P 500 index, you’ll be investing in the 500 stocks included in that index.

5. Don’t Cash Out your 401(k) if You Get a New Job

If you’re only in your 30s, it’s likely that you’ll change jobs a couple of times or more, over the course of your career. When you change jobs, you’ll have a number of options for what to do with the 401(k) you hold with your previous employer.

One of these options is to cash out your 401(k). But this is typically not a great idea from a personal finance perspective. If you take a lump sum payment and you’re younger than 59 ½, you may not only owe income taxes on the withdrawal, but also a 10% early withdrawal penalty. What’s more, your money will no longer be working for you in a tax-advantaged account, potentially setting you back in your retirement savings goals.

A better option is to roll over your 401(k) into another tax-advantaged retirement account, such as your new employer’s plan, if they offer one, without paying income taxes. Or you can roll your 401(k) into an IRA without paying taxes. IRA accounts offer the added benefit of additional investment options, and they may have lower fees than your 401(k).

Recommended: How to Transfer Your 401(k) When Changing to a New Job

6. Protect Your Earnings with Disability Insurance

An injury or an illness that keeps you from going to work can hamper your retirement savings plan. However, disability insurance can help cover a portion of your lost income — usually between 50% and 70% — for a period of time.

Most employers offer some sort of short-term disability insurance, with a benefit period of three to six months. Some employers may offer long-term policies that cover periods of five, 10, or 20 years, or even through retirement age.

Check with your employer to see if you are covered by a disability policy and whether it provides enough coverage for your needs. If your employer’s plan falls short, or you don’t have access to one, you might consider purchasing a policy on your own.

The Takeaway

The earlier you can start saving for retirement the better. A long time horizon gives you the opportunity to take advantage of compounding growth for a longer period of time, which can help you increase the amount you’re able to save. Pay attention to the fees you’re paying on investments, which can eat away at returns over time.

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).

Photo credit: iStock/AJ_Watt

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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