Related Articles

Subsidized Student Loans

If you qualify for Federal Direct Subsidized Student Loans, you should definitely take advantage, as they are one of the best student loans you can get.

Unsubsidized Student Loans

Who Is Eligible For Direct Loans?

There are several factors to be aware of when it comes to qualifying for direct loans. There are also limits to how much you can borrow with Direct student loans.

Note: All graduate and professional students are considered independent students. Also, graduate and professional students aren't eligible for subsidized loans.

There is also a total loan limit you have to follow:

Dependent Students: $31,000, with no more than $23,000 subsidized

Independent Students: $57,500 for undergraduates, with no more than $23,000 subsidized

Professional and Graduate Students: $138,500 for professional and graduate students, with no more than $65,500 subsidized. These loan limits include any aggregate loans taken out during undergraduate study.

How Much Time Do You Have To Pay Off Your Direct Loans?

With the Unsubsidized student loan, once you have graduated from school, you have a six-month “grace period” where you don’t necessarily have to make payments on your loan although you will have to pay any interest you accrued on the amount you borrowed.

In most cases, Subsidized student loan borrowers will not have to worry about payments until the grace period is over.

Your repayment period begins a day after the grace period ends - this holds both for Subsidized and Unsubsidized student loan borrowers.

Because you absolutely do not want to miss when your repayment begins, it is important that you communicate clearly with your loan servicer to get details the specific date your repayment period starts, how much you need to be paying and the methods of payments.

If for some reason, you are unable to pay the interest during the six-month grace period (under the Unsubsidized program) , the interest amount will be capitalized. This means that the interest amount will be added to the principal which can potentially increase the amount you have to pay each month.

Generally you will have between 10-25 years to pay off your student loans.

If you decide to consolidate your loans using the Direct Consolidation Program this time period is extended up to 30 years.

For both the Subsidized and Unsubsidized loans, you have the opportunity to use income-based repayment programs like PAYE and REPAYE.

What If You Need To Borrow More?

Many people see those subsidized and unsubsidized student loan limits for undergraduates and don't know how they will afford to pay for college. And that's a rational fear if you were planning to borrow the full cost of college. But remember, paying for college is a pie - and there are a lot of different slices to choose from. 

For the full breakdown of the "best" way to pay for college, check out this article: The Best Way To Pay For College.

If you're already exhausted other options, and know your ROI on education, then you can look at private loans. 

We recommend students shop and compare private loan options before taking them out. Credible is an excellent choice because you can compare about 10 different lenders in 2 minutes and see what you qualify for. Check out Credible here.

We also have a full comparison tool on the Best Private Loans To Pay For College here.

Key Takeaways

There are many weird stock market indicators that pundits try to use to explain what you should be doing in the stock market at any given time.

There seems to be many ideas that people will suggest to determine your investing strategy including the January-effect, the presidential cycle, which team wins the Super Bowl, and how well stocks will fare.

Over time, the of the stock market are hard to beat, and timing the market is not something that many people can do on a reliable basis.

Based on this month, you may have encountered the "Sell in May and Go Away" philosophy. While it may sound kitschy or superstitious, does this theory actually have any legs? 

What Exactly Is ‘Sell In May And Go Away?’

The basic theory behind “Sell in May and Go Away” is that the stock market has had a nice run up during the fall and winter months (November through April). As spring and summer approaches, the theory suggests we will begin to see somewhat of a decline during the spring and summer months. 

If you abide by this, you would sell your stocks in late April or early May (hopefully realizing nice gains). Then, you could sit on the cash until the fall where you would buy back into the stock market.

Sounds simple, doesn’t it?

If you think this idea is brand new, it has actually been around for decades and studied by numerous stock market theorists. Some theorists support the validity of the Sell in May and Go Away theory while others say it’s pure hogwash. 

That said, it might be a tempting concept to get behind either because traders may not be as active during the summer months. Or  perhaps some may simply think that it’s a possible opportunity to time the market.

The Problem With Sell In May And Go Away

When so many other investors are doing the same thing with their stock investments, it's hard for any one individual investor to see much of an impact. Any quantifiable benefit you possibly would have realized is diluted. 

Beyond that, the other major problem with this theory is that it doesn’t account for your unique investing and financial situation. Listening to others who may not know your specific situation and basing your investment decisions off of them isn’t the best way to grow your investments. Following sage advice is one thing, but following pundits without fully researching or talking to others about it is a trading mistake.

While it may be beneficial to sell out of some of your stocks, you can only know that after analyzing your holdings in light of your investment needs and goals.

Sell In May And Go Away Historical Returns

LPL Financial measured the S&P 500 Index May-October returns during the decade of the 2010s and found an average of a positive 3.8% return each year, with no significant declines. 

The S&P 500 was also up 10.5% from May to October 2021, though it was down 5.3% during the same period in 2022.

Who Are You Investing For?

At the end of the day, it all comes down to deciding on your investing strategy and sticking with it. Some people might look at the long-term fundamentals of a company to invest in. 

Others may prefer investing in index funds and forgetting about the money due to a long-term investment horizon. 

Those are some of the basics, but the point is to have a plan to guide your decision-making. That helps you plan for your retirement and create a portfolio that can get you there.

If you have long-term investing on the horizon, you don't need to worry about whether it is time to get out of the stock market. Instead, just ignore the experts on CNBC and stick to your plan. 

That means if you put new money into the market every month/quarter, then keep on doing that. If you rebalance every quarter or semi-annually then keep on doing that—unless your underlying goals change.

Is There A Benefit Of Not Following The Masses?

If you have read The College Investor for long, you’ll know that we love Warren Buffett and has him listed as one of the best investors of all time. Buffett does not let what others say affect his investing decisions and says his philosophy is to hold stocks forever.

While that is not the only investing strategy, it is one that has obviously worked for Buffett over his long career. Whatever your investing strategy is, stick with it and don't follow what everyone else is doing.

The Bottom Line

If you take a long term approach to investing in the stock market, you probably won't want to sell in May (or any other time), just because it happens to be part of a catchy rhyme. 

You may experience potential downturns, but you'll also take advantage of potential gains if the market goes up during the summer months. 

Over time, the long-term returns of the stock market are hard to beat, and timing the market is not something that many people can do on a reliable basis.

Minimizing costs is usually key to maximizing returns, but not always. Sometimes, state income tax breaks can compensate for the cost of 529 plans with higher fees. So, how can you find the best 529 plan for your state and situation?

A more focused analysis of 529 plan portfolio performance net of costs and state income tax breaks yields results that differ from traditional 529 plan ratings.

Let's break it down.

Popular Ratings Of 529 Plans

There are several well-known ratings of 529 plans, such as: 

• Savingforcollege.com: 5-Cap Ratings and Performance Rankings
• Morningstar: Gold, Silver, and Bronze Ratings

These ratings are based on a holistic evaluation of 529 plan performance, considering the full mix of investment options.

More recently, Penn-Wharton published a study that compares the performance of each state's 529 plan with a lower-cost, out-of-state plan. 

This study confirms two things:

• Direct-sold 529 plans have lower fees than advisor-sold 529 plans, lower than 1%. 
• Investors in 28 states would be better off going out of state for lower fees. 

This is similar to previous research, such as Savingforcollege.com's Fee Study. The Penn-Wharton study identified California as the lowest-cost state since it has lower average fees on its set of investment options.

Two Investment Options Are Enough

A key flaw of all these studies is they use a holistic analysis to identify the best collection of investment options. Most 529 plans offer a dozen or more investment options.

But, all most families need are just two investment options:

1. High-risk/high-return investment option
2. Low-risk investment option

They can then mix these investment options to achieve an asset allocation that yields their desired combination of risk and return. Most of the performance of an investment portfolio is due to the asset allocation (e.g., percentage equities), not the specific investments included in the portfolio.

The high-risk investment option can be an S&P 500 index fund. Other stock funds, such as the Russell 2000 and a total stock market index fund, behave similarly to the S&P 500. 

Only about 75 stocks in these index funds dictate the performance of the funds because the funds are weighted by market capitalization. Everything else is just a matter of taste. Chasing after the latest fad, such as a REIT, foreign stock fund, or ESG fund, usually results in lower long-term performance.

Although the expenses vary by portfolio, the index funds usually have the lowest fees.

But the fees for the same index funds do vary by 529 plan, from 2 bp to 65 bp. (A "bp" is 1/100th of a percent.)

Combined Impact Of Fees And State Income Tax Breaks

The total annual asset-based fee was identified for the S&P 500 index fund for each direct-sold 529 plan. The fee information was extracted from the latest version of each 529 plan's disclosure brochure or program description.

If the 529 plan does not offer an S&P 500 portfolio, a large cap or total stock market index fund was substituted, whichever had the lowest fees. Examples include the Vanguard Total Stock Market Index Fund and the U.S. Broad Large Cap Index Fund.

The highest state income tax break was also identified for each 529 plan. Two-thirds of the states offer a state income tax deduction or tax credit based on contributions to the state's 529 plan. 

The fees and state income tax breaks were combined to calculate the net return on investment after investing $100 per month at a 6% annual rate of return for 10 years. This more naturally mimics the typical performance experienced by investors in 529 plans, in contrast with analysis that assumes a $10,000 lump-sum contribution.

A 6% annual rate of return, about half of the long-term return on an S&P 500 index fund, is what one could expect by using an age-based asset allocation on average. The monthly contribution amount does not hold much significance as the return on investment is proportional. 

However, $100 per month is low enough to ensure eligibility for the maximum state income tax break. The analysis assumes that the value of the state income tax break is contributed to the 529 plan as an extra contribution once a year. Fees are also subtracted once a year.

The result is shown in the following table, with Wyoming omitted since it does not have its own 529 plan or offer a state income tax break. The table is sorted according to Net ROI, from highest to lowest. 

The average fees are 22.9 bp, and the average state income tax break is 5%, with an average net return of 41.9%. Ten 529 plans have a net return of 45% or higher, earning them a gold star.

Although California has the lowest overall fees, there are four states that charge lower fees on their S&P 500 index portfolios, and California does not offer a state income tax break. As a result, California drops to 40th place when one considers the net return on investment. Instead, Indiana, which has a large state income tax break, takes first place.

The dozen lowest performing states either do not offer a state income tax break or do not have a state income tax. This includes three states with very low fees: 

• Florida
• South Dakota
• California

However, offering a state income tax break does not guarantee good performance. Mississippi offers a state income tax deduction but also charges the highest fees at 65 bp, resulting in among the worst performance. 

In contrast, New Jersey charges similar fees, at 62 bp, but offers a much better state income tax break, yielding an above-average net return on investment.

Generally, there is a stronger correlation between the net return on investment and the value of the state income tax break than with having lower fees. There is no correlation between fees and the state income tax break, so higher fees are not necessary to provide better benefits to families.

List Of States And 529 Plan Performance (ROI)

Here's a breakdown of states, their fees, tax breaks, and net return on investment (ROI) in ROI order:

Student loan forgiveness has been a top priority for President Biden during his presidency. He has proposed forgiving $10,000 per borrower, but he does not have the legal authority to forgive student loans on his own (and as a result, this is held up in the Supreme Court).

However, he has already forgiven more than $66.9 billion in student loans, using student loan forgiveness programs that have previously been authorized by Congress. As the executive, he's been able to streamline and fix programs that already exist to ensure that borrowers who qualify get the student loan forgiveness they deserve.

Learn how President Biden has forgiven the most student loans to-date, and how to qualify for these student loan forgiveness options. 

Borrower Defense To Repayment

The Trump administration delayed processing of borrower defense to repayment discharge applications for years, tried to change the rules retroactively, tried to implement partial discharges, rejected applications without reviewing them and generally acted in bad faith to deny borrowers the borrower defense to repayment discharges for which they were eligible. 

The borrowers filed a class action lawsuit the U.S. Department of Education, seeking an end to further delays and proper processing of their applications for discharge. (Sweet v. Cardona, Case No. 19-cv-03674-WHA, U.S. District Court, Northern District of California)

The Biden Administration decided to settle this lawsuit. The settlement will provide billions of dollars of discharges to about 200,000 borrowers who attended 153 colleges.  (The full list of for-profit colleges appears in Exhibit C starting on page 60 of the PDF document containing the settlement.) It will also remove related derogatory information from the borrower’s credit histories. Borrower defense to repayment applications that have not yet been processed will be processed in a timely manner, according to a schedule specified in the settlement agreement. 

The borrower defense to repayment (20 USC 1087e(h) and 34 CFR 685.206(c) and 34 CFR 685.222) provides for the cancellation of a borrower’s federal student loans when the college violated federal or state laws or engaged in a substantial misrepresentation concerning the borrower’s student loans or the educational services paid for using the student loans. If a borrower qualifies for the borrower defense to repayment discharge, the borrower’s federal student loans will be cancelled and all previous payments refunded to the borrower.

Although this lawsuit concerns borrowers who previously submitted an application for the borrower defense to repayment discharge, eligible borrowers can continue to submit applications at studentaid.gov/borrower-defense/. 

Important Note For Timing: If the settlement is approved, it will apply not just to borrowers who filed claims before June 22, but also to borrowers who file claims after June 22 but before the court approves the settlement. A hearing is scheduled for July 28. In particular, the settlement provides that these borrowers will have their applications processed within three years, and if they aren't processed, their loans will automatically be forgiven in full.

The Biden has also approved other categories of borrower defense to repayment discharge claims, including $500 million to 18,000 borrowers who attended ITT Technical Institute (ITT) and $1 billion to 72,000 borrowers by rescinding the Trump Administration’s partial relief formula. Borrowers who attended DeVry University, Marinello Schools of Beauty and Corinthian Colleges have also qualified for the borrower defense to repayment. 

Total Forgiven: $14.5 billion in student loans to 1.1 million borrowers.

Public Service Loan Forgiveness

On October 6, 2021, the Biden Administration announced a Limited PSLF Waiver that is in effect through October 31, 2022. The Limited PSLF Waiver counts all payments made by borrowers, including late and partial payments and payments made in any repayment plan, toward Public Service Loan Forgiveness.

To qualify, borrowers of loans in the FFEL program must consolidate those loans into a Federal Direct Consolidation Loan before the deadline.

In addition, all borrowers must file a PSLF form using the PSLF Help Tool before the deadline. (Borrowers of FFELP loans must consolidate their loans first, then file a PSLF form, both before the deadline.)

About 22,000 borrowers received immediate loan forgiveness because of this change, and about 550,000 borrowers will eventually become eligible for loan forgiveness because of this change. 

About 145,000 borrowers have qualified for $8 billion in student loan forgiveness under the Limited PSLF Waiver as of early June 2022. 

In addition, more than 19,000 borrowers have qualified for $1.5 billion in PSLF and TEPSLF forgiveness without needing the Limited PSLF Waiver as of the end of May 2022.

The U.S. Department of Education also implemented an automatic data match with U.S. Department of Defense records to identify borrowers who were eligible for PSLF due to their military service.

The Biden administration is also reviewing previously denied applications for PSLF to identify processing errors that unfairly denied borrowers the loan forgiveness to which they are entitled. 

Total Forgiven: Since October 2021, the Biden Administration has forgiven $42 billion in student loans to 615,000 borrowers.

Read More: Understanding The Biden PSLF Waiver vs. PSLF vs. TEPSLF

Closed School Discharges

If a college closed while the student is enrolled or within 180 days of the student’s withdrawal, the student may be eligible for a closed school discharge of their federal student loans if they are unable to complete their education through a teach-out or by transferring credits to another school. 

The Biden administration provided $1.126 billion in closed school discharges to 107,000 borrowers who attended ITT Technical Institute. This is in addition to the borrowers who attended this college and qualified for a borrower defense to repayment discharge. 

Total Forgiven: $1.26 billion to 107,000 borrowers.

Total And Permanent Disability Discharge

If a borrower is totally and permanently disabled, they may qualify to have their federal student loans discharged. 

There are three ways to qualify for a Total and Permanent Disability (TPD) Discharge by demonstrating an inability to engage in substantial gainful activity.

• Department of Veterans Affairs (VA) determination of a service-connected disability that is 100% disabling.
• Social Security Administration (SSA) disability status determination with a next disability review scheduled for five or more years after the most recent disability status determination. This applies to either Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).
• Doctor certification of a severe disability that has lasted or is expected to last for at least 5 years or which is expected to result in death. 

If the TPD discharge is based on the SSA determination or doctor’s certification, there is a three-year post discharge monitoring period during which the borrower cannot have earned income that exceeds the poverty line for a family of two. Otherwise, the repayment obligation will be reinstated. 

The U.S. Department of Education is performing a data match with VA and SSA records to implement the TPD discharge automatically for eligible borrowers. This provided $5.8 billion in discharges to 323,000 borrowers automatically. 

The Biden administration has also restored eligibility for $1.3 billion in TPD discharges for 41,000 borrowers whose loans were reinstated due to a failure to file paperwork during the pandemic. 

Total Forgiven: $9.1 billion to 425,000 borrowers.

Payment Pause And Interest Waiver

Editor's Note: Dates have been updated to reflect the most recent updates to the payment pause and interest waiver.

The paused payments under the student loan moratorium count as though they were made toward the 120-payment requirement for Public Service Loan Forgiveness (PSLF) and the 240 or 300 payment requirements for the forgiveness after 20 or 25 years of payments under income-driven repayment (IDR).

By the time the payment pause and interest waiver expires in mid-2023, borrowers of eligible loans will have benefited from 36+ months of paused payments. That’s over one-third of the requirement for PSLF and 10% or 12.5% of the requirement for IDR forgiveness. 

That’s the equivalent of about $30 billion to more than 1 million PSLF borrowers and about $60 billion to more than 8 million IDR borrowers. This forgiveness has not yet been received by most eligible borrowers, so it’s not part of the overall $25 billion figure. 

Only federal education loans held by or on behalf of the U.S. Department of Education are eligible for this forgiveness. This includes all loans in the Direct Loan program and certain FFELP loans for which title was transferred to the U.S. Department of Education or a guaranty agency. Commercially-held FFELP loans, most Federal Perkins Loans and private student loans are not eligible. 

Borrowers of commercially-held FFELP loans and Federal Perkins Loans can make them eligible by including them in a Federal Direct Consolidation Loan. It’s a little late for this, given that the student loan moratorium is set to expire in mid-2023, but perhaps the payment pause and interest waiver will be extended a ninth time. 

Tax Status Of Student Loan Forgiveness

The American Rescue Plan Of 2021 (P.L. 117-2) made all student loan forgiveness and discharge tax-free through December 31, 2025.

Without this change, the IRS would have treated the amount forgiven as taxable income to the borrower. It’s as though someone gave the borrower money to repay their student loans. The amount forgiven is reported to the borrower on IRS Form 1099-C. The federal government gives with one hand while taking back with the other. 

But, because of this change, borrowers do not need to worry about the federal tax liability associated with the loan forgiveness. However, some states may still levy state taxes on student loan forgiveness.

President Biden has called for this tax-free status to be made permanent. 

With all of these administrative process improvements and changes, President Biden has forgiven the most student loans of any president, and will likely be forgiving more as the rest of his term continues.

Peak borrowing season for new student loans runs during the summer months, June, July and August. But predatory lending can be a problem for some student loan borrowers all throughout the year. 

What exactly is predatory lending? How can borrowers protect themselves from predatory loans? We'll answer those questions and more in this quick guide.

Definition Of Predatory Lending

The term “predatory lending” is not well defined. Many borrowers use it to refer to loans that have terms that they do not like. But the FDIC defines it as “imposing unfair and abusive loan terms on borrowers.” Typical examples include payday loans and auto title loans. 

Characteristics Of Predatory Loans

The FDIC identifies several characteristics of predatory lending, such as:

Some of these characteristics apply to student loans and some don't. For example, federal and private student loans don't have prepayment penalties, as a matter of law. But families borrowing to pay for college may encounter non-education loans that have these characteristics. 

Other characteristics of predatory loans include:

Federal and private student loans share some of these characteristics. So even legitimate loans aren’t perfect. Also, federal student loans aren't subject to the defense of infancy or statutes of limitation. 

Both federal and private student loans are made to traditional students. And some lack the financial sophistication to fully understand the consequences of borrowing to pay for college.

How To Protect Against Predatory Lending

Here are four steps you can take to safeguard yourself from unfair loan terms.

1. Consider Alternatives To Borrowing

Apply for grants and scholarships, which do not need to be repaid. Consider tuition installment plans, which spread out the college costs over less than a year and don’t charge interest. You may also want to get a part-time job to earn some money to pay college bills.

Borrow as little as you need, not as much as you can. The idea is to live like a student while you’re in school, so that you don’t have to live like a student after you graduate. 

2. Borrow Federal First

Federal student loans have low fixed interest rates and flexible repayment terms. They also offer a variety of benefits (some of which private loans can't match). These include federal deferments and forbearances, death and disability discharges, income-driven repayment and loan forgiveness options.

3. Check Your Credit Before Applying For Private Loans

You can check your credit reports for free at AnnualCreditReport.com. Errors can affect your ability to qualify for a loan and the interest rate you’ll pay if you do qualify. Correct any errors by disputing them. 

Do so at least 30 days before you apply for a private student loan as it can take a month for errors to be removed from your credit reports.

4. Shop Around When Looking For A Loan

Most borrowers focus on finding the lowest-cost loan. And that's a great starting point. But other terms that may be of interest include the quality of customer service (e.g., does the lender offer evening and weekend call center hours) and the availability of loan discounts (e.g., autopay discounts, good grades discounts, graduation discounts).

When comparing student loans, borrowers should consider both the monthly loan payments and the total payments over the term of the loan. A lower monthly loan payment may involve paying a lot more over the life of the loan.

A loan’s APR combines the impact of the interest rate, loan fees and repayment term. A higher APR is a more expensive loan. Borrowers should be more careful when a loan’s APR is in the double digits. For example, a 16% interest rate on a 10-year repayment term means that the borrower will pay more in interest than the amount borrowed. For a 20-year term, an interest rate of 8% or more means paying back more than double the amount borrowed.

Another bad sign is when a loan requires more than a 10-year repayment term for the monthly loan payments to be affordable. That’s generally a sign that you borrowed too much or that the loan is too expensive.

Final Thoughts

Ultimately, the best way to protect yourself against predatory lending is to become financially literate. This will help you understand how interest rates, fees and loans work so that you can make smarter borrowing decisions.

Be sure to read The College Investor's student loan guide. Your school may also offer free courses on how to pay for your education in a financially responsible way. Finally, you can find a wealth of financial tools such as calculators, budget worksheets, and planning checklists on MyMoney.gov.

The Department of Education issues Federal loans to students, but it doesn’t work with borrowers directly. Instead, it hires outside loan servicers to shoulder the administrative burden of educational debt. 

The Federal Student Aid office currently works (or has worked) with eleven loan servicing companies. Borrowers typically work with one loan servicing company for the life of their loans. They receive their initial disbursement from the company. And 10 to 30 years later, they receive a celebratory letter from the same servicer when they pay off the loans.

But not every borrower has that experience. The U.S. Department of Education can transfer a loan to a different loan servicer at any time (and historically, they've done this about every 5-10 years for some borrowers). Here’s what you need to know if your student loan servicer changes.

What Does A Student Loan Servicer Do?

When borrowers take out Federal student loans for the first time, the Department of Education assigns the borrower to a loan servicer. From that point forward, borrowers access their loan account through the loan servicer’s website or app.

Loan servicing companies disburse payments, send out bills, and collect payments from borrowers. If you want to change your repayment plan or apply for deferment or forbearance, you'll need to work through your loan servicer as well.

Currently, one loan servicing company, FedLoan Servicing (and MOHELA going forward), tracks progress towards Public Service Loan Forgiveness (PSLF) and other loan forgiveness programs.

Why Do Student Loan Servicers Change?

There are various reasons that student loan servicer changes can happen. Sometimes the move is initiated by the borrower. In other cases, the Department of Education may force the change. We'll look at a few examples below.

Borrower Actions

The government doesn't allow borrowers to just switch federal loan servicers at any time. In other words, you can't just demand to be moved to a new company if you're unhappy with the service you're receiving.

But there are a few actions borrowers may take that will lead to a servicer change. First, borrowers that consolidate student loans may select their loan servicer during the consolidation. Following consolidation, the loans will be transferred to the loan servicer you chose. 

Another example would be if you decide to pursue Public Service Loan Forgiveness (PSLF). Once you join the program, your loans will automatically be transferred to FedLoan Servicing.

A final example is applying for disability discharge. NelNet is the current loan servicer that handles all disability discharge requests, and your loans would be transferred to NelNet if you're pursuing this. 

Department Of Education Actions

Sometimes loan servicers can change for reasons outside of the borrowers control. The Department of Education may simply decide not to renew your servicer's contract. And when the current contract expires, your account will need to be moved to a new company.

These types of changes don't happen often. But, in April 2023, the Department of Education announced that it had signed new servicer contracts with five companies:

• Central Research Inc.
• Edfinancial Services
• MAXIMUS Federal Services
• Missouri Higher Education Loan Authority (MOHELA)
• NelNet

Only Edfinancial Services, MOHELA, and NelNet are currently servicing federal student loans. So unless your loans are with either of those companies, there's a strong chance that you will be changing servicers in the near future.

Contracts End

Sometimes the loan servicers themselves decide to not work with the Department of Education. For example, FedLoan Servicing, GSMR, and Navient all ended their contacts. 

There are many reasons why loan servicers may want to not renew their contracts - but it always typically comes down to money. We have a full article on why loan servicers are dropping out here.

What Happens When A Student Loan Servicer Changes?

When your student loan servicer changes, you don’t have to worry about “starting over” with new loans. Student loans don't change payment terms when the servicer changes. And prior payments should all be accounted for. 

Loan servicers are supposed to make the transition from one servicer to the next as seamless as possible. When student loan servicer changes happen, StudentAid.gov says these are the steps that should be taken:

• Current servicers send emails to borrowers informing them about the transfer.
• Current servicers transfer loans to the new servicer.
• Borrowers receive welcome letters from the new servicer.
• Borrowers account information will be transferred to the new servicer, so the new servicer’s website will accurately reflect payment history.
• During the transition, both servicers work together to make sure all payments are credited to the borrower’s loan account.

You may experience a few weeks of miscommunication or incomplete records with your new loan servicer. But everything should be sorted out as the transition comes to a close.

What Should I Do If My Student Loan Servicer Changes?

As a borrower, you don’t need to do too much if your loan servicer changes. You will simply create an online account with the new loan servicer. This will allow you to set up auto draft or bill pay with the new loan servicer. It will also allow you to keep track of your loans.

And, of course, you will need to send your monthly payment to the new loan servicer. The easiest way to do this will be through the loan servicer’s online portal. However, you can also send checks to the new loan servicer once it confirms your account. 

However, we strongly recommend that you have accurate records of your loans prior to any switch. This means having copies of your statements and loan balances - just to make sure your records are accurate after the switch!

What Can I Do If I'm Unhappy With My New Servicer?

When your loan servicer switches, you may have the ability to change servicers on your own terms. A primary method for switching servicers is by consolidating federal loans. When borrowers consolidate their loans, they have the option to select any loan servicing company.

If consolidating isn’t an option for you, you can make a complaint about your servicer through the Department of Education’s Federal Student Aid Feedback System. You can also file a complaint with the Consumer Financial Protection Bureau (CFPB) or Better Business Bureau (BBB).

Depending on your state, you may also have the option of a state ombudsman to help you with your student loans. For example, as part of California's Student Loan Borrowers' Bill Of Rights, there will be a new ombudsman for borrowers in the state to contact for assistance. 

Finally, you could consider refinancing your federal student loans with a private lender. You may be able to lower your interest rate during a student loan refinance. But you'll also lose out on benefits like Income-Driven Repayment (IDR) and federal forgiveness programs. 

You shouldn't refinance federal student loans just to get better customer service. But if you're wanting to pay down your loans as fast as possible with the least interest, refinancing could help. And if your service improves too, that's just icing on the cake. These are our favorite student loan refinancing companies.

If you’re looking to get your personal finances in order and pay off debt, knowing where to start can be a real challenge - especially when it comes to figuring out which loans to pay off first. You might be feeling some paralysis by analysis when deciding which debt to pay off first. 

This step-by-step guide will help you figure out where to start, how to keep going, and how to personalize the debt payoff journey to suit your needs. Our guide assumes that you've already have a basic budgeting system in place and now you just need a strategy to pay down your debt.

Before talking about the various types of debt you may have to pay off including medical debts, credit cards, and student loans, it’s critical to prioritize your current, delinquent, and defaulted debts. 

• Current debts are any debts where you owe money, and you’re making on-time payments every month. 

• Delinquent debts are debts where you are behind on payments, but the bill is not yet in collections. 

• Defaulted debts are debts in collections. You'll know a debt is in default if a collection agency is hounding you to get you to collect payment.

Not sure whether your debts are current, delinquent, or in default? A free credit report can help you figure out all that information.

When it comes to paying off debt, your top priorities should be to continue making minimum payments on all current debts. Paying your bills on time each month will help you to build a good credit score. You don’t want to damage your credit score by letting one of these bills fall into delinquency.

Then, if you have delinquent debts, can you make them current? This depends on your savings and whether you have the money to pay off this debt. Rehabilitating a loan is better for your credit than letting it slide into default. 

If you think that you may end up defaulting on a debt or two, consider doing it strategically, by seeking free advice from a low-cost financial attorney or a certified credit counselor first.

Once you’ve defaulted on a debt, it can’t do any more damage to your credit than it’s already done. Collections agencies may be hounding you, but you can get them to stop. Unless you’ve been served with a lawsuit or you have the money to settle an old loan, you don’t want to deal with collections agencies. Let these loans in default wait while you get the rest of your financial house in order.

If you’ve fallen behind on debt payments, getting them current can be tricky. But if you have a full-time job and are willing to trim lifestyle expenses to the bare bones, you probably can get most or all of your bills current. 

Once your bills are current, you can start the phase of debt payoff and figure out which debt to tackle first.

Predatory loans are loans that have an interest rate above the legally established usury rates, (which may hover around 39.5% in some states). Usury rates refers to a rate of interest considered to be excessive compared to market interest rates. 

Some lenders get around usury laws by charging obscene “renewal” fees for short-term loans. For example, title loan companies can charge more than 100% annually. They do this by re-issuing their loans each month until a borrower defaults (and loses their car) or manages to pay off the loan. Payday loans have even higher interest rates.

Payday loans, pawn shop loans, and car title loans are loans issued by lenders who are happy to issue “technically legal” loans while ruining borrowers' lives. 

If you have a predatory loan, get that loan out of your life as quickly as possible. The fees are so high it will hinder your ability to pay off any debt in a relatively quick manner. 

Although it’s tempting to include every type of debt in your preferred debt payoff plan, there are a few to save for the end. This is because they offer unique benefits to borrowers. Consider "deprioritizing" debt payoff on these types of loans. This means you're going to address them - but maybe in a different way (via loan forgiveness), or at a different time (due to interest rate or other factors). 

After your worst debt is in the rearview mirror, pick a debt payoff strategy to help you decide what to pay first.

An effective debt payoff strategy recommends you eliminate one debt at a time so you can see your progress. Every debt you pay off frees up more of your cash to eliminate the next one.

Avalanche Method: Prioritize Your Highest Interest Debt First

In the avalanche method of debt payoff, you make minimum payments on every debt except your highest-interest debt. 

Every extra dollar you put towards debt (beyond minimum payments) will go towards paying off your debt with the highest interest rate. Once that debt is eliminated all the money that was going towards the eliminated debt goes to the debt with the next highest interest rate.

In the example below, the credit card with the 22% interest rate is paid off before any other debt. The borrower then pays the private student loan, the personal loan, and finally, the car loan. The federal student loan and mortgage are deprioritized because their interest is lower and they’re considered to be “good debts.”

Snowball Method: Prioritize Your Smallest Debt First

The snowball method is all about getting quick wins to keep you motivated. In the snowball method, you’ll pay off the debt with the smallest balance first. This way, you may be able to pay it off in just a few months and feel invigorated to pay off the next.

In the example below, the borrower first pays off the personal loan with a $1,872 balance even though she has higher interest debts. This method isn’t as favorable mathematically, but it tends to work well with human psychology. It’s especially effective if you have a bunch of tiny debts that just need to be cleaned up forever.

Tsunami Method: Prioritize The Debt You Hate The Most

The Debt Tsunami method harnesses your emotional energy to help you destroy debt. In this method, you prioritize the debt that you loathe the most. If the overdue child support that you owe to your ex causes you to lose sleep, get rid of it first. 

Not feeling as much hatred for racking up your credit card for the trip to Bali with your sisters?  Save it for later.

The Debt Tsunami payoff method is designed to give you more emotional freedom as you gain financial freedom as well. If you have some emotional baggage around your debt, this could be a great option for you.

In the example below, the personal loan for a wedding ring associated with a broken engagement is paid off first followed by credit card purchases, the new car loan, and finally the private student loan.

When you first start paying down debt, you may not have many opportunities to refinance debt at a lower interest rate or use 0% balance transfers to cut down on the interest you’ll pay. 

But as you pay down debt, your credit score is likely to rise, and more opportunities will open up. Once you’ve started to develop your debt payoff muscles, taking advantage of these opportunities can help you work smarter.

Your first plan doesn’t need to be your only plan when you’re paying off debt. Combine new tactics with your strategy to develop an even better way to get out of debt faster.

Get rid of the final remaining debt you have—most likely your student loan debt. Check to see if you qualify for loan forgiveness or alternative paths to forgiveness. Then, create a plan to attack one debt at a time. 

For student loans specifically, there are a lot of repayment plans that might make more financial sense than simply aggressively throwing money at them. Even though your goal is to become debt-free, you don't want to waste money in the process.

With enough determination and focus, you can motivate yourself to eliminate large debts and achieve greater levels of financial freedom.

A student loan ombudsman is an independent, objective and impartial mediator. Their job is to help student loan borrowers resolve disputes. They are neutral and do not represent either party in the dispute. 

Most lenders and loan servicers have their own student loan ombudsmen. But the federal government has two ombudsmen as well. One federal ombudsman helps federal student loan borrowers while the other works to resolve borrower disputes with private lenders.

In this guide, we'll share tips on how to resolve your student loan disputes on your own before you seek additional help from a student loan ombudsman. We'll also provide the ombudsman contact information for the federal government and for several major lenders and servicers.

Most Common Student Loan Disputes

Many student loan issues arise because of the complexity of the federal student loan system. With so many repayment plans to keep track of, it can be difficult for even the most competent of companies to service federal loans effectively. This is precisely why some federal loan servicers have been dropping out.

But servicing issues aren't just a federal student loan problem. Private student loan lenders are certainly capable of making mistakes too. Regardless of loan type, the most common student loan disputes include:

• Missing loan payments or loan payments that were not applied correctly
• Incorrect loan balance
• Errors involving interest
• Misleading, inaccurate or incomplete information provided to the borrower
• Inadequate accommodations for the borrower’s financial situation
• Lack of loan repayment options
• Wrong loan status
• Illegal lender collection activities
• Errors in information provided to credit bureaus
• Identity theft
• Problems caused by the merging of two or more servicers
• Problems with quality of customer service
• Problems relating to requirements for loan forgiveness, loan discharge, deferments, forbearances, and reinstating repayment obligations after discharge
• Attempts to collect a student loan that was discharged in bankruptcy
• Problems related to student loan consolidation or refinancing
• Problems related to student loan settlements
• Confusion about the difference between federal and private student loans (or types of federal loans)

Sometimes loan balances that are higher than expected can be for legitimate reasons like interest capitalization, negative amortization, or late fees and collection costs.

But inaccurate loan balances can also be caused by loan servicer error in incorrectly applying a payment or losing a payment. Below, we discuss how to resolve these types of issues when they occur.

How To Resolve Student Loan Disputes On Your Own

First and foremost, stay calm. Dealing with loan problems can get emotional. But try to avoid having it affect your interaction with the lender or loan servicer. Venting may make you feel better, but it doesn’t solve your problem. Don’t make threats. 

1. Clarify The Nature Of The Dispute

Start by clarifying the nature of the dispute. What exactly is the problem? What information can you provide relating to the dispute? What is your desired outcome? What are the obstacles to resolution of your dispute?

2. Gather Information

It's helpful to collect key information about your student loans. Questions you'll want to get the answers to at this stage include:

• What is the name and contact information for the lender and loan servicer? (If you don’t know the name of your lender or loan servicer, you can often find this at StudentAid.gov or AnnualCreditReport.com.) 
• What is the type of loan?
• Is it a federal or private student loan?
• What is the interest rate?
• What is the due date?

Keep copies of documentation, such as bills, proof of payment (receipts, cancelled checks and bank statements showing an automatic transfer), correspondence (letters and email messages), promissory notes and other proof of your claims.

3. Contact Your Lender Or Loan Servicer

Try to resolve the dispute directly with your lender or loan servicer before filing a formal complaint. Here's the contact information for the current federal student loan servicers:

There are two situations when you might want to call a different number than the ones listed above. First, if the problem involves death, disability, severe illness or similar financial challenges, try calling the lender’s main telephone number and ask for their “compassionate review” process.

Second, if you've defaulted on your loan and you're dealing with a collections agency, the Default Resolution Group is the first place to contact. You can get in touch with them at 1-800-621-3115
1-866-313-3797.

4. Document Everything

Keep notes of your conversations with the lender or loan servicer. Write down who you spoke with and the dates and times when you spoke with them, what was said and what you were told. Any details concerning the nature of the problem will be helpful.

If an agreement was reached, follow up in writing to confirm the agreement. Send letters with delivery confirmation or by certified mail, return receipt requested, so that you have proof of receipt.
Ask for a response within a reasonable amount of time, such as within a few weeks. Most borrowers receive responses to their complaints within two weeks.

When To Contact Your Lender's Student Loan Ombudsman

If you don’t get a response from the lender or loan servicer or you're not satisfied with the response, it may be time to contact a student loan ombudsman.

There are several different types of student loan ombudsmen. Start with the lender’s own ombudsman. Here are links to the ombudsmen for several major lenders and loan servicers. 

• AES/PHEAA
• Educational Credit Management Corporation (ECMC)
• Great Lakes
• National Student Loan Program 
• Navient
• Sallie Mae
• Trellis Company (formerly Texas Guaranteed Student Loan Corporation (TG))

The U.S. Department of Education operates a Feedback Center (1-844-651-0077) where you can submit complaints concerning federal student loans (and other federal student aid) in addition to using the ombudsman. 

It's best to wait a few weeks after submitting a complaint before moving to the next step of reaching out to a federal ombudsman. The lender may respond to the complaint and eliminate the need to escalate the issue.

When To Contact A Federal Student Loan Ombudsman

If working with the lender directly or through its ombudsman fails to yield a resolution, then turn to the federal or state ombudsman. The state ombudsman is usually an office within the state attorney general or state higher education agency.

There are two federal ombudsmen — one for federal student loans and one for private student loans. Here's how to contact them.

Federal Student Aid Ombudsman

The Federal Student Aid Ombudsman, also known as the FSA Ombudsman, deals with Direct Loans, Federal Family Education Loans (FFEL), Federal Perkins Loans and other federal student aid. They can be reached by telephone at 1-877-557-2575 or 1-202-377-3800 or by fax at 1-606-396-4821 or 1-202-275-0549.

The FSA Ombudsman will research the problem and work with you and the lender, loan servicer or collection agency to resolve the dispute. They can:

• Identify and evaluate options for addressing your concerns
• Clarify the requirements for deferment, forbearance, cancellation and discharge
• Explain how interest, late fees and collection charges work
• Review your loan payment options

The FSA Ombudsman does not have the authority to overturn decisions of other entities. But, they have a strong track record of success in resolving disputes. If necessary, they will refer you to the appropriate office or organization and provide them with clear information about the nature of the dispute

Private Student Loan Ombudsman

The Private Student Loan Ombudsman is provided by the Consumer Financial Protection Bureau (CFPB). You can submit a complaint online by calling 1-855-411-2372 (TDD 1-855-729-2372).

It can be helpful to look at the CFPB’s consumer complaint database to see how similar problems have been resolved. Seeing how other issues have been addressed could help you phrase your complaint in a way that gives you the best chance of receiving a satisfactory resolution.

State-Based Student Loan Ombudsman

Currently, 10 states and the District of Columbia have "Ombudsman"-type roles. These are usually served by administrators in financial oversight departments within various states. This goes along with the many "Student Loan Bill of Rights" that states have been passing.

Typically, these offices have shorter wait-times for assistance and can potentially help you get your situation resolved.

California

Celina Damian, Student Loan Ombudsperson 

California Department of Financial Protection & Innovation

(866) 275-2677

CA Department of Financial Protection & Innovation

Colorado

Martha Fulford, Student Loan Ombudsperson 

Office of the Attorney General

(702) 508-MySL (6975)

studentloans@coag.gov

Colorado Office Of the Attorney General

District of Columbia

Ricardo Jefferson, Student Loan & Foreclosure Ombudsman

Department of Securities, Insurance & Banking

(202) 727-8000

dcloanhelp@dc.gov

DC Student Loan Ombudsman

Illinois

Joseph Sanders, Student Loan Ombudsman

Office of the Attorney General

1-(800)-455-2456

www.illinoisattorneygeneral.gov/

Maine

William Lund, Student Loan Ombudsman

Bureau of Consumer Credit Protection

(207) 624-8527

www.credit.maine.gov/

Maryland

Sean McEvoy, Assistant Commissioner

Department of Labor, Licensing & Regulation

(410) 230-6185

https://www.dllr.state.md.us/finance/consumers/frslombud.shtml

Minnesota

Betsy Talbot, Manager

Office of Higher Education 

(651) 259-3965

www.ohe.state.mn.us/

New York

NYS Department of Financial Services

1-(800) 342-3736

students@dfs.ny.gov

www.dfs.ny.gov/consumers/student_protection

Nevada

Evelyn Castro, Student Loan Ombudsman

Office of Nevada State Treasurer

(702) 486-3384

SLO@nevadatreasurer.gov

Virginia

Scott Kemp, Student Loan Advocate

State Council of Higher Education

(804) 786-2832

studentloan@schev.edu

www.schev.edu/studentloan

Washington

Stephanie Sampedro, Student Loan Advocate

Student Achievement Council

(833) 881-0397

loanadvocate@wsac.wa.gov 

www.wsac.wa.gov/

Other Resources For Resolving Student Loan Disputes

If you've followed all of the steps above and haven't received a satisfactory resolution to your student loan complaint, you still have a few options. For many borrowers, their next step should probably be to file a complaint with the FTC or Better Business Bureau (BBB). 

U.S. Department of Veterans Affairs (VA). Veterans who are attending or attended a college through the G.I. Bill can file a complaint with the VA GI Bill Feedback System. Military spouses and dependents can also seek help through Military OneSource.

Airing your grievance through social media like Twitter and Facebook can sometimes put public pressure on the company to resolve your dispute. And, finally, your member of Congress may be able to help as they have aides who focus entirely on helping constituents resolve problems with the federal government. 

“Crypto” has become something of a buzzword in the financial world over the past few years, and for good reason! With the emergence of blockchain technology, crypto stands to revolutionize the way we conduct transactions and manage our money. And as Bitcoin and Ethereum have shown us, they also can pay out serious returns.

In this article, we will explore some of the key ways to invest in crypto and altcoins in 2023, from using exchanges to the complex (but rewarding) world of self-custody.

Keep in mind that cryptocurrency, especially altcoins, are a very risky and speculative asset. So, as with anything you read online about crypto, just remember to DYOR (do your own research) and that this is NFA (not financial advice.)  

Let's get started!

How To Invest In Cryptocurrency Directly

With direct cryptocurrency investing, there’s no middleman involved. You’re holding the actual cryptocurrencies in your digital wallet. To purchase cryptocurrencies directly, you’ll need to go through one of the exchanges that specialize in trading cryptocurrencies.

A few of these are Coinbase, Kraken, Uphold, and Binance. If you’ve never invested directly in cryptocurrencies, it’s important to understand the difference between base coins and alt coins.

Base Coins 

Bitcoin and Ethereum are base coins. We have full articles dedicated to how to invest in Bitcoin and how to invest in Ethereum, so we won't go into full detail here. But these are the main starting point of investing in cryptocurrency. 

How To Invest In Bitcoin and Ethereum

These coins can be purchased directly with fiat currency (i.e., US dollars deposited into your exchange account or through a debit card). You can do this on an exchange. 

There is often a fee for exchanging fiat currency for cryptocurrencies. This might be in a commission or a spread on the bid/ask price of the cryptocurrency.

Coinbase and Kraken are our favorite places to invest in base coins.

You can see our full list of the best cryptocurrency exchanges here.

You can also invest in BTC and ETH through various decentralized exchanges, like Bisq.

Alt Coins

Essentially, anything that is NOT Bitcoin is considered an altcoin, or alternative coin. Often, these digital assets serve specific purposes or aim to improve upon blockchain technology in some way. 

For example, Ethereum’s native token, ETH, serves as the foundation for transactions and smart contract execution on a decentralized platform. Some other popular altcoins include Chainlink, Polkadot, and Dogecoin.

When considering which altcoins to invest in, it's important to do your research and understand the underlying technology and purpose of each asset. It would also be wise to consider general market trends, the coin’s potential for growth, as well as risks and volatility.

Binance is a great place to invest in alt coins.

Benefits and Risks of Investing in Altcoins

It’s no secret that millionaires have been made through altcoins like DOGE. But it’s not always as simple as hitting the big, green “buy” button and then cashing out massive gains. Investors should understand that altcoins are a high-risk, high-reward investment.

Before we talk about how to invest in altcoins, let’s do a quick rundown of the benefits and risks involved.

Benefits

1. High potential returns: Altcoins can offer much higher returns than traditional investments due to their volatility and the potential for rapid price increases.
2. Diversification: Investing in a range of altcoins based on solid projects can diversify an investment portfolio, lowering overall risk.
3. Innovative use cases: Altcoins often have unique use cases and technologies that can offer new possibilities for investors and businesses.
4. Early investment opportunities: Some altcoins in the early stages of development offer investors the chance to get in on the ground floor of a promising project.

Risks

1. High volatility: Altcoins can be extremely volatile, with sudden price swings and the potential for significant losses.
2. Unregulated market: The cryptocurrency market is largely unregulated, which can make it more susceptible to scams and “rug-pulls”.
3. Market saturation: There are thousands of altcoins on the market, and more cropping up every day. Obviously, not all of them will succeed in the long term.
4. Low liquidity: Some altcoins may have low liquidity. This can make it difficult to sell them quickly if necessary, or result in slippage that can incur additional loss.

Given these factors, investors should approach altcoins with caution and a well-informed strategy. 

Researching individual altcoins and understanding their underlying technology, market potential, and risk factors is crucial before making any investment decisions. And as with any speculative investment, buying altcoins should only be done with money that you can afford to lose.

With that understanding in place, let’s talk about 2 of the best ways to invest in altcoins in 2023–through exchanges, and through self-custody.

How to Invest in Altcoins through Centralized Exchanges

Almost every exchange has major coins such as BTC and ETH. But if you’re wanting to dive into the esoteric world of alts, finding an exchange with a lot of coin listings is your best bet. 

Here are a few options to consider:

Binance

• Largest cryptocurrency exchange in the world by trading volume.
• Over 500 different cryptocurrencies for trading.
• Requires Know Your Customer (KYC) verification for certain account features.

Read our full Binance review here.

KuCoin

• Offers over 400 different cryptocurrencies for trading.
• Does not require KYC verification for basic account features, but certain actions may require verification.

Read our full KuCoin review here.

Uphold

• Exchange that also functions as a digital wallet
• 250+ cryptocurrencies, 27 traditional currencies, and 4 precious metals.
• Requires KYC verification for account creation.
• Strong reputation for security and transparency.

Read our full Uphold review here.

Using centralized exchanges is the simplest way to invest in altcoins. But it’s not the only way. 

Especially in light of the mishandling of funds by prominent exchanges, many crypto investors are turning to our second method: self-custody (or decentralized investing).

How to Invest in Altcoins through Self-custody

Self-custodying your altcoins involves setting up your own personal cryptocurrency wallet and then transferring base coins to your wallet so you can do decentralized transactions.

Here's a quick 4-step guide to investing in altcoins through self-custody:

1. Choose a wallet: There are several different types of cryptocurrency wallets, from software to hardware. Research the different options and choose a wallet that meets your needs for security, ease of use, and compatibility with the altcoins you want to invest in. Read our guide to the best cryptocurrency wallets.
2. Transfer BTC or ETH: Once you've set up your wallet, you can transfer your BTC or ETH from your centralized exchange to your self-custody wallet.
3. Purchase Altcoins: You can then connect to decentralized exchanges like Uniswap or Curve to exchange your BTC or ETH for altcoins.
4. Secure your wallet: Especially for long-term investments, you’ll likely want to secure your newly-transferred assets. This often includes setting up a strong password and enabling two-factor authentication, as well as backing up your wallet’s seed phrase.

Self-custody is a great option for investors who want complete control over their assets and are willing to take on the responsibility of securing them.

It also opens the door to other means of investing in alts through chains like Ethereum, BSC, and the Polygon (Matic) Network.

How To Invest In Cryptocurrency Funds and Futures

Holding a fund with exposure to cryptocurrencies can reduce volatility. You also don’t have to worry about exchanging from fiat currencies into a cryptocurrency or maintaining a digital wallet.

Additionally, a fund can be traded in the same manner as you trade stocks or mutual funds. The only problem with cryptocurrency funds is that there's currently only one to choose from.

Grayscale Bitcoin Trust (GBTC)

GBTC is a fund that does hold Bitcoin. The fund does not track Bitcoin 1-1. Whereas Bitcoin is several thousand dollars, GBTC is currently only $10.86. GBTC is not nearly as volatile as Bitcoin.

However, GBTC’s 2% management fee is much higher than you'll pay for the typical index fund or even actively-managed mutual fund.

Bitcoin Futures

The Chicago Mercantile Exchange (CME) has a futures product called the Bitcoin Futures Contract (BTC). It tracks Bitcoin 1-1.

A futures contract doesn’t make the best investment since it expires periodically and must be rolled into the next contract. But if you want to hold a position in BTC using a futures contract short-term, CME’s BTC product may be ideal.

The difference in using CME’s BTC is that you aren’t relying on a cryptocurrency exchange. Going from one cryptocurrency exchange to another can mean liquidity issues and differences in margin requirements.

But CME is a reliable exchange that has been around for decades. There’s also plenty of liquidity with BTC and CME sets the margin requirements. 

How To Invest In Cryptocurrency Companies

Some companies are involved in cryptocurrencies through microprocessor technologies that power crypto mining, developing their own cryptocurrency, or creating a platform that powers cryptocurrencies (i.e., blockchain).

Each of the companies listed below have publicly-traded stocks. To invest in them, you simply need to open an account with an online stock broker and buy the number of shares you want to own. To reduce costs, look for brokers that offer free stock trades.

Except for RIOT, none of the stock tickers below are for companies that wholly rely on cryptocurrency-related technologies as their sole revenue driver. Rather, they have integrated cryptocurrency into their other revenue streams.

AMD, INTC, And NVDA

All three of these companies create microprocessors and are involved in cryptocurrencies by helping to supply crypto mining technologies. NVDA is leading the pack in this category. Its popular GPUs are used to mine Bitcoin.

COIN

Coinbase Global Inc is the publicly traded company behind the popular Coinbase cryptocurrency exchange. They make money by helping traders execute their trades, as well as through loans and other offerings. As a result, their profits are directly tied to the cryptocurrency marketplace. The more volume that's traded, the more that Coinbase makes. 

CRM

Salesforce has created a blockchain (Sales Blockchain) that utilizes its platform’s metadata. It includes apps and can be shared with network partners.

V And MC

Visa and Mastercard control the flow of digital credit to and from credit cards and debit cards. They do not issue these cards directly but instead depend on different companies to handle issuing cards and providing customer support. The networks provided by V and MC make digital cash possible.

Both companies have jumped into the cryptocurrency space. V has partnered with Coinbase to issue debit cards linked to Coinbase digital wallets. MC has done something similar through a partnership with Bitpay.

RIOT

Riot Blockchain, Inc. is a true cryptocurrency pure play company. It is a small company that is focused on building and supporting blockchain ecosystems. RIOT is risky, however, as the company isn’t yet producing any revenues.

Final Thoughts

There are many ways to invest in cryptocurrency, from direct investments to more indirect routes using funds and stocks. The route you choose depends on your risk tolerance and what you’re most comfortable with. 

Some people may want to avoid opening up an account at a cryptocurrency exchange and are fine buying a fund or cryptocurrency-related stock. But others may feel that the potential high reward of investing directly in cryptocurrencies is worth the high risk.

Still others may be prefer to avoid cryptocurrency investing altogether. If diversification and minimal volatility are your top investing priorities, you may be better off sticking with index funds and ETFs or computer-managed portfolios with one of the top robo-advisors.