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If you borrowed money from the government to help pay for college, the time will come when you need to pay your student loans back. That time typically arrives six months after you graduate or drop below half-time status.

While the prospect of paying student debt may seem daunting while you’re a student with little to no income, don’t stress. The U.S. Department of Education offers a number of repayment options, including plans that only require you to pay a small percentage of your monthly salary. Plus, there are steps you can take to make it easier to repay your student loans and potentially save money on interest.

Read on to learn how to start paying off student loans.

Paying Back Your Student Loans

You don’t need to start thinking about paying your loans while you’re enrolled in school at least half-time, and for six months after you graduate (which is called the grace period).

Unless your loans are subsidized by the federal government, however, interest will accrue during that entire period of time. That interest gets added to your loan balance, or capitalized, when repayment begins. As a result, your balance will be larger after you graduate than the amount you initially borrowed. You’ll also be paying interest on that larger balance moving forward.

If you have some income as a student (and have unsubsidized loans), you might choose to make monthly interest payments while you’re in school, or to make a lump-sum interest payment before your grace period ends. This will leave you with a smaller balance to pay off once your repayment period officially begins and can help you save money on interest. However, this is not required.


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

Types of Student Loans

To determine the right student loan repayment strategy, it’s important to know what type of student loans you have. Here’s a look at the main types of federal student loans.

Direct Subsidized Loans

Direct Subsidized Loans are a type of federal student loan only for undergraduates who have demonstrated financial need. With these loans, the government pays the interest on the loan while you are in school and during the grace period.

Direct Unsubsidized Loans

Direct Unsubsidized Loans are available to eligible undergraduate, graduate, and professional students, and eligibility is not based upon financial need. Borrowers are responsible for all interest that accrues on the loan.

Direct PLUS Loan

Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for education expenses. These loans are unsubsidized, meaning that interest accrues throughout the life of the loan, including while the student is enrolled in school.

When Do You Have to Pay Back Federal Student Loans?

You need to begin paying back most federal student loans six months after you leave college or drop below half-time enrollment.

Direct PLUS loans enter repayment once your loan is fully disbursed. However graduate/professional students who take out PLUS loans get an automatic deferment, which means they don’t have to make payments while they are in school at least half time, and for an additional six months after they graduate.

If you’re a parent PLUS loan borrower, you can request a deferment (it’s not automatic). This deferment means you won’t have to pay while your child is enrolled at least half time, and for an additional six months after your child leaves school or drops below half-time status.

How Do I Pay Back My Federal Student Loans?

When you leave school, you’ll be required to complete exit counseling. This is an online program offered by the government that helps you prepare to repay your federal student loans. You’ll then have the option to pick a repayment plan. If you don’t choose a specific plan, you’ll automatically be placed on the 10-year standard repayment plan. However, you can change plans at any time once you’ve begun paying down your loans.

Your federal loan servicer will provide you with a loan repayment schedule that tells you when your first payment is due, the number and frequency of payments, and the amount of each payment.

Your billing statement will tell you how much you need to pay. If you signed up for electronic communication, you’ll want to pay attention to your email. Most loan servicers send an email when your billing statement is ready for you to access online.

You might also consider signing up for autopay through your loan servicer. Since your payments will be automatically taken from your bank account, you won’t have to worry about missing a payment or getting hit with a late fee. Plus, you’ll receive a 0.25% interest rate deduction on your loan.

Choosing a Loan Repayment Plan

To repay your loan, you’ll need to pick a repayment plan. Here’s a look at your options, plus tips on why you might choose one plan over another.

The Standard Repayment Plan

The Standard Repayment Plan is the default loan repayment plan for federal student loans. Under this plan, you pay a fixed amount every month for up to 10 years (between 10 and 30 years for consolidation loans). This can be a good option for borrowers who want to pay less interest over time.

The Extended Repayment Plan

The Extended Repayment Plan is similar to the Standard Repayment plan, but the term of the loan is longer. Extended Repayment plans generally have terms of up to 25 years. The longer term allows for lower monthly payments, but you may end up paying more over the life of your loan thanks to additional interest charges.

The Graduated Repayment Plan

The Graduated Repayment Plan starts with lower payments that increase every two years. Payments are made for up to 10 years (between 10 and 30 years for consolidation loans). If your income is low now but you expect it to increase steadily over time, this plan might be right for you.

The Income-Driven Repayment Plan

With income-driven repayment plans (IDRs), the amount you pay each month on your student loans is tied to the amount of money you make, so you never need to pay more than you can reasonably afford. Generally, your payment amount under an IDR plan is a percentage of your discretionary income (typically 5% to 10%).

Under all IDR plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period (either 20 or 25 years).

There are currently two IDR plans accepting new enrollments:

•   Saving on a Valuable Education (SAVE) Plan—formerly the REPAYE Plan

•   Income-Based Repayment (IBR) Plan

IDR can be a good option if you’re having difficulty meeting your monthly payment and need something more manageable.

Consolidating Your Loans

If you have multiple federal student loans, you have the option of consolidating them into a single Direct Consolidation Loan. This might simplify repayment if you are currently making separate loan payments to different loan servicers, since you’ll only have one monthly payment to make. In addition, a Direct Consolidation Loan could make you eligible for more repayment plans than your current loans are eligible for.

Federal loan consolidation will not lower your interest rate, however. The fixed interest rate for a Direct Consolidation Loan is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of a percent. It might also extend your repayment term, which can result in paying more interest over the life of the loan.

Refinancing Student Loans

When you refinance your student loans, you combine your federal and/or private loans into one private loan with a single monthly payment. This can simplify repayment and might be a smart move if your credit score and income can qualify you for lower interest rates.

With a refinance, you can also choose a shorter repayment term to pay off your loan faster. Or, you can go with a longer repayment term to lower your monthly payments (note: you may pay more interest over the life of the loan if you refinance with an extended term).

If you’re considering a refinance, keep in mind that refinancing federal loans with a private lender disqualifies you from government benefits and protections, such as IDR plans and generous forbearance and deferment programs.


💡 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.

The Takeaway

If you have federal student loans, you generally don’t need to start paying them down until six months after you graduate. At that point, you’ll have the opportunity to choose a repayment plan that fits your financial situation and goals. Whatever plan you choose, you’re never locked in. As your finances and life circumstances change, you may decide to switch to a different payment plan, consolidate, or refinance your student 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.

FAQ

Is there a way to get rid of federal student loans?

If you repay your loans under an income-driven repayment plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years. Other ways to pursue federal student loan forgiveness are through Public Service Loan Forgiveness and Teacher Loan Forgiveness.

What is the best option for repaying student loans?

The best federal student loan repayment plan for you will depend on your goals and financial situation. If you want to pay the least possible in interest, you might want to stick with the standard repayment plan. If, on the other hand, you want lower monthly payments and student loan forgiveness, you might be better off with income-driven repayment. If your income is high but you want lower payments, you might look into a graduated or extended repayment plan.

What can the federal government do if you do not pay back your student loans?

Typically, If you don’t make payments on your loan for 90 days, your loan servicer will report the delinquency to the three national credit bureaus. If you don’t make a payment for 270 days (roughly nine months), the loan will go into default. A default can cause long-term damage to your credit score. You may also see your federal tax refund withheld or some of your wages garnished.

If, however, you had student loans that were on the pandemic-related pause, you have a little more breathing room. There is currently a 12-month “on-ramp” period that ends on September 30, 2024. Until that time, borrowers who miss making payments on their federal student loans won’t be penalized in the ways described above. Interest will still accrue, though, so you’re not entirely off the hook.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

SOSL1223006

If you’re getting divorced, you are going through a major upheaval on many fronts, including your financial life. You may wonder (and worry) about how your debt will be managed. For instance, will you wind up responsible for what your soon-to-be former spouse owes?

While the following information can’t take the place of consulting an attorney, it can help answer some of the most commonly asked questions as you navigate the divorce process. You’ll learn smart strategies for managing your debt as you move through your divorce.

Community Property vs Common Law Property Rules

First things first: Know that states generally follow either community property rules or common law property rules.

Community property states include:

•   Arizona

•   California

•   Idaho

•   Louisiana

•   Nevada

•   New Mexico

•   Texas

•   Washington

•   Wisconsin.

•   If you live in Alaska, you are in what’s known as an “opt-in state.” You and your spouse may have signed an agreement making your assets community property, but if you didn’t sign this agreement, Alaska follows common law property rules, as does every other state excluding the nine states that adhere to community property law.

If you live in a state where community property laws apply, both spouses are typically responsible for debts incurred while married. In fact, most debts are considered to be the responsibility of the “community” (the two married partners) even if only one of them signed the paperwork.

After a legal separation takes place, debt in these states is typically owed only by the person who took on that debt. Exceptions are made if the debt was taken on, pre-divorce, for the following reasons:

•   To maintain a joint asset, such as a new HVAC system on a home

•   To purchase family necessities

•   Or if the couple keeps joint accounts.

But what if one or both members of a married couple took out student loans before the marriage? In this case, the debt very well might not be considered part of community debt, although it could if the spouse signed on as a joint account holder.

If your state follows common law for property, debts taken on by one spouse are, typically, solely that person’s debts. Exceptions can include ones that benefit the marriage, such as childcare, food or clothing, and shelter or household items considered necessary.

Both parties are typically responsible if they both signed a contract agreeing to make payments, or if both names are on a property title to property or a shared account. This can also be true if both spouses’ income was considered when a creditor was making a lending decision.


💡 Quick Tip: A low-interest personal loan can consolidate your debts, lower your monthly payments, and help you get out of debt sooner.

End of Debt Accrual

When two people decide to go their separate ways, a crucial question to have clarified is when, exactly, during the separation/divorce process will you stop incurring marital debt in your state? In California, as one example, a person stops being responsible for his or her spouse’s debt on the date they separate. Every state is different so it is best to consult with an attorney.

Note that, even though state law may draw the line on your liability for a spouse’s debts because of separation or divorce considerations, creditors may still have a legitimate case for pursuing payment from you if repayment of the debt falls behind.

Plus, let’s say that according to the divorce decree, your soon-to-be ex-spouse will be responsible for payments made on a credit card. If your name is on that credit card, the court would order your ex-spouse to make payments. However, if he or she doesn’t actually make the payments on time, it can still affect your credit in a negative way.

Talk to your attorney about options available to get your name off of any accounts with debts assigned to your ex-spouse, including having your ex-spouse refinance a loan so that it is solely in his or her name. You and your ex-spouse could agree to each ask creditors to remove one another’s names according to the dictates of the divorce decree.

Recommended: Budgeting Tips for Life After Divorce

Additional Considerations

Courts may assign debts that are considered necessities to the party believed to have the ability to pay them. This may or may not be divided equally, especially in common law property states where the goal is equitable division, rather than equal division of property.

•   No matter which one of these legal structures your state follows, debt typically follows the asset. In other words, if you get a car, you’ll probably also be responsible for paying it off. This also means that, if you end up with more property than your ex-spouse after the divorce, you may be taking on a greater percentage of the debt.

•   If you and your spouse signed a prenuptial or postnuptial agreement that lays out division of debt in case of divorce, your situation probably won’t mirror the typical divorce in your state.

•   Because laws about divorce and debt responsibility differ by location, it’s important that you hire an attorney who is experienced in the laws of your state. Some couples find that using a mediator to amicably divide debts and assets is preferable to having a judge make the calls. Some mediators are also attorneys, which can be helpful.

Managing Debt After a Divorce

The cost of divorce, emotionally and financially, can be significant. Once the dust clears after a divorce, you’ll need to take stock of what you owe, balance-wise, and what monthly payments you are responsible for. You may discover that payments are higher than what you can comfortably afford each month, now that you’re only relying upon just one income.

In that case, are there any loans that you can pay off and still have enough of a savings cushion in the bank? You might, for example, have a loan with a relatively high monthly payment but, if you only have a few payments left, paying off the loan may help. Or maybe you can draw from savings to finance the fees related to divorce.

If not, you might consider consolidating your high-interest credit cards and loans into one payment through a lower-interest personal loan. Consolidating debt with a personal loan could significantly free up cash flow, right when you need it after a divorce.

Recommended: How to Use a Personal Loan for Loan Consolidation

Paying Off Debt With a SoFi Personal Loan

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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.

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 .

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

SOPL1223007

It’s no secret that many Americans are carrying high-interest debt. Cumulative credit card debt passed the $1 trillion mark in the second quarter of 2023, a new record, and the average person is toting around almost $8,000 in debt.

These are daunting figures, to be sure, and for those who are living paycheck to paycheck, without money in the bank, getting debt-free can feel like an impossible dream.

But it doesn’t have to be. There are ways to wrangle what you owe into submission, such as budgeting well and snagging lower interest rates. Read on to learn some effective tactics for paying down and then paying off your debt.

Begin by Creating a Budget

Note that this is suggestion #1. A budget is key to paying off debt when you don’t have a lot of money, because it gives you a bird’s-eye view of how much income you are bringing in and how much you are spending (and where).

Living day to day and not knowing where your money is unlikely to be a good debt payoff path. When you see your spending habits on a monthly spreadsheet, it can be a powerful revelation. You’ll probably realize things about your finances that you never knew before.

There are many different budget methods. One of the most popular is the 50/30/20 budget rule, which helps you allocate 50% of your take-home pay to needs, 30% to wants, and 20% to savings and additional debt payments. That last category can really help you bring down your debt.


💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

Defining “Broke”

Being broke means having absolutely no money. More than likely, you do have money; you’re just overspending what you earn or maybe spending what you don’t have (on credit cards).

It can be easy to free up some money if you’re already earning it. Rethink money-draining activities like eating out too often, buying a coffee when you can make it at home, and perhaps spa or gym memberships when you can work out in cheaper ways (walking, running, workout videos on YouTube). Maybe you can save on streaming services by dropping a platform or two.

Increase Your Income

If you are carrying debt and don’t have money in the bank, perhaps it’s time to think about how you could bring in more cash. You might look for a new job, train up for one that pays more. You might sell your stuff that you no longer use or need. You could find a part-time job or side hustle; perhaps driving an Uber or Lyft. If you have a hobby (making jewelry, gardening, or fixing cars), you may be able to turn that into a money-making side business.

Change Your Spending Habits

Yep, it’s easier said than done, but keep your eyes on the prize: being debt-free. You might identify your spending triggers, such as shopping when you’re bored, and find free or cheap ways to keep yourself occupied. Or recognize that lifestyle creep can prevent you from paying down debt: That happens when you get a raise or earn extra money and spend it instead of saving it. Also be on the lookout for FOMO spending: When you overspend because you have “fear of missing out” on what friends, coworkers, or social media influencers are doing.

Say No to Temptation

Yep, it’s easier said than done, but keep your eyes on the prize: being debt free. That means saying no to expensive vacations, a new car, eating out, buying expensive gifts, going regularly to the nail salon, buying fancy new clothes, living in a higher-rent apartment, and wasting electricity. There are plenty more suggestions, but you get the idea.

Automate Your Savings

Take advantage of technology, and set up recurring transfers from your checking account into savings just after you’re paid. By automating your savings this way, you can build up some money in the bank and get past the “I’m broke feeling.” Even $20 or so will accumulate and make a difference. Simply set it and forget it.

Establish an Emergency Fund

That automatic-deduction savings account can double as your small emergency fund. Use it only when needed. Train yourself not to dip into it otherwise. If an emergency does arise, you might possibly be able to cover it with the money you’ve saved from this fund, and you wouldn’t have to use your credit card yet again.

Apply for a Lower Interest Rate

High-interest rates can make it very hard to get out of debt. Most of your minimum monthly payment goes to those interest charges, not your principal debt. Ask your credit card issuer if they can lower your rate to keep your business.

If it’s a no-go with your credit card company, you may want to look into a balance transfer credit card, which can give you zero-percent interest for a promotional period (usually 18 months or so), helping you pay off debt.

Consider a Personal Loan

Consolidating your credit cards into one low-interest personal loan could be your first step in the journey away from being broke.

With a (hopefully) lower interest rate and a fixed monthly payment, you can always know what you’re paying. That’s good for your budget. It can help make it easier to pay off your high-interest credit cards and loans and greatly simplify your life.

You can figure out ahead of time how much money you could save in interest payments by using a personal loan calculator.

The Takeaway

As you work towards paying off debt, even when you have no money in the bank, stay motivated. Pat yourself on the back for making small bits of progress. It may take time and a variety of tactics, such as budgeting wisely and bringing in some extra cash, to get to your goal.

The option of using a lower-interest personal loan to pay off credit cards is another tactic that can help you crush your debt.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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.

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 .

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

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOPL18122

The average credit card debt for someone in their 30s is $4,110, but that only tells part of the story about what America owes on their plastic.

Credit card debt in America is a significant issue, with combined balances topping $1 trillion in the third quarter of 2023. You probably are aware that credit card debt is high-interest debt and can be hard to pay off.

If you are wondering how your balance compares to those of other people your age, to see how you stack up, read on. What follows is a decade-by-decade review of what Americans owe. Whether your debt is less than or more than the norm for your age group, you could likely benefit from paying it off, which is why you’ll also learn smart tactics for doing so below.

Credit Card Debt Ages 30 to 39

Welcome to your 30s, which can be a time that many people are establishing their adult lives. What does that mean? Possibly home ownership (or outfitting your rental home), having a family and paying for the kids’ expenses, traveling, dinners out with friends, and maybe new clothes because, congrats, you snagged a new job.

Some of these changes will impact your overall debt by age, but consider just your debt related to using your plastic. Your evolving lifestyle can cost you.

The average credit card debt for those in their 30s is $4,110, significantly more than the $1,462 owed by people ages 18 to 29. You should consider not only how this figure can impact your overall financial life, but also how it can affect your credit rating. You’ll want to take note of your credit utilization ratio, or how much of your credit limit your balance represents, as you work to keep your profile in good shape. Financial experts suggest this number stay at or below 30%.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

Credit Card Debt Ages 40 to 49

Americans between 40 and 49 have on average, $5,373 in credit card debt, which is the highest for the age groups reviewed here. Many Generation X-ers have bought houses, cars, and started families. They are increasingly consuming and, as life gets busier, growing financial demands can encourage the growth of credit card debt.

As consumers are more and more stabilized in their lifestyle and careers, they tend to grow more comfortable spending money they can’t immediately repay. Additionally, at this age, people may be focused on financing children’s education, which can make paying off their credit card balances a lesser priority.

Credit Card Debt Ages 50 to 59

This age group owes an average of $5,085 in credit card debt, a bit less than those in their 40s. Many people in their 50s may be over the crest of their expenses as a parent or as a homeowner; perhaps their kids are out of college and they’re happy with their house as is.

However, as time passes, medical expenses can grow, and those can be put on their credit card and grow their debt.
What’s more, saving for retirement is likely to be a primary focus at this age. For those trying to fatten up their nest egg, paying off credit card debt may move to the back burner.

Recommended: Tips for Using a Credit Card Responsibly

Ways to Pay Off Your Credit Card Debt

As you plan to pay off your credit cards, it’s important not to underestimate the challenges of your mid-to-late 30s. With growing responsibilities and increasingly complicated finances, it can be easy to fall into debt.

It’s important to organize your budget in a way that allows you to make monthly payments to reduce and eventually eliminate debt while still accumulating savings. Also, knowing when credit card payments are due and paying them promptly is an important facet of maintaining your financial wellness.

•   One strategy that may be worth trying is the debt snowball method, where you prioritize repayment on your debts from the debt with the smallest amount to the debt with the largest amount, regardless of their interest rates. (While still making minimum payments on all other debts, of course.)

When you pay off the debt with the smallest amount, focus the money you were spending on those payments into the debt with the next lowest balance. This method builds in small rewards, helping to give you momentum to continue making payments. This method is all about giving yourself a mental boost in order to pay off your debt faster.

The idea is that the feeling of knocking out a debt balance — however small — will propel you toward paying down the next smallest balance. The con, however, is that you could end up paying more interest with the snowball method, because you’re tackling your smallest loan balance as opposed to your highest interest debt.

•   The other popular payoff method, the debt avalanche method, encourages the borrower to pay off the loan with their highest interest rate first. While you don’t get that psychological boost that comes with knocking out small debts quickly, paying off your highest interest loans first is the more cost-effective solution of the two.

•   Another option to consider is to apply for a personal loan. Personal loans are loans that can be used for almost any purpose, whether that’s home improvement, covering unexpected medical expenses, or paying off credit card debt.

Personal loans can be a way to get ahead of debt, since interest rates are typically competitive, especially when compared to high-interest credit cards. A personal loan allows you to consolidate debt — simplifying multiple monthly payments with different credit card companies into one monthly payment.

•   Another strategy to pay off credit card debt is, of course, to cut down on expenses and tighten your budget. When it comes to paying off debt, organization is key.

Pick one of the different budgeting methods that suits you best. Make sure you are tracking both your income and your expenses. Take a look at your monthly purchases and try categorizing them into different areas. With some strategic planning, small changes can add up to make a big difference.

Using a Personal Loan to Pay Off Your Credit Card Debt

If you decide that a personal loan is your best option, shop around, and see what kinds of offers you qualify for from different lenders.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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.

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 .

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.

SOPL1223010

Whether you’re buying a home or getting a college education, taking on debt can allow you to invest in your future. The downside? Whatever you borrow will eventually need to be repaid, and that can add up to a considerable portion of your monthly expenses. Add in credit card bills or an unexpected financial emergency, and getting out of debt could start to feel like an overwhelming task.

Fortunately, it’s possible to break the debt cycle. Here are some steps you can take now to help get your finances in order.

Review Your Credit Card Statements

Credit card debt prevents many people from breaking the debt cycle. Reviewing your credit card statements closely can be a great first step.

Make note of your expenses and see exactly where all of your money is going. Are you spending hundreds of dollars a month on take-out? Are there a few subscriptions you enrolled in but have since stopped using? Be honest with yourself as you assess your spending, and note any areas where you can adjust or cut back.

Set a Budget

After you’ve reviewed your spending, consider making a budget. You can start by tallying your monthly income and monthly expenses. Don’t forget to include savings goals, and be sure to set up new limits for your discretionary spending.

If you’re new to budgeting, there are several different methods to consider. The 50/30/20 budget rule, zero-based budget, and the envelope budget system are three common examples. Whatever method you decide to use is up to you — what really matters is that you find a system that works for you.


💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

Accelerate Your Repayments

If you’re paying off debt, one way to speed up your repayment is paying more than the monthly minimum. Making additional payments on your debt each month could not only help you eliminate your debt more quickly, it could also potentially reduce the money you spend in interest in the long term. Even just $25 a week could have an impact on your repayment.

There are a couple of debt repayment strategies that could help get you back on track. One is the debt snowball method, which prioritizes paying off the smallest debt first while making the monthly minimum payment on all other debts. Once the smallest balance is paid off, you’d focus on the next-smallest debt.

While this method may not reduce the money you spend in interest, the rewarding feeling of seeing your debt dwindle could encourage you to stick with your repayment plan.

Another debt repayment strategy is the debt avalanche, or debt-stacking method. Here, you’d make a list of all your debts by order of interest rate, highest to lowest. While making your minimum monthly payments on all the debts, “attack” the highest interest rate loan with as many extra payments as you can.

Unlike the snowball method, the avalanche method is about streamlining your debt repayment so that you save the most money on interest. It can require more discipline, but keeping track of how much you are saving in interest can be a great motivator.

Establish an Emergency Fund

You can’t predict the future, but you can do your best to prepare for it. Having an emergency fund can help cover unexpected costs and avoid having to use a credit card, which could send you deeper into debt.

Using a windfall, like a bonus at work or your tax refund, is a good way to start an emergency fund. You can put this money in a dedicated savings account or another cash equivalent, if you prefer.

Then each week, aim to save a specified amount of money in your emergency fund. Even saving just $10, $15, or $20 a week can help you be more prepared when a financial emergency strikes. If possible, plan to save somewhere between three and six months’ worth of living expenses.

Recommended: How Much Money Should Be in Your Emergency Fund?

Pay For Things With Cash or Check

While you’re paying down debt, consider storing your credit cards somewhere safe and instead paying for purchases in cash or by check. Doing so can help you keep tabs on how much you’re spending and spot areas where you may be able to cut back.

If you must use a credit card to make a purchase, consider what it might cost you in interest if you aren’t able to pay off your balance at the end of the month. A credit card interest calculator can help you estimate how much interest you will pay on the debt.

Live Within (or Below) Your Means

It can be easy to get swept up in having the best of everything, but living in debt to sustain that lifestyle can ultimately add stress. You can rise above this by living within or below your means. This means spending less money than you make, which in turn can allow you to focus on preparing for a rainy day, building wealth, and achieving financial freedom.

Recommended: Living Below Your Means: Tips and Benefits

Determine Needs vs. Wants

Is that new pair of shoes or the latest video game really a must-have?

As you’re trying to break your debt cycle, it’s a smart move to evaluate your wants against your needs. For example, before you make a purchase, carefully think about whether you need it or simply want to have it. If it’s something you can live without, consider holding off until you’re on firmer financial ground.

Breaking out of a debt cycle requires discipline and determination. While skipping out on wardrobe upgrades or the newest tech gadgets now can seem like a huge sacrifice, when you start making headway on paying down what you owe, odds are you’ll feel the reward.

Get a Side Hustle

Another great way to help end the debt cycle: find some extra income by getting a side hustle. You could use money you earn from your new gig to make extra payments on your debts.

Not sure where to look for work? Take a look at your skills and interests and see where you may be able to find an extra job or make some passive income.

Consolidate Debt with a Personal Loan

If you’re juggling multiple high-interest debts, you may want to explore a debt consolidation loan. Typically, this involves using a new loan or line of credit to pay off existing debts, consolidating several payments into one.

By consolidating those debts into a single loan — ideally one with a lower interest rate — you can streamline payments and potentially reduce your monthly payments or save on interest.


💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

The Takeaway

It can feel overwhelming and frustrating to feel stuck in a debt cycle. But the good news is, there are strategies that can help you get ahead of your debt and regain control over your finances.

Being more mindful about where your money goes, building up savings so you’re prepared for unexpected expenses, and paying for things with cash instead of credit cards are all good steps you can take now. And if you’re trying to pay down multiple high-interest debts, you may want to explore whether a debt consolidation loan is right for you.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

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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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