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The cost to become a nurse or nurse specialist ranges from a few thousand dollars to hundreds of thousands. The cost rises with education level — from a two-year associate degree to a doctorate — but so do average earnings.

You already know that you’ll be in demand. More than 203,000 new openings for registered nurses alone are expected each year over the next decade.

Typical Nursing School Costs and Salaries

There are a number of routes to becoming a nurse or nurse assistant. Here are the main types, median pay (based on 2021 figures from the U.S. Bureau of Labor Statistics), and average educational costs.

Keep in mind that many students benefit from student loans and scholarships. Working nurses reaching for the next rung up may be eligible for tuition reimbursement from their current employer.

Certified Nursing Assistant (CNA)

Becoming a CNA may require a high school degree. You typically need to complete four to 12 weeks’ worth of courses and onsite training and pass an exam.

The cost of a CNA program varies, sometimes substantially, based on length and whether the program is state approved.

Average education cost: $600 to $2,000

Median pay: $30,310

Licensed Practical Nurse (LPN)

Also known as a licensed vocational nurse, an LPN must complete a state-approved educational program, which typically takes 12-18 months, and pass a licensing exam.

Tuition cost: as low as $1,000 to $5,000

Median pay: $48,070 per year

Recommended: Guide to Nursing Student Loans

Registered Nurse (RN)

Registered nurses need at least a two-year associate degree in nursing from an accredited college or technical school to practice.

Average in-state tuition cost: $3,500 per year at public institutions; $15,470 per year at private schools

RNs with an associate degree in nursing can seek a bachelor of science in nursing (BSN) in an RN-to-BSN program, which usually takes one to two years to complete.

Average cost of online RN-to-BSN: $25,000 to $80,000

The American Association of Colleges of Nursing considers the four-year Bachelor of Science in nursing the degree that provides the educational and experiential base for entry-level professional practice.

Average total in-state cost of a BSN: $40,000 to $80,000 at a public school; $60,000 to $120,000 at a private school

Median pay for all RNs: $77,600 per year

Advanced Practice Registered Nurse (APRN)

An advanced practice registered nurse holds at least a master’s degree in nursing. The four specialties are nurse practitioner, certified registered nurse anesthetist, certified nurse midwife, and clinical nurse specialist.
A Master of Science in nursing will take one to two years. The tuition cost is often higher than that to obtain a BSN.

Tuition cost of a Master of Science in nursing: $22,000 to $100,000 per year

Master’s-level programs still allow grads to join the APRN ranks, but a doctorate is quickly becoming the standard, according to the American Association of Colleges of Nursing.

Most research-focused doctoral nursing programs grant a Ph.D. The Doctor of Nursing Practice degree is more practice focused.

Cost of Doctor of Nursing Practice program after earning a master’s degree: $20,000 to $40,000

Median pay for nurse anesthetists, nurse midwives, and nurse practitioners: $123,780 per year

If you need to borrow in order to get through school, know that you’re in good company. Most nurses take out loans (federal and private student loans are available) to earn their professional titles.

Other Fees While Studying to Be a Nurse

The anatomy of a nursing degree consists of much more than tuition, which might be the figure on a website that catches your eye. Still, the cost of college tuition alone can be helpful in calculating the total tab: Multiplying the current tuition price by four will yield a rough estimate.

Myriad fees can add up to hundreds of dollars. Books and software can average $2,000 to $3,000 per academic year.

Other expenses to keep in mind include travel costs, living costs (especially if you’re unable to work while studying), lab fees, and the cost of a laptop.

Some nursing schools may also require students to take out liability insurance and get immunizations.

Before stepping into a new job or practice, aspiring RNs have to pass the National Council Licensure Examination test, better known as the NCLEX exam, which costs $200 per attempt. Taking the NCLEX exam a second (or even third or fourth time) time costs more in studying, coursework, and time.

How to Pay for Nursing School Without Going Broke

If just thinking about the cost of nursing school raises your blood pressure, know that student loans, grants, and scholarships are available.

Plus, some hospitals will help pay for nursing school. Duke University Health System employees, for example, may be eligible for tuition assistance.

Here are the main ways to pay for nursing school.

Federal Student Loans

Students can apply for federal aid — including student loans, scholarships, grants, and work-study — by completing the FAFSA, the Free Application for Federal Student Aid, each year.

It’s a good idea to submit the FAFSA even if you’re not expecting federal aid because other student aid programs piggyback off the application.

Many nurses plan to work for a qualifying nonprofit or government organization. They aim for the federal Public Service Loan Forgiveness program and one of the income-based repayment plans.

Scholarships and Grants

An aspiring nurse may want to use a scholarship search tool and seek out grants. Pell Grants go to undergraduate students only.

The American Association of Colleges of Nursing also maintains a grants and scholarship database for nursing schools.

The Nurse Corps Scholarship Program will pay your tuition, fees, and other educational costs if you agree to work at a critical shortage facility after graduation.

Recommended: Search for Scholarships and Grants by State

Private Student Loans

If federal aid does not cover the total cost of nursing school, private student loans are another option.

Private student loans are available from private lenders and generally allow students to borrow up to the school’s estimated annual cost of attendance. That includes tuition and fees, room and board (or living expenses), books, supplies, a personal computer, transportation, and child care.

Two- and four-year colleges are required to publish the cost of attendance on their websites.

It’s important to keep in mind that federal protections and programs like income-based repayment apply only to federal student loans.

Still, private student loans can fill gaps in need. Learn more in our guide to private student loans.

The Takeaway

How much is nursing school? Getting an associate degree can cost a few thousand dollars. The full path leading to a master’s or doctorate can cost hundreds of thousands. A lot will depend on whether the school is public or private, whether you’re an in-state student, and whether you receive scholarships or grants.

In any case, here’s to your health, and to heeding the call to become a nurse.

In addition to private student loans for all qualifying students, SoFi offers private graduate school loans for health care professionals that come with a variety of repayment options and no fees.

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

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.

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

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Once you begin looking for financing options, you may find your search leads you to multiple forms, including personal loans. One choice available to prospective borrowers is a short-term loan.

A short-term loan is a personal loan that can help with personal financial needs. But this type of loan may not fit every situation since it typically only provides limited funds. Read on to find out whether a short-term loan may help you meet your financial goals.

What Is a Short-Term Loan?

When you take out a short-term loan, you borrow funds to address immediate financial needs for a limited period. These loans serve a variety of functions, depending on your situation. For example, individuals may take out a short-term loan to keep them afloat until their next paycheck.

Or, someone running their own business who needs to cover small expenses may take out a short-term business loan.

Recommended: What Is a Personal Loan?

How Do Short-Term Loans Work?

Essentially, short-term loans operate on a short time scale. The approval process and repayment schedule occur quickly, usually within a year.

Average personal loan interest rates range from 5.99% to 36% APR, depending on the applicant’s creditworthiness. Short-term loans tend to be near the higher end of this scale, in addition to fees and penalties that may be charged by a lender.

However, lenders such as banks or credit unions offer varying personal loan terms and rates. So, it’s important to research and shop around before you apply for one.

What Can You Use a Short-Term Loan for?

Short-term loans can be used for many purposes when you need quick access to money and your cash flow is low. You can use the funds from a short-term loan to cover unexpected costs such as medical bills or for everyday expenses until you reach your next paycheck.

Businesses might use short-term loans in the form of merchant cash advances so they can replenish inventory or purchase new equipment even when short on cash. In this scenario, the business receives a lump sum of cash from a lender and repays it with a percentage of credit or debit card sales until the advance is paid in full.

Recommended: What Are Personal Loans Used For? And How to Apply

Example of a Short-Term Loan

A bank overdraft can be considered a short-term loan the bank provides when your account balance isn’t sufficient to pay for a purchase you’ve made. In this scenario, your account lacks funds to make a payment, but the bank lends you that money. In return, you pay a fee.

How Long Is a Short-Term Loan?

Every loan varies based on the lender and applicant. Often, short-term loans mature within a year or less. However, it is possible to find one that extends up to two years. Any loan term longer than that qualifies as either a medium-term or long-term personal loan.

Characteristics of Short-Term Loans

Short-term loans have unique features, such as:

•   Smaller borrowing amounts compared to other loans.

•   Typically offered as unsecured loans.

•   High annual percentage rates (APRs).

•   Short repayment periods.

•   Sometimes weekly payments are required.

Benefits of a Short-Term Loan

Short-term loans come with certain disadvantages, mostly due to their high interest rates. But they can be helpful if you find yourself in a tight spot. Some benefits include:

High Approval Rates

Since short-term loans only provide limited funds, the lending requirements may be easier to meet. Because of that, more applicants have a chance of approval. Even though you may not need a stellar credit score, you may still have some trouble if you have a low credit score. Your lender may ask for proof of a steady income, among other criteria.

Online Application

Short-term loans are also easy to access. Lenders often offer online applications, so there’s no need to visit a brick-and-mortar office. Applications are typically easy to fill out, taking only minutes to complete.

Quick Access to Funds

The short-term loan processing time is typically fast. As a result, you will probably receive approval and loan proceeds faster than you would for a long-term loan. So they might be a good option if you have an unexpected expense you need to pay as soon as possible.

Lower Accrued Interest

While short-term loans can come with high interest, they generally have a short time frame. Because of that, there are fewer total interest payments. As long as you pay on time, you could save money on built-up interest with a short-term loan.

Credit Score

As mentioned above, you don’t typically have to have an excellent credit score to get approved for a short-term loan. Applicants with average credit scores may also be able to usually qualify for a short-term personal loan.

Unsecured Personal Loan

When it comes to the difference between a secured vs. unsecured loan, a secured loan means more risk on the borrower’s part. That’s because a secured loan requires collateral, such as your car or your home. But most lenders don’t require collateral for a short-term personal loan because it doesn’t carry enough risk.

Recommended: Using Collateral on a Personal Loan

Disadvantages of a Short-Term Personal Loan

While short-term loans are easier to qualify for, they may not be the right choice for everyone. Here are some drawbacks to be aware of:

Lower Limit

For borrowers who need a significant amount of money, a short-term personal loan may not be the right choice. The borrowing limits for these types of loans tend to be small, sometimes just a few hundred dollars, to make it easier to pay off in a short amount of time.

May Lead To Cycle of Debt

Because of the high-interest rate and steep fees attached to short-term loans, they really aren’t long-term solutions. They might be an option in an emergency but can lead to a cycle of debt if relied on too often.

Types of Short-Term Loans

There are a few variations on the short-term loan available to you. The type of personal loan you apply for will generally depend on the amount of cash you want and how quickly you need it. Here are some worth considering:

Payday Loans

A payday loan is a short-term loan that some people use to tide themselves over financially until their next paycheck. The funds are meant to be repaid at the time of the borrower’s next payday — thus, the name. However, payday loan issues arise if the borrower can’t repay the loan in the short time frame required.

Installment Loans

Installment loans give borrowers a way to access a lump sum of money that’s repaid in monthly installments over a set time frame. A fixed-rate loan with steady monthly payments makes budgeting during the repayment period more convenient.

Lines of Credit

A line of credit is similar to a credit card. You receive a credit limit and can tap into the line of credit as needed. Funds can be taken out in installments of the amount needed at the time they’re needed. But you can’t surpass your limit, which the lender bases on your creditworthiness.

Recommended: Personal Loan vs Personal Line of Credit

Merchant Cash Advance

Merchant cash advances are used by businesses that make mainly debit or credit card sales. As a means to secure cash, the business will borrow a lump sum, which is advanced against the business’s daily sales. The lender is then repaid through a certain percentage of the business’s daily sales.

Invoice Financing

Similar to merchant cash advances, invoice financing is a type of short-term loan that can help business owners meet financial needs. The business submits unpaid invoices, i.e., accounts receivable, to a lender as collateral. The lender charges a fee for the financing and can collect on the invoices if the borrower defaults.

Short-Term Loan vs Long-Term Loan

It’s always important to explore your options. Short-term loans probably aren’t the right option if you need a large amount of funds in a lump sum or will need to periodically draw small amounts from a set amount of credit. In these situations, a long-term loan might be a better solution.

Long-term personal loans can sometimes have high-interest rates depending on the applicant’s credit score and other factors used by the lender. They may not require collateral, which makes them seem risky to lenders.

Here’s a breakdown of how these two loans stack up against each other:

Typical Requirements to Get a Short-Term Loan

Requirements to be approved for a short-term loan vary by lender, but all lenders will evaluate your creditworthiness in some way. Generally, a higher credit score will likely secure you better terms and interest rates. You also need to be able to show your lender a range of personal and financial information such as proof of identity, verification of employer and income, and proof of current address.

Can I Get a Short-Term Loan With Bad Credit?

While short-term loans don’t typically require excellent credit, the higher an applicant’s credit score, the better their chances of approval. A lender may also offer more favorable interest rates and terms to a borrower with a higher score. Since short-term loans are often for relatively small amounts of money, requirements tend to be laxer.

Personal Loan Options From SoFi

SoFi offers personal loan options to fit a variety of financial situations and needs. With competitive interest rates and a range of terms, there may be a SoFi Personal Loan that works for you. SoFi does not charge fees on personal loans, so you only repay the loan principal and interest.

The Takeaway

Short-term personal loans vary based on your financial situation and the lender you use. Some lending institutions use high-interest rates and hidden fees that can add to the overall cost of a short-term personal loan. That doesn’t make a personal loan bad, but it’s important to be aware of what you’re agreeing to when you borrow money.

SoFi may have a personal loan that will work for your unique financial situation and needs. Checking your rate takes 60 seconds and won’t affect your credit score.^*

Photo credit: iStock/kitzcorner

^*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

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Getting laid off? Not great. Getting laid off with student loans? Even worse. Although the payment pause for federal student loans has been extended well into 2023, now is a good time to plan ahead and rethink your payment plan.

Fortunately, there are options for borrowers to lean on when they lose their jobs or experience another change in circumstances.

While many of these repayment plans can increase the amount you pay over time, including interest, they can make your student loans more affordable during a temporary period of financial hardship.

How COVID Affected Student Loans

COVID-19 led to pretty major derailments for some of us. Whether you were just starting your career or had a rapidly growing resume, there’s a good chance your job situation looks different now than before the pandemic.

Unemployment filings reached a record high at the end of March 2020, meaning a slew of people wondered how to pay their student loans with no job. Educational debt can be difficult to keep up with under the best of circumstances, let alone in the midst of a crisis. Fortunately, the government made some moves to offer federal student loan borrowers some solace.

The Trump administration suspended both principal and interest payments on federal student loans through January 2021. President Biden then extended the forbearance several times, most recently until the second half of 2023. Payments automatically stopped on March 13, 2020, and the suspension doesn’t affect the borrower’s eligibility for student loan forgiveness programs.

To be clear, the ruling doesn’t affect privately held student loans, like the ones through lenders like Sallie Mae® or smaller providers. However, private loan holders may still have options that can help keep their loans from becoming financially overwhelming.

Recommended: How Do Student Loans Work? Guide to Student Loans

Talk to Your Student Loan Servicer

If your loans haven’t been automatically suspended, you can still reach out to your student loan servicer about a modified repayment agreement if you’ve lost your job or are otherwise experiencing trouble with your current plan.

Sallie Mae, for instance, has “instituted additional options for customers experiencing financial difficulty” due to COVID-19. The company invites borrowers to contact them via online chat or phone to discuss alternatives and assistance.

No matter who your lender is, there’s a good chance they can offer you a temporary solution if you’re unable to make your payments. You may be able to pause your payments, for instance — though you’ll probably still accrue interest during the pause.

Either way, it’s worth reaching out to lenders to update them on your situation and hear what they might be able to offer.

File for Unemployment

Unemployment insurance — commonly referred to simply as “unemployment” — is a joint federal-state benefit that offers cash relief to eligible workers who lose jobs through no fault of their own.

Each state has its own requirements and filing processes, which you can learn more about by selecting your state in the drop-down menu .

Unemployment benefits may offer you enough cash flow to make some payments toward your student loans, especially if you were able to modify your payment plan with your servicer. But if not, there are alternatives to consider.

Options for Paying Off Student Loans While Unemployed

Life moves in unexpected ways. Student loan servicers know that, which is why most have specific protocols in place for borrowers whose plans change in one way or another.

Here are some that might be helpful in the case of sudden joblessness.

Forbearance

Student loan forbearance allows borrowers to pause student loan payments or make a smaller payment for a set period of time. It’s available for both federal and private student loans, and it can take a big load off your monthly budget.

In many cases, it’s worth exploring other options before turning to forbearance. You may still be accruing interest during the forbearance period, which can drive up your total debt quickly.

You also may not be making any progress toward potential student loan forgiveness programs.

Recommended: Will Pausing Payments Affect My Credit Score?

Deferment

Another option that may be right for you is student loan deferment, which works similarly to forbearance: You won’t be required to make payments for a temporary period, but you’ll still be responsible for the interest that will accrue during that time.

The main difference between forbearance and deferment is that deferments are usually granted in response to a certain life change, such as going back to school at least half-time or actively serving in the military, whereas you can always apply for forbearance (though it may not be granted).

Losing your job is another life change that may make you eligible for student loan unemployment deferment. Again, it’s important to understand that you’ll likely still be responsible for the interest generated during the deferment period, which could mean you pay more for your loan overall.

Certain types of federal student aid may not incur interest during the deferment, such as Direct Subsidized Loans, but you’ll want to double-check with your servicer before you make any decisions.

Income-Driven Repayment Plans

If you have federal student loans, you can look into income-driven repayment programs, which allow borrowers to adjust their payments based on what they can afford.

The government offers a variety of income-driven repayment plans, including the Pay As You Earn Plan (PAYE), the Income-Contingent Plan (ICR), and the Income-Based Repayment Plan (IBR).

Income-driven repayment plans generally reduce your payments to 10% of your discretionary income, which could bring your payments down to $0. The plans adjust once you’re making money again, ensuring that your payments are affordable. But because they might extend your overall repayment period, you can also end up paying significantly more interest in the long run.

In August 2022, President Biden proposed changes to some income-driven repayment programs as part of his forgiveness plan. Payments for undergraduate borrowers would be reduced to 5% of discretionary income instead of the current 10%.

Recommended: REPAYE vs PAYE: What’s the Difference?

Student Loan Forgiveness

A variety of programs allow certain borrowers to have their student loans forgiven, canceled, or discharged if they meet certain requirements.

In many cases, you will be required to have made a certain number of qualifying monthly payments on the loan and meet the terms for the specific forgiveness program you’re considering.

Many student loan forgiveness programs are contingent on the borrower being employed in a specific industry or by a nonprofit organization. That means this option might not help you during unemployment. But it’s worth keeping in mind over the life of your student loan. You might want to bookmark our guide to student loan forgiveness.

Dealing With Late Student Loan Payments

When you’re late making a federal student loan payment, your account quickly becomes past due or “delinquent.” You’ll likely face a late fee, which is usually a percentage of the missed payment.

If you cannot make the payment, it’s important to call your loan servicer right away to make arrangements, such as deferment, forbearance, or a new repayment plan. Otherwise your account will remain delinquent, even if you continue to make subsequent payments on time.

If you are delinquent on your federal student loan for 90 days or more, your lender will report it to the three major national credit bureaus. Your credit score will take a hit, making it more difficult to qualify for good terms on loans and credit cards.

After 270 days, your loan will go into default. Defaulting on your student loan has serious consequences. First, the entire amount you owe on your loan, including interest, becomes due immediately. You won’t be able to take out any other student loans, and you’ll no longer qualify for deferment or forbearance. The government may take your tax refund and federal benefits and garnish your wages to pay off your loan.

Terms and fees for private student loans vary by lender, but the fallout from missed payments is essentially the same.

All you have to do to avoid delinquency and default is talk to your lender or loan servicer as soon as you can. The worst thing you can do is ignore the problem and hope it goes away.

Paying It Off: New Jobs, Side Hustles, and More

Although COVID led to layoffs, furloughs, and hiring freezes, many companies are now actively recruiting again. If you’re back at work but still struggling to make payments, consider ways to bring in some extra money each month.

That’s where the side hustle comes in. Many people have turned their crafting hobby into a small business on Etsy. Others are delivering groceries or pre-made meals with a service like Instacart. Check out our roundup of 9 ways to pay off student loans.

Once you’re back on your feet, refinancing student loans is one way to reduce your debt burden. It can be difficult to refinance while unemployed: Income is one of the factors lenders look at when assessing potential borrowers. But when you’re ready, refinancing private student loans, or a combo of private and federal loans, can lower monthly payments, the interest rate, or both. And that can make loans more affordable in both the short and long term.

It is important to remember that if you refinance your loans with a private lender, you forfeit all of federal benefits, including student loan forgiveness and deferment.

The Takeaway

After a job loss, student loan borrowers have options. Deferment and forbearance allow you to pause payments during times of financial hardship. Just be aware you’ll still be responsible for the interest that accrues during the payment pause. Income-driven repayment plans are another option that can lower your monthly loan bill to as little as $0. Talk to your lender as soon as you foresee a problem paying your bill. That way you can protect your credit score and reduce the stress that comes with loan delinquency or default.

^*If you become involuntarily unemployed, deferred payments may be applied for a maximum of 12 months, in aggregate, over the life of the loan. Additional terms and conditions apply; see SoFi.com/faq-upp for details.
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.

It’s a common dilemma: Should you pay off credit cards or student loans first? The answer isn’t totally cut and dried. But if your credit card interest rates are higher than your student loan interest rates, paying down credit cards first will probably save you more money in interest.

But don’t stop there. Keep reading to learn how to calculate what’s best for your situation, and why. Along the way, you’ll learn more about how credit cards work, the complexities of student loans, and two very different strategies for paying down debt.

Prioritizing Your Debts

Experts are split over the best debt to pay off first. Some recommend you tackle the smallest balance first because of the psychological boost that comes from erasing a debt entirely.

However, from a purely financial standpoint, you’re better off paying off the debt that carries the highest interest rate first. That’s because the higher the interest rate, and the longer you hold the debt, the more you end up paying overall. This usually means tackling high-interest credit card debt first.

Keep in mind that prioritizing one debt over another does not mean that you stop paying the less urgent bill. It’s important to stay on top of all debts, making at least minimum monthly payment on each.

Failing to make bill payments can hurt your credit score, which can have all sorts of effects down the road. For example, a poor credit score can make it difficult to secure new loans at low rates when you want to buy a new car or home, or to take out a business loan.

You might consider setting up automatic payments on your loans. Automatic payments can make it easier to pay bills on time and juggle multiple payments.

If you’re having trouble making your monthly payments, consider strategies to make your payments more manageable, such as refinancing.

Student Loan vs Credit Card Debt

Before we get into if it’s better to pay off credit cards or student loans first, let’s look at how each debt is structured.

Student Loan Debt

A student loan is a type of installment loan used to pay for tuition and related schooling expenses for undergraduate or postgraduate study. Borrowers receive a lump sum, which they agree to pay back with interest in regular installments, usually monthly, over a predetermined period of time. In this way, student loans are similar to other installment loans such as mortgages, car loans, and personal loans.

At a high level, there are two types of student loans: federal and private. The U.S. government is the single largest source of student loans. Federal student loans have low fixed interest rates: Current rates are 4.99% for undergrad loans, and 7.44% for graduate and professional loans. These loans come with protections like income-driven repayment plans, deferment and forbearance, and loan forgiveness.

Private student loans are managed by banks, credit unions, and online lenders. They may have a fixed or variable interest rate, which is tied to the borrower’s credit score and income. Average interest rates range from 3.22% to 13.95% for a fixed rate, and from 1.29% to 12.99% for variable.

Private student loans don’t come with the same protections as federal student loans. For instance, they are not eligible for President Biden’s loan forgiveness plan.

Payback timelines vary widely. As with other loans, the longer your repayment timeline, the lower your monthly payment will be — but you’ll pay more in interest over the life of the loan. The shorter your repayment period, the larger your monthly payment, and the less interest you’ll pay.

Recommended: Types of Federal Student Loans

Credit Card Debt

Credit cards offer a type of revolving credit, where account holders can borrow money as needed up to a set maximum. You can either pay off the balance in full or make minimum monthly payments on the account. Any remaining balance accrues interest.

Credit cards usually come with higher interest rates than installment loans. The average credit card interest rate in September 2022 was 21.59%. But an individual credit card holder’s rate depends on their credit score. People with Excellent credit will pay an average of 18.04%, while those with Bad credit will pay closer to 25.14%.

Depending how the account is managed, credit card debt can be either very expensive or essentially free. If you always pay off credit cards in full each month, no interest usually accrues. However, if you make only minimum payments, your debt can spiral upward.

Recommended: Taking Out a Personal Loan to Pay Off Credit Card Debt

Should I Pay Off Credit Card or Student Loan First?

When it comes to student loan vs credit card debt, there’s no universal answer that fits everyone in every situation. A number of factors can tip the scales one way or another, especially the interest rates on your loan and credit card.

We’ll explore two scenarios: one in which paying off credit cards is the best move, and another where student loans get priority.

The Case for Paying Down Credit Cards First

If you are carrying high-interest credit card debt, you’ll likely want to focus on paying off credit cards first. As you saw above, the average credit card interest rate (21.59%) is significantly higher than the maximum student loan interest rate (13.95%). Even if your credit card interest rate is lower than average, it’s unlikely to be much lower than your student loan’s rate.

Credit card debt can add up quickly, and the higher the interest rate, the faster your debt can accumulate. Making minimum payments still means you’re accruing interest on your balance. And as that interest compounds (as you pay interest on your interest), your balance can get more difficult to pay off.

A high balance can also hurt your credit score, which is partially determined by how much outstanding debt you owe.

Paying Off Credit Card Debt

Once you decide to focus on paying off credit cards first, start by finding extra funds to send to the cause. Look for places in your budget where you can cut costs, and direct any savings to paying down your cards. Also consider earmarking bonuses, tax refunds, and gifts of cash for your credit card payment.

Next, make a list of your credit card balances in order of highest interest rate to lowest. The Debt Avalanche method refers to paying off the credit card with the highest interest rate first, then taking on the credit card with the next highest rate.

It bears repeating that focusing on one debt doesn’t mean you put off the others. Don’t forget to make minimum payments on your other cards while you put extra effort into one individual card.

You may also choose to use a Debt Snowball strategy. When using this method, order your credit cards from smallest to largest balance. Pay off the card with the smallest balance first. Once you do, move on to the card with the next smallest balance, adding the payment from the card you paid off to the payment you’re already making on that card.

The idea here is that, like a snowball rolling down a hill gets bigger and faster as it rolls, the momentum of paying off debt in this way can help you stay motivated and pay it off quicker.

Managing Your Student Loans

Meanwhile, it’s important that you continue making regular student loan payments while you’re prioritizing your credit card debt. For one thing, you shouldn’t just stop paying your student loans. If you do, federal student loans go into default after 270 days (about 9 months). From there, your loans can go to a collections agency, which may charge you fees for recouping your debt. The government can also garnish your wages or your tax return.

You can, however, typically adjust your student loan repayment plan to make monthly payments more manageable. If you have federal loans, consider an income-driven repayment plan, which bases your monthly payment on your discretionary income.

While this may reduce your monthly student loan payments, it extends your loan term to 20 to 25 years. That can end up costing you more in interest. So make sure the extra interest payments don’t outweigh the benefits of paying down your credit card debt first.

Refinancing Your Student Loans

It can also be a smart idea to refinance student loans. When you refinance a loan or multiple loans, a lender pays off your current loans and provides you with a new one, ideally at a lower rate.

You can use refinancing to serve a couple of purposes. One option is to lower your monthly payment by lengthening the loan term. This can free up some room in your budget, making it easier to stay on top of your monthly payments and redirect money to credit card payments. Just remember that lengthening the loan term can result in you paying more interest over the course of your loan.

Or you can shorten your loan term instead. This can be a good way to kick your student loan repayment into overdrive. Your payments will increase, but you’ll reduce the cost of interest over the life of the loan. In other words, you’re giving equal weight to paying off your student loans and your credit card debt.

When you refinance with SoFi, there are no origination or application fees.

To see how refinancing with SoFi can help you tackle your student loan debt, take advantage of our student loan refinancing calculator.

Take control of your debt by refinancing your student loans. You can get a quote from SoFi in as little as two minutes.

FAQ

Should you pay off your student loans or your credit cards first?

The answer depends on a number of factors, especially the interest rates on your loans and credit cards. But if your credit cards carry high interest rates, you’ll likely save more money in interest by paying off your credit cards before your student loans.

What is the best debt to pay off first?

From a purely financial perspective, it’s best to pay off your highest interest-rate debt first. This is called the Debt Avalanche method. Paying off the most expensive debt (usually credit cards) first will save you the most money in interest.

Is it smart to pay off credit card debt with student loans?

This is probably not a good idea. First of all, paying off credit cards with student loans may violate your student loan agreement, which limits the use of funds to tuition and related expenses. If you use a credit card exclusively for educational expenses like textbooks and computers, you might be able to use loan funds to pay it off. However, you should check your loan agreement carefully to make sure this is allowed.

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Your credit card statement can feel like information overload with all of its numbers and terminology. Understanding the definition of terms like outstanding balance, statement balance, and billing cycle can help you to navigate this monthly statement a little more easily.

So what is an outstanding balance, how is it different from a statement balance, and can it affect your credit score? Put simply, the outstanding balance on a credit card is what the amount of money you still owe to the credit card company is called. Knowing this figure is important to avoiding interest and potential effects on your credit.

What Is an Outstanding Balance on a Credit Card?

Outstanding balance is another way to express current balance. In fact, depending on your credit card issuer, your monthly statement and mobile app may use the term “current balance” instead of “outstanding balance.”

But what is an outstanding balance in credit card terminology? A credit card outstanding balance is simply the amount of money you have not paid to the credit card issuer — i.e., it’s what you still owe.

Your outstanding balance includes any purchases you have made on your credit card but have not yet paid off (from the current and previous billing cycles), but it also includes:

•   Interest earned on previous balances

•   Balance transfers (and any balance transfer fees)

•   Cash advances

•   Any other fees you may owe, like late fees or foreign transaction fees

Recommended: Closing a Credit Card with a Balance

Where to Find Your Outstanding Balance on a Credit Card

You can check your outstanding balance by calling your credit card issuer or accessing your account online or through the mobile app. Depending on the terminology the company uses, you may see the outstanding balance listed as your current balance or simply your credit card balance.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Current Balance vs Outstanding Balance

Current balance is simply another term for outstanding balance. Depending on your credit card issuer, you might see one term or the other used. In some cases, it may simply be labeled “account balance” or “credit card balance.”

Recommended: How to Avoid Interest On a Credit Card

Statement Balance vs Outstanding Balance

So what’s the difference between a credit card statement balance and outstanding balance? Your credit card statement balance is the total amount owed after a billing cycle. It can include any purchases made during the billing cycle, plus any balance, interest, and fees carried over from the previous billing cycle.

Once issued, the statement balance amount does not change, even if you continue to swipe your card for more purchases during the grace period (this is the period between statement closing date and due date, during which you won’t earn interest on your unpaid statement balance). As long as you pay off the statement balance in full by the due date, you should not accrue any interest.

Your outstanding balance encompasses everything you owe at a specific moment in time. Sometimes your outstanding balance can be higher than your statement balance; sometimes it may be lower. Consider this example:

Your billing cycle ends, and you now have a statement balance of $1,000. In the next week, you spend $500 more with your credit card. Your statement balance remains $1,000, while your outstanding balance grows to $1,500. But as long as you pay that $1,000 statement balance by the due date, you will not incur any interest — and your statement balance will drop to $0 until the end of the next billing cycle.

Recommended: Tips for Using a Credit Card Responsibly

Remaining Balance vs Outstanding Balance

Remaining balance refers to whatever amount is still due after you’ve made your monthly credit card payment. For example, if your statement balance is $500 but you only pay $300, your remaining balance is $200. This, along with the interest it accrues, becomes a part of your outstanding balance.

You can avoid accruing interest on a remaining balance by paying off your statement balance in full each month rather than only the credit card minimum payment.

Recommended: When Are Credit Card Payments Due

What Is an Average Outstanding Balance?

The typical amount of an outstanding balance can vary widely from person to person — it all depends on how much you use your credit card, what your credit limit is, and whether you carry a balance. That being said, your average outstanding balance is simply the amount you owe on a credit card, averaged over a certain period of time.

The average outstanding balance formula for a statement period would be the total of your balance for each day of the statement period, divided by the number of days in the cycle. This can be helpful to know given most credit card issuers calculate interest on a daily basis, based on your average daily account balance.

Recommended: What is the Average Credit Card Limit

Paying Your Credit Card Outstanding Balance: What to Know

The nuances of credit card balances can be tough to nail down, but understanding how they work — particularly outstanding balances — may help you avoid interest and impacts to your credit score.

Here’s the short version:

•   Paying the minimum balance due each month will help you avoid late fees and negative marks for late payments on your credit report.

•   Paying the statement balance in full by the due date will keep you from accruing interest.

•   Paying down the outstanding balance, or current balance, even outside of your normal payment cycle, can reduce your overall credit utilization, which influences your credit score.

How Interest Contributes to Outstanding Balances

When you make purchases with your credit card throughout a billing cycle, the card issuer has lent you money to cover the expenses. And if you don’t pay the lender the statement balance in full by the specified due date, any remaining balance will become part of your outstanding balance — and it will start accruing interest.

The best way to avoid paying credit card interest is to pay your statement balance in full by each due date.

Recommended: Tips for Using a Credit Card Responsibly

How an Outstanding Balance Affects Your Credit Score

When you carry over unpaid balances, you’ll do more than earn interest that you have to pay. You’ll also increase your overall credit utilization, which is the amount of your total available credit you’re using. That’s because your outstanding balance counts toward your credit limit.

For example, if your credit limit is $5,000 and your outstanding balance is $2,500, you’ve utilized 50% of your credit limit. In general, creditors prefer to see a credit utilization of 30% or lower. This signals to them that you can responsibly pay back your debts.

In fact, credit utilization is the second most important factor affecting your FICO credit score. It accounts for 30% of your overall credit score. Thus, carrying a high outstanding balance regularly can adversely affect your credit score.

For this reason, experts typically recommend paying off your full statement balance every month if you’re able. And if you make a large payment on your credit card during a billing cycle that increases your outstanding balance tremendously, you may want to pay it off early to reduce your credit utilization — or else you chance a drop in your credit score.

Recommended: What Happens If You Overpay Your Credit Card?

The Takeaway

Credit cards can be confusing, especially when you’re new to the terminology. But once you understand how your statement and outstanding balances work and can responsibly make payments in full and on time, credit cards can be a great tool for boosting your credit score.

FAQ

Does outstanding balance mean past due?

Having an outstanding balance does not necessarily mean it’s past due. Your credit card requires a minimum monthly payment; if you have satisfied that payment, you do not need to immediately pay your outstanding balance. But keep in mind that you generally need to pay the full statement balance each month to avoid accruing interest.

How do I clear the outstanding balance on my credit card?

To clear the outstanding balance on a credit card, you can make a payment equal to the amount. This should bring the balance down to zero. However, you do not always have to pay your outstanding, or current, balance to avoid interest. Paying your monthly statement balance in full should keep you from accruing interest, even if your outstanding balance is higher.

Why is my outstanding balance negative?

Your credit card outstanding balance can go negative if you pay off the card and then receive a credit for a returned item or claim cash-back rewards from your purchases. If you want, you can request a check from the credit card issuer in the amount of the negative balance. Or, you can apply the negative balance on a credit card toward future purchases on the credit card.

Photo credit: iStock/SARINYAPINNGAM

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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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .


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