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We all know paying student loans on time is important, but sometimes life gets in the way. Perhaps you’ve been laid off or are having trouble finding a job. Maybe you’ve run into an unexpected expense, like car repairs or medical bills. Or maybe you got so busy with work and personal commitments that you just forgot.

If you’re behind on student loans, you’re not alone. As the cost of college and total student loan debt continues to rise, it is naturally becoming increasingly more difficult to keep up. In fact, over 10% of borrowers are more than 90 days behind on their student loans. And recent research suggests that nearly 40% of borrowers may default of borrowers may default on their student debt by 2023.

If you are falling behind on your student loan payments, just about the worst thing you can do is … nothing. Letting your loan payments lapse can have serious consequences for your financial future.

The good news is there are options for getting back on track with your loans and choosing a repayment plan that works for you.

Student loans can feel like a burden, but they don’t have to hold you back. By taking the right steps for you, you can help make your student debt manageable.

Why You Shouldn’t Ignore Missed Payments

Denial is a normal response when you’re feeling overwhelmed. But avoiding your late payments isn’t going to solve the problem and could potentially make things worse for you down the line.

Once you miss a payment, your loan is technically delinquent. With federal loans, if you make the payment within 90 days, everything will go back to normal. If more time passes, your loan servicer will likely report the delinquency to the major credit reporting agencies, and your credit score will suffer.

If you continue to be behind in payments, usually for 270 days, your loan may go into default. This is serious: Your entire loan amount may become due right away, and you won’t be able to take advantage of deferment, forbearance, or other options for relief until you get out of default.

This could harm your credit score, and the government may eventually be able to garnish your tax refund and more. If you miss a private student loan payment, the lender can usually take action more quickly by adding on late fees, referring your loan to a debt collection agency, or more.

Unlike other types of debt, student loans generally can’t be discharged during bankruptcy except in cases of undue hardship. As you can see, the consequences of ignoring an overdue loan are serious. Luckily, there are things you can do to avoid that.

Review Your Spending by Making a Budget

It sounds simple, but many of us don’t have a clear idea of how much money we have coming in and going out—or what we’re spending it on. If you’re having trouble keeping up with any of your bills, including student loans, making a budget is a good first step towards seeing your whole financial picture.

The total of your after-tax salary or wages, any income from a side hustle, and any help you might regularly get from family will be the starting point at which you can see how much money is coming in.

Next, tally up your expenses—how much money is going out. This includes fixed expenses, which typically stay about the same every month, such as rent, insurance, utilities, transportation, and groceries. Include your minimum loan payment in this calculation. This tally might also include variable expenses, which may fluctuate month to month, such as money spent on shopping or eating out.

If your spending exceeds your income, that could be a contributing factor if you’re unable to afford your loan payment. To address this, you might consider thinking about ways to increase your income or to reduce your expenses.

Can you ask for a raise or get a supplemental gig? Can you cancel that gym membership and jog outdoors instead? Or propose low-cost activities, like a picnic, instead of going out to bars and restaurants with friends?

Making a workable budget—and sticking to it—can go a long way to ensuring you have money in your account to make payments on time. And setting up auto-billing (sometimes called autopay) with a bank account or loan servicer may also help ensure payments are made automatically.

Looking into Deferment or Forbearance

Sometimes, making a budget isn’t enough. If you’re going back to school or encountering an economic hardship, it might not be feasible to pay your loans for a certain time period.

In cases like this, if you have federal loans, you can apply for a deferment or forbearance with your loan servicer. Both of these options could allow you to temporarily stop payment or reduce the amount you pay.

Borrowers may qualify for federal student loan deferment if they’re in school at least half-time, are on active military duty, or while you’re in certain graduate fellowships. You may also be eligible for up to three years of relief if you’re unemployed, in the Peace Corps, or facing economic hardship.

If granted deferment status, a borrower won’t be responsible for the interest that accrues on certain types of federal student loans, including Direct Subsidized Loans, Federal Perkins Loans, and other subsidized loans; however, borrowers will likely need to pay interest on Direct PLUS loans and other unsubsidized federal loans.

Borrowers could be eligible for federal student loan forbearance if unable to pay their loans because of medical bills, changes in employment (such as reduced hours, reduced pay, or job loss), or other financial difficulties. In these situations, it’s up to the loan servicer to decide whether to grant a borrower forbearance.

In other selective situations, on certain qualifying loans they must grant it. These include if a borrower is completing a medical or dental internship or residency, serving in AmeriCorps, or using 20% or more of their gross income each month for student loan payments.

It’s important to note that with forbearance, borrowers are responsible for interest that accrues regardless of the type of loan they have. And all that unpaid interest will be added back onto the principal of the loan—which could make the total amount you’ll eventually have to repay substantially higher.

Private lenders, on the other hand, aren’t required to offer relief if you’re struggling financially, but some are willing to temporarily reduce your payments if you’re unemployed or have another short-term setback. It could be worth reviewing your contract terms or reaching out to your provider about options.

Considering an Income-Driven Repayment Plan

If your financial situation doesn’t seem like it’ll improve anytime soon, and you can’t make ends meet while paying your student loans, there are federal repayment programs that may be able to help.

With federal loans, you may have the option of switching to a repayment plan that ties your monthly payment to your discretionary income in order to make it more affordable. The plan you may qualify for depends on the types of loans you have, your financial situation, and when you took them out.

All income-driven repayment plans limit monthly payments to between 10% and 20% of discretionary income. If the loan is not fully repaid at the end of the repayment period, the loan balance may be forgiven. However, a number of factors will determine if there will be a balance to be forgiven, such as income increase over the life of the loan and debt-to-income ratio.

The downside to going with an income-driven repayment plan is that you may end up owing more in interest compared to some other plans, since the term is longer.

If the monthly payment is not enough to cover the monthly interest charge, all or a portion of the difference will be paid by the government, depending on the type of income-driven repayment plan you have. There may be some instances in that the unpaid interest is capitalized, meaning added back to the principal balance of the loan.

Either way, making the minimum payment on time every month can be an important factor in having strong credit and avoiding negative consequences.

Refinancing Your Student Loans

Another potential solution to unaffordable payments can be student loan refinancing. Federal or private student loans may be able to be refinanced by taking out a new loan with a private lender, which will pay off your existing student debt.

The new loan may come with a lower interest rate or a lower monthly payment than the existing loans, especially if the borrower has a strong credit and employment history. Refinancing with SoFi means there won’t be any origination fees or prepayment penalties.

It is important to remember that if you refinance your student loans with a private lender you will lose access to federal benefits such as deferment, income-driven repayment plans, and public student loan forgiveness.

Getting Your Loans Back on Track

Missing student loan payments is a sign that you need to take action. Ignoring the problem and letting late notices pile up won’t make the issue go away and could open you up to serious consequences.

But if you face the problem head on, you have options for catching up and getting back on track.

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.

SOSL18217

There’s nothing quite like the feeling of having your credit card balance paid in full. It’s like a breath of fresh air, a surge of pride, and a huge sigh of relief all rolled into one. But Americans have an on-going love affair with plastic.

Collectively we hold more than $1 trillion in credit card debt. When it comes to getting rid of credit card debt, baby steps can lead to big victories—even the possibility of getting those credit cards paid off in 2020.

To be clear, we’re not talking about being completely debt-free in 2020. Depending on how much you owe on all your debt in total, that could be a longer journey. But targeting your credit card debt can be a smart first-step since credit card debt can sometimes come with a high interest rate.

We’ve put together eight common strategies for how to get rid of credit card debt. But first, you’ll need to get your head in the game. Unless you suddenly receive an inheritance or win the powerball, unloading debt can be challenging.

If you truly want to try and eliminate credit card debt in the new year, it’s going to require a lot of budgeting, discipline, and will-power. You’ll likely have to make sacrifices and compromises. But if you can keep your eye on the prize, next year you could be looking at a nice, round zero.

1. Limit Your Use of Credit

No strategy for how to crush credit card debt is going to work if you continue to rely heavily on your credit cards. Pick one card to keep—ideally, one with good terms, like a low interest rate or a great rewards program —and put the rest away.

You can store them in a safe place or even cut them up so you’re not tempted to use them. If the card doesn’t carry a large annual fee, consider not canceling your credit card account, since losing that cards credit history or percentage of credit utilization could possibly have an affect on your credit score.

2. Take a Hard Look at Your Spending

Go through last month’s bank and credit card statements and add up all the money you spent eating out, or shopping for non-essentials. You may be surprised at what you find.

Review your spending closely and see if there is any room for you to cut back on unnecessary expenses. Then, create a budget that’s completely within your means.

The goal is to cut back on your discretionary spending so you can focus additional funds on paying off your credit card debt. Take a look at our tips for creating a better budget. Building a workable budget is one of the first steps in tackling your debt.

3. Create a Debt-Repayment Strategy and Stick to It

There are a few different schools of thought when it comes to eliminating your credit card debt, especially if you have debt spread over multiple credit cards. Regardless of the strategy you choose, make the minimum monthly payments on all of your debts.

One strategy is called the debt avalanche method. Using this method you’ll organize your credit card debt from highest interest rate to lowest interest rate.

Focus your efforts on repaying the debt with the highest interest rate first. Then as you pay off each credit card, you can contribute the money you were contributing to the next debt.

On average, Americans will pay more than $1,000 in interest this year, so tackling the highest interest rate first could be appealing. You can use our credit card interest calculator to see an estimate of how much interest you’ll accrue on your current track.

The other approach suggests you focus on the credit card with the smallest balance first. This is called the debt snowball method. The goal of this strategy is to encourage you to continue your debt repayments. Since you start with the smallest balance, you’ll start seeing the impact of your payments faster.

6. Transfer to a Balance Transfer Credit Card

This could help you toward your goal of eliminating your credit card debt but in order to do so it will require diligence to avoid common pitfalls.

A balance transfer credit card allows you to open a new low-interest or interest-free credit card and transfer your existing balance from a high-interest credit card, so you can pay off the debt. In theory, paying off the debt should be easier without a high APR.

The introductory APR on low or 0% transfers generally lasts anywhere from six to 18-months, so be sure you understand the terms and conditions. These can be a useful tool if you can repay your debt during the introductory period.

7. Consolidate Your Debt with a Personal Loan

A personal loan won’t eliminate your debt, but it could help you get out of the high-interest credit card game. Instead of a revolving door of debt, you can opt to pay one monthly fixed payment, possibly at a lower interest rate.

8. Pay More than You Owe, More Often than You Owe It

As you work toward paying your credit card debt, consider making more than the monthly minimum payments. This can help you pay off your debt faster and in doing so, could help you reduce the amount of money you spend in interest over the life of the debt. This can be helpful in both the avalanche and snowball methods of debt repayment.

Ready to see how consolidating your credit card debt with a personal loan could help you take control of your finances? SoFi can help. Use our personal loan calculator to compare your current debts with a personal loan.

When you take out a loan with SoFi there are no prepayment penalties or origination fees. You’ll also gain access to a community of like-minded savers.

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.

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 .

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.

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.

SOPL19020

Earning an MBA (Master of Business Administration) degree is no small feat. Between the work you did in undergrad, the application process, determining how to pay for your MBA education, and completing your studies, internship(s), and other work—you’ve done a lot. You should be proud of yourself!

But what comes next?

After all, you’ve taken a breadth of courses. According to The Princeton Review, core business school
courses (often taken in Year 1 of a two-year program) cover a range of topics: finance, management, accounting, decision science, organizational behavior, and economics. During Year 2, students may specialize their studies.

For example, Berkeley’s Haas School of Business offers courses including technology, health management, and corporate social responsibility. All these subjects are designed to help an MBA grad develop the skills to lead in a business setting.

According to a survey by the Association of International Graduate Admissions Consultants, about 57% of survey respondents reported wanting to acquire new business-related skills and knowledge.

Others hoped the degree would increase their job prospects, help them build a strong professional network, help them make a positive difference in the world and/or lead to an increased salary.

With these skills in hand, there are a number of avenues your post-MBA career can follow. Below, you’ll find some of the paths today’s MBA-holders are considering—and they may not be what you expect. And because MBA students leave school with an average of $70,000 in loans, we’ll dig into possible ways to tackle that debt, too.

Tech

According to the Graduate Management Admissions Council (GMAC), MBA grads are likely to find opportunities in the tech world . Major tech companies include Amazon, Microsoft, and Google—and their lesser known counterparts are hiring MBA grads, too. GMAC polled recruiters, and 89% said they were looking to employee people with a business degree.

MBA grads might be hired for work in strategy, product management, business development, finance, operations, or human resources. Depending on your undergraduate degree (computer science, engineering, etc), your previous work experience, and your specialization in grad school, some roles may be a better fit than others.

Sustainability

If you’re an MBA grad aiming to making a positive environmental or social impact, you may be leaning towards a job at the intersection of business and sustainability. You could work for a company devoted to green energy such as a solar power company, or an automobile brand that makes hybrid and electric cars.

You might also want to consider a company that aims to develop new green products, or that wants to make its current business practices more sustainable.

“Environmental issues like climate change and its impacts are going to profoundly affect businesses across almost every sector in coming decades,” said Katie Kross, managing director at the Center for Energy, Development, and the Global Environment (EDGE) at Duke’s Fuqua School of Business. “Today’s MBA students are launching their careers in a world where natural resource constraints have far-reaching implications for how businesses operate.”

Entrepreneurship

By definition, an entrepreneur is an innovator who launches and operates a business, often taking on most of the financial risk and reaping most of the rewards.

Business schools recruit future business leaders, so plenty of MBA students attend graduate school hoping to gather the skills necessary to create and run a successful company. Some even started companies before attending business school, gaining valuable experience, with specific questions about how to improve their business.

Cameron McCain is one such MBA grad . According to McCain, the biggest advantages to earning an MBA as an entrepreneur, for him, included building a network. One day, those people may be behind the doors you’re knocking on in your quest for capital. He also says that an MBA helps entrepreneurs fill in the gaps of their own business acumen. For McCain, that meant focusing on finance, an area in which he had less experience.

Entertainment

Fashion, entertainment, and sports companies likely need people with a business background. Take film and television companies, for instance. Like other businesses, they require market data analysis. Which products are succeeding? Which are failing? Being able to look at consumer data and then make strategic business moves is an MBA-taught skill set.

Entrepreneur Cara Withers Shaw , who got her MBA from Pepperdine University, worked for multiple entertainment companies (Disney, Twentieth Century Fox) before launching her own company. She says her time in business school helped her develop the quantitative and qualitative analytical skills she needed to study movie-going data.

But What About My Loans?

If you attended a two-year MBA program at a top business school and took out student loans in order to do so, chances are you’re looking at around $80,000 to over $100,000 in student loan debt.

This doesn’t mean your hard-earned degree isn’t worth it, financially speaking. Debt for B-School grads who attended Harvard, Stanford, or the University of Chicago ranges from $86,000 to $116,000; their average salary is about $161,000. That said, even with a hefty salary, grads’ loans may be overwhelming.

There are strategies that may make your monthly payments more manageable. First, once you know your income, you might spend some time making a new budget that factors your loan payments into your expenses. You might consider setting up automatic payments, which could ease your stress—and keep you from missing a payment.

And refinancing your student loans at a lower interest rate may help lessen the amount of interest you pay over time, potentially saving you money in the long haul. (Keep in mind that if you have federal loans, refinancing means losing access to benefits like student loan forgiveness, especially if you choose to work in the public sector.)

Regardless of the path you choose, your MBA likely played a large part in getting you there. And with a better handle on your student loans, you’ll likely have more energy and time to devote to making it count.

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.

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.

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

SoFi 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.

SOSL19089

If you get a job with a governmental agency or not-for-profit organization and you have federal student loan debt, you may be able to receive loan forgiveness under the Public Service Loan Forgiveness (PSLF) program.

Currently, if you qualify for this program, and make 120 payments under a qualifying repayment plan while working full time for an employer that falls within PSLF parameters, then the government will forgive the remaining balance of your Direct Loans.

List of Public Service Jobs

You may be asking: What is a public service job? What type of job would qualify me for PSLF?
According to the office of Federal Student Aid, the answer to those questions is that qualifying public service employment is not about your specific role, it’s about who employs you. Their list of public service organizations includes:

•  government organizations at any level (federal, state, local, or tribal)

•  not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code

•  other types of not-for-profit organizations that are not tax-exempt under Section

•  501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services

•  serving as a full-time AmeriCorps or Peace Corps volunteer

Bullet point three mentions jobs that have a primary purpose of providing “certain types of qualifying public services.” To have the potential to qualify for the PSLF program under this option, you’d need to work for an employer that has at least one of the following as a primary purpose:

•  Emergency management

•  Military service

•  Public safety

•  Law enforcement (this includes “organizations that are publicly funded and whose principal purposes include crime prevention, control or reduction of crime, or the enforcement of criminal law”)

•  Public interest law services (this refers to “legal services provided by an organization that is funded in whole or in part by a local, state, federal, or tribal government”)

•  Early childhood education (this includes “licensed or regulated child care, Head Start, and state funded pre-kindergarten”)

•  Public service for individuals with disabilities

•  Public service for the elderly

•  Public health (this includes “organizations that employ nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health support occupations, as such terms are defined by the Bureau of Labor Statistics”)

•  Public education (this includes “services that provide educational enrichment or support directly to students or their families in a school or a school-like setting”)

•  Public library services

•  Other school-based services

There are a few types of employers whose employees do not qualify for PSLF. They are:

•  Labor unions

•  Partisan political organizations

•  For-profit organizations, including for-profit government contractors

•  Not-for-profit organizations that:

◦  Are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code

◦  Do not provide a qualifying public service as their primary function

You can also use a tool provided by StudentLoans.gov to see if you potentially qualify for forgiveness under the PSLF program.

Why You Might Choose the Public Service Path

Working in public service can feel wonderful, knowing that you’re helping to make your community a better place.

Although you can accomplish that by working a for-profit job and also volunteering for a cause that matters, when you work in one of the public service jobs, this is what you’re doing as your vocation, full time—and you can still choose to volunteer for causes you care about on the side.

Pros and Cons of the PSLF Program

While there are advantages to going the public service route and potentially qualifying for PSLF, it is not a guarantee that you will qualify and that it will be worth it in the long run.

The main advantage to PSLF is that after a set time, the balance of your Direct Loans could be forgiven. And the forgiven amounts in this program aren’t typically considered income, which would mean you wouldn’t be taxed on the forgiven amount—that isn’t true of all of the loan forgiveness programs.

You may also pay less on your federal loans each month because you must use an income-driven repayment plan to be eligible to receive PSLF, and that can help with cash flow.

However, as we mentioned above, you may qualify only if you work for certain types of employers. And to take advantage of PSLF, you’ll need to work full-time for a qualifying employer for 10 years and make 120 qualifying payments—and make sure, every year (or if you switch employers), you submit an Employment Certification Form. You also may need to jump through additional hoops to qualify; PSLF is not awarded automatically.

It’s also worth considering that if you work for a for-profit employer, you might make more money than you would at a public service job, which could allow you to pay off your student loan debt more quickly. If you aggressively paid off your student loans in fewer than 10 years, it’s possible that you could pay less in interest than if you made 120 payments under this forgiveness program.

And, if you enroll in the program but then stop working for a qualifying employer, you could end up with a larger outstanding balance because of accumulated interest from the income-driven repayment plan (more loan payments means more interest payments).

A New York Times article, published in May 2018 (“Public Servants Do Get Student Loan Forgiveness. Meet One of the First.”) includes stories from people who struggled to first qualify for the program, and then to get “coherent status updates.”

One doctor mentioned in the article handed her paperwork off to her mother, an attorney, and neither of them could navigate the process successfully. Another person who is struggling to glean the benefits of the program is an attorney who actually works for the Department of Education, which administers the program.

Another challenge is that the PSLF program focuses only on federal student loans so, if you also have private ones, they aren’t eligible for PSLF, even if you work in one of the qualifying public service jobs. Getting loan forgiveness for private loans is highly unlikely, although you may be able to talk to your private lender to obtain more temporary relief measures, such as loan deferment or forbearance if necessary.

In fact, the only times when loan forgiveness seems to happen with private loans is typically under exceptionally dire circumstances, such as if the borrower becomes completely disabled or dies. Even then, there isn’t a formal process for forgiveness.

What to Do If PSLF Isn’t Right for You

So, what do you do if you don’t qualify for PSLF or if you have private loans? One option is to refinance your student loan debt. If you have a good credit history and solid income potential (among other important financial factors), then you might qualify for a lower interest rate, which can reduce the amount of money you’d pay over the life of the loan.

Some lenders, like SoFi, will consolidate federal and private student loans, and then refinance them into one loan. This means that your new lender would pay off all of your old loans, and then, based on terms you agree to, issue a brand new loan to you.

If you refinance your federal loans with a private lender, you would then lose the potential for any federal benefits, including PSLF and income-driven repayment plans, so it’s important to do your homework first: consider your short-term and long-term needs; make sure you’re getting the lowest rate possible; ensure that the lender has the loan programs (fixed/variable) and terms you need; check to see if you’ll have to pay any fees; see what benefits you can gain with your new lender; and find out if the lender you’re considering will first do a soft credit pull before you apply (so you can see what rates you qualify for) that won’t have the potential to affect your credit rating.

Student Loan Refinancing with SoFi

It’s important to remember that you should review all federal repayment options first before refinancing with a private lender. If you do choose to refinance with a private lender, consider SoFi.

At SoFi, you can consolidate federal student loans with private ones, refinancing them into one convenient loan. Plus, there are no hidden fees. And SoFi offers member discounts and career counseling, among other potential benefits. You can use SoFi’s student loan refinancing calculator for an estimate of how much you might save.

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.

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.

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

SoFi 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.

SOSL19086

Debt happens. Sometimes you need to rely on a credit card or loan to meet the demands of life’s expenses. But if you hold a sizable amount of credit card debt, have defaulted on a loan, or have failed to pay an unexpected emergency room bill, it’s important to know what could come next.

To help provide a broad understanding of what might happen if your debt goes into collections, we’re going to take a look at the Fair Debt Collection Practices Act (FDCPA). Look, maybe it’s not the most compelling-sounding document, but a general understanding of the FDCPA could help over the course of your financial life.

It’s important to remember that if you have specific questions about debt collection laws or the FDCPA, it would be best to consult your tax attorney and financial advisor. This article is merely an overview of the debt collection process and should not be taken as advice. We want the following intel to serve as background info—nothing more. With that in mind, here is a closer look at the world of debt collection.

What the FDCPA Doesn’t Cover

If you’re facing serious debt and are being contacted by debt collectors, it’s important to understand your rights. The FDCPA is essentially the Federal Trade Commission’s (FTC) rule book on how debt collectors can interact with consumers. Typically, debt collectors are thoroughly schooled in the ways of FDCPA, because they have to comply with it when collecting on consumer debts. However, the FDCPA does not apply to the following:

•  Creditors (i.e., the lenders you originally took the debt from)

•  Corporate or commercial debts (this means the FDCPA doesn’t apply when a large company defaults on their debt)

•  Business-related debts (even for consumers, the FDCPA does not extend to debts incurred for business expenses)

P.S.: More exceptions might apply here, and for more information, you can consult your tax attorney and review the FDCPA in full.

Now that we’ve got a handle on where the FDCPA doesn’t come into play, let’s look at rules the FDCPA lays out for debt collector-consumer interaction:

Debt Collectors Cannot Harass the Consumer

In accordance with the FDCPA , debt collectors can’t “harass, oppress, or abuse” the consumer in attempts to collect their payment.

Debt Collectors Can Contact You Multiple Ways

Debt collectors can contact you to collect a debt using multiple methods of communication including by phone, mail, email, or even text messages.

They Can Collect for a Number of Outstanding Debts

Consumer debt collectors aren’t limited to collecting for credit card debt. They can also collect for auto loans, medical bills, student loans, mortgages, and other household debts. However, as noted above, they cannot collect for business debts.

They Can Ask Your Friends and Family How to Reach You

While debt collectors cannot discuss your debt with anyone else (with the potential exception of your spouse and your attorney), they can ask others for your address, your home phone number, and where you work. However, collectors can typically only contact them once.

Collectors Must Provide Information in Writing

Once a debt collector has contacted you, they have five days to send you a written notice stating how much money you owe, the name of the creditor you owe it to, and what you can do if you don’t think this debt is yours.

Collectors Must Verify Your Debt

If you are being contacted about debt you don’t believe is yours, the FDCPA notes that you must send the debt collector a letter within 30 days of receiving their letter, clearly communicating that you’re not liable for that money.

The collector then needs to send you written verification of the debt, for example, a copy of a bill for the amount you owe, before the agency can start contacting you to collect the money again.

They Can Take Money from Your Paycheck

A debt collector can obtain a court order for garnishment, directing that your wages or benefits be seized to repay your debt.

They can also seek a court order allowing them to take money from your bank account. It’s important not to ignore any lawsuit filed by a debt collector against you.

They Can’t Call You at All Hours

There are restrictions in place that limit when and where debt collectors can contact you. For instance, they can’t call before 8 a.m. or after 9 p.m. (consumer’s local time), unless you specifically give them permission.

They also can’t call you at work, if you tell them you aren’t allowed to get calls at work.

They Must Stop Contacting You if You Ask

If you send a debt collector a letter by mail, asking them to stop contacting you, then they can only contact you to tell you about a specific action they are taking, such as filing a lawsuit.

If you send a letter stating you’ve hired an attorney to represent you, the collector must communicate with your attorney. However, the FTC recommends you talk with the debt collector at least once to confirm whether they are talking about debt that you actually owe.

They Can’t Lie

Debt collectors can’t lie just to get your attention. Any information a debt collector shares with you must be accurate.

They cannot embellish the amount of money you owe or misrepresent themselves by saying they’re attorneys or government representatives. They also can’t threaten you with a false arrest or legal action.

They Must Abide by Laws

Collectors cannot engage in unfair practices such as trying to collect extra interest or fees beyond what you owe. They cannot deposit a post-dated check early, and they cannot threaten to take your property without obtaining a court order.

If you believe a debt collector has broken a law, you can sue them in state or federal court for damages such as lost wages and medical bills. You can report violations to your state attorney general’s office , the Federal Trade Commission , or the Consumer Financial Protection Bureau .

About SoFi

If you’re reading this, it might be because you’re worried about keeping up with debt payments—whether that’s payments on credit card debt, student loan debt, or another loan. The ideal scenario, of course, is getting that debt under control before it goes into collections. And one way to do that is by tracking your spending and effectively organizing your finances so that you can stay on top of your debt payments.

SoFi Relay is a complimentary product that can help you track your spending, view all of your accounts on one dashboard, and set debt payoff goals. You can leverage SoFi Relay to keep your debt payoff plan on track, such that you’re spending more time crushing your debt and less time worrying about default.

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 .

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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