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Many people struggle to keep up with the demands and expenses of daily life, which can create stress and anxiety. That’s why some choose a minimalist lifestyle: Fewer possessions make for easier management. Minimalists strive to eliminate anything in their life that does not serve their purpose. This leads to more physical, emotional, and financial space.

If the concept of minimalism appeals to you, read on to better understand what a minimalist lifestyle is, its benefits, and how to start on the path to a simpler, more manageable, and possibly more affordable lifestyle.

What Is a Minimalist Lifestyle?

Minimalist living is uncluttered by superfluous items like luxury cars, excessive clothing, and purely decorative furnishings. There can be many reasons someone chooses a minimalist lifestyle; they might want to simplify their life to reduce stress, improve their health, or reduce harm to the environment. They may also want to cut back on expenses and improve their budgeting and finances.

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Surprising Benefits of a Minimalist Lifestyle

When you have less stuff, it follows that you have less to worry about. A minimalist lifestyle allows you to carry less literal and metaphorical baggage around.

Another benefit is that minimalists buy fewer things, which can allow you to save money. From a holistic perspective, minimalism reduces consumerism, and that can benefit the planet.

How to Live a Minimalist Lifestyle

Living a minimalist lifestyle can seem daunting for some, requiring a mindset shift. Here’s a window into a more minimalist mindset and lifestyle to give you a taste of what it involves. And don’t forget as you read that there are benefits to living below your means.

Invest in Experiences

Rather than collecting things and possessions, a minimalist lifestyle emphasizes experiences. Minimalists spend, just in a more deliberate way. For example, minimalists may spend on vacations and concerts rather than on cars and jewelry.

Audit Your Life

Auditing your life involves deciding what is most important and eliminating anything superfluous. Deciding what is most important can be difficult, but some questions to ask yourself are: How am I doing mentally and physically? What’s important to me now that perhaps wasn’t before? The answer to these and similar questions can help you pinpoint your core values and priorities.

A free budget app can help you audit your spending and evaluate how much of it is really necessary.

Eliminate Needless Expenses

A meaningless expense to one person may be valuable to another. That’s why conducting a life audit is important to help you decide which expenses are not serving your purpose. For example, a person might discover that buying gas is often unnecessary if they can manage without a car most of the time. Or that mid-price brands and gently used items can be just as nice as luxury goods.

Set Limits and Delegate

A minimalist lifestyle is easier to control. Setting limits and delegating is one way to live a minimalist lifestyle because you have less to manage. For example, you might use an accountant to do your taxes, or hire someone to manage your website. You might have fewer screens or electronics or downsize to a smaller home.

Recommended: Does Net Worth Include Home Equity?

Honor Your Priorities

The goal of auditing your life is to establish priorities to eliminate what doesn’t align with them. Part of the journey to minimalism is learning to appreciate what you have and not constantly desire new things. Perhaps you and your partner decide to live on a single income while one of you cares for the family. You may also earn less and have to economize.

Minimalist Lifestyle Tips

How do you implement a minimalist lifestyle? Because the changes can be profound, try making small changes at first as you gradually adjust to a new mindset.

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1. Declutter Your Environment and Your Mind

A great place to start is to declutter your environment. Start with your home, your workspace, your car. Get rid of things you haven’t used in a while or that you are just hanging onto in case you need them. As the space around you becomes less messy, you might find your thinking becomes more clear. You can also make some money by selling your unwanted stuff or donate items.

2. Be a Purposeful Not Prolific Consumer

Minimalists still make purchases, but the emphasis is on quality rather than quantity. An example is choosing to use one credit card that serves many purposes rather than five because each one comes with different rewards. Yes, you may benefit from free miles and cash back, but you will also have to buy more to earn those points and rewards, which is consumerism, the antithesis of financial minimalism.

3. Digitize Movies and Books

Most of us have bookcases full of books that sit and gather dust. It’s fine to keep some treasured items and classic novels, but you can also download e-books or visit your local library. Declutter your home of old DVDs, CDs, and books you don’t need.

4. Recycle and Reuse

Reusing shopping bags, refilling a water bottle instead of buying bottled water, or taking your own cup to Starbucks are ways to cut back on trash and single-use products. You’ll save money and help the environment.

5. Get Organized

As you declutter, you’ll find ways to be more organized. Find a space for things you want to keep, and use storage bins and organizers. When everything has a place, you’ll waste less time trying to locate things, and you’ll be more motivated to put things back when you’ve used them.

Recommended: The 52 Week Savings Challenge

The Takeaway

A minimalist lifestyle is appealing, considering how busy and cluttered daily life can be. You don’t have to embrace full-on minimalism immediately but can take small steps, such as establishing goals and priorities, decluttering your environment, and organizing. You can also reduce your expenses and financial obligations this way. As you progress, you may find that your mind clears, your life slows down, and you are able to budget more appropriately too.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

How do you live a minimalist lifestyle?

Living a minimalist lifestyle requires prioritizing and eliminating things that do not align with your values. The process of elimination will be different for everyone, but it does not have to be quick or painful. Just removing one thing or downloading a budgeting and money tracking app can help you achieve a simple minimalist lifestyle.

What is an example of a minimalist?

An example of a minimalist is someone who lives with very little furniture, or none at all, or someone who moves to a smaller home. A less extreme version of a minimalist might be someone who simplifies things by clearing items from countertops, buys few clothes, or chooses a vegan diet.

What is the 90 rule for minimalism?

The hardest part of achieving a simpler minimalist lifestyle is decluttering. How do you decide what to get rid of? The 90 rule can help. Choose a possession, and ask yourself if you’ve used that item in the past 90 days. If not, then it’s a candidate for elimination from your life because it is not currently serving a useful purpose.

Photo credit: iStock/Pramote Naksomrit

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.


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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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A credit card is a small, rectangular piece of plastic or metal that lets you make purchases. Whether you’re buying lunch or a new piece of furniture, a credit card enables you to borrow funds from a credit issuer to pay the merchant. Then, every month, you’ll receive a statement in the mail with your balance, which you’ll want to pay off every billing cycle. Otherwise, you’ll owe interest on the remaining amount.

While the concept sounds simple, it’s easy to rack up debt if you’re not careful. With that in mind, here’s credit cards explained in-depth.

Credit Card Meaning

Banks and other financial institutions issue credit cards to consumers to extend revolving lines of credit. A revolving line of credit means the cardholder can borrow money up to their credit limit and then repay it on a continuing basis.

With other lines of credit, like a personal loan, you take out a lump sum amount and agree to repay it within a specific timeframe. During this timeframe, you make fixed installment payments. On the other hand, with a credit card, you can repeatedly borrow against the limit, which gives you more flexibility to use the card as needed.

When you receive your credit card, you’ll note several different numbers on it. There’s the credit card account number, alongside your name and the credit card issuer’s logo. Also on a credit card are the credit card expiration date, which marks when the card is valid through, and the CVV number on a credit card, which offers an extra layer of security in purchases made online or over the phone.

Recommended: What Is a Credit Card CVV Number?

How Does a Credit Card Work?

While there are different types of credit cards, this is the basic way they work. Once you have a new credit card in hand, you can use it to make purchases at places that accept credit card payments. Then, every month, you’ll receive a statement either electronically or in the mail, depending on your preference. The statement will include all purchases, your outstanding balance, and the minimum monthly payment due.

You’re required to make at least the minimum payment on your account to keep it open and in good standing. However, you also can opt to pay your entire balance in full or decide on another amount (as long as it meets the minimum payment requirement). If you were to pay an amount that exceeds your total balance, then you’d end up with a negative balance on your credit card.

If you aren’t able to make the minimum credit card payment, the outstanding balance will roll over to the next month and begin accruing interest and fees — which can significantly add up over time. Therefore, it’s best to get in the habit of paying off your credit card every month to avoid paying an extremely high amount of interest. But, if your finances don’t allow you to pay the entire balance, you could make smaller payments throughout the month to minimize the amount of accumulating interest.

To ensure you make your monthly payments, you can usually set up autopay for the minimum payment. This way, you won’t miss a payment and get charged a late fee. Unfortunately, late payments also can end up on your credit report, which can negatively affect your credit score.

How Does Credit Card Interest Work?

Every credit card comes with an annual percentage rate (APR), which represents the annualized cost of borrowing including interest and fees and marks an important part of how credit cards work. In general, credit cards are considered to have high interest rates vs. some other forms of credit, such as personal loans.

Some credit cards have more than one APR, such as a balance transfer APR, an introductory APR, or a cash advance APR. While introductory APRs are usually lower than the standard rate but only last for a promotional period, cash advance APRs are typically higher than the standard purchase APR.

You will pay interest based on the APR on a credit card if you have an outstanding balance that carries over from one month to the next. Credit issuers use your average daily balance, interest rate, and the number of days in the billing cycle to calculate the interest amount.

Usually, credit issuers offer a grace period where interest will not accrue. This period is typically between the statement date and due date, commonly 21 days.

Credit vs. Debit Cards

They may look alike, but there are notable and important differences between credit cards and debit cards. For starters, you’re not borrowing funds with a debit card. Instead, you’re drawing on funds in the bank account attached to the debit card. As such, you can’t incur interest charges, nor can you rack up debt. However, you can’t use a debit card to help establish your credit.

In general, debit cards offer less robust consumer protections against financial fraud and theft than credit cards do. They also don’t typically offer rewards or other benefits that credit cards can have.

6 Common Types of Credit Cards

Now that you understand how credit cards work, here are some available credit card options.

1. Reward Cards

You can earn cash back, points, or miles when you spend money using a rewards credit card. Some credit cards may also offer a sign-up bonus. For example, a credit card could offer 100,000 points when you spend $4,000 or more within the first three months of enrolling.

You can usually find a card offering rewards that coincides with your spending habits. For example, if you love shopping at a particular store, retail-branded cards have lucrative benefits for frequent shoppers.Some programs, like SoFi Plus, provide exclusive benefits that go beyond standard rewards, offering additional perks for members who qualify.

Keep in mind that you typically have to have a good credit score to qualify for a rewards credit card. But, even if you do qualify, it’s essential to keep your spending habits in check. Reward cards incentivize you to spend money, so you don’t want to end up overspending and getting into a pile of debt you can’t climb out of.

2. Credit Builder Cards

If you have little to no credit or need to build your credit, a credit builder credit card is a viable solution. You’ll likely start with a lower credit card limit and an APR that’s higher than the average credit card interest rate to reduce the credit card issuer’s risk.

Credit builder credit cards usually don’t come with the bells and whistles that rewards cards offer. Instead, the card can help you build your credit. With that said, you’ll want to use your credit card responsibly, making on-time monthly payments and paying off your balance every month. Not doing so could negatively impact your credit history and cost you a lot of money.

3. Balance Transfer Cards

Do you have a high-interest outstanding credit card balance? Using a balance transfer credit card is one solution for helping you tackle your debt. Balance transfer credit cards let you move your current credit card debt to a new account with a lower interest rate. Additionally, transferring your balance can mean you’ll only have to stay on top of one payment a month, rather than multiple.

Having a good credit score can help you qualify for a balance transfer credit card. If you qualify, you could receive a lower ongoing rate or even a 0% introductory rate, which usually will last for six to 18 months. You’ll want to try to pay off your balance within that promotional period, before the higher APR kicks in.

Note that balance credit cards often charge a fee for transferring a balance — usually 3% or so of the amount transferred. So, make sure you factor in the additional fees before you move over your existing balance.

4. Secured Credit Cards

Another option for those with little to no credit or poor credit history is a secured credit card. With a secured credit card, you make a refundable deposit, which protects the card issuer from defaulted payments. If you default, the credit card issuer can use the deposit to recoup the loss.

Your deposit is usually the amount of your credit limit. For example, if you are approved for a $500 limit, you may need to put down $500. Though your deposit will be tied up while the account is open, a secured credit card can allow you to build your credit when used responsibly. Just keep in mind that while secured credit cards are generally easier to qualify for, they also tend to have higher APRs and fees.

If you decide to close a secured credit card account, you can usually get your deposit back. The card issuer may also give you the option to upgrade to an unsecured card if you’ve proven your creditworthiness. In this case, you’d receive a refund as well.

5. Travel Credit Cards

If you’re a frequent flier or visit hotels often, a travel credit card can be a lucrative choice. Many airline and hotel brands have credit cards that let you earn miles, points, or rewards to use toward your travel adventures. Some credit cards may also come with a sign-up bonus or extra perks such as free checked bags, access to VIP airport lounges, and travel insurance.

When selecting a card, you’ll want to find the card that makes sense for the way you travel. That way, you can get the most out of your credit card. Travel credit cards usually require applicants to have good to excellent credit for approval. So, before applying, make sure to check your credit score to see if it’s acceptable.

6. 0% Introductory APR Credit Cards

If you’re getting ready to make a big purchase, a 0% introductory APR credit card might be worth considering. With this type of credit card, the card issuer gives you a 0% introductory rate to make purchases during a specific time frame. This way, you can make the purchase without paying interest on the expensive item(s).

However, you’ll want to make sure you repay the entire amount before the introductory period ends to avoid interest. Before you swipe, make sure you have a plan to pay off the balance within that time frame.

Also note that to qualify for a 0% introductory APR credit card, you usually must have good to excellent credit.

Pros and Cons of Credit Cards

Here’s an overview of the pros and cons of credit cards, which are helpful for anyone just getting familiar with the credit card definition to be aware of:

Pros

Reasons a credit card can be worthwhile include:

•   Convenience. A credit card offers much greater convenience than, say, carrying around a wad of cash. You can easily swipe or tap your card at any merchant that accepts credit card payments, which the vast majority do.

•   Pay over time. Another benefit of a credit card is that it allows you to pay over time for a purchase. Say you’re in an emergency and need to access funds immediately, but know you’ll be good to pay back the amount soon. Or maybe you’re making a big purchase and don’t want to have to shell out for it all at once, instead spreading out payments throughout the month.

•   Build positive credit history. Credit cards give you the means to establish a strong payment history, which can help boost your credit score. When you need to apply for a personal loan or mortgage in the future, a higher credit score can help you qualify for better terms and rates.

•   Track spending. Credit cards are valuable tools for budgeting since many cards let you track your spending on an app or online. Also, some credit cards give you the ability to categorize your expenses to see where your money is going and make adjustments accordingly.

•   Get fraud protection. If your debit card information is stolen, fraudsters can directly access your bank account. But, if you use a credit card, you usually have more fraud protection benefits in places such as purchase protection and identity theft protection. For instance, you can dispute a credit card charge and even receive a credit card chargeback.

•   Earn rewards. Many credit cards offer a reward program like SoFi Plus that gives you points or cash back when spending money. For example, you could earn money for traveling, shopping, or even statement credits.

Cons

Remember, while credit cards are a valuable financial tool, they can also hinder you if not used responsibly. Here are some downsides to keep in mind:

•   Potential to damage credit. Just as you can positively impact your score with a credit card, you can also negatively affect it.

•   Possible to rack up debt. Credit cards can make it easy to rack up a mountain of debt that can continue ballooning, thanks to interest. It’s not easy to get rid of credit card debt either (for instance, here’s what happens to credit card debt when you die).

•   Interest. Credit cards generally have higher APRs compared to other types of debt — usually well into the double digits. It can make purchases much more expensive if you’re paying a hefty amount of interest on top of the actual cost.

•   Fees. Another downside of credit cards is the potential to incur fees. Some are avoidable, like late fees or cash advance fees, while others can be harder to avoid, such as if your credit card of choice charges an annual fee.

How to Apply for a Credit Card

Before you apply for a new credit card, you’ll want to check your credit score. You can pull a free copy of your credit report at AnnualCreditReport.com. Knowing your credit score will help you determine whether you meet the approval requirements for the cards you’re interested in.

Once you decide on some card options, you can usually get prequalified online. If you prequalify for a card, your approval odds could be in your favor (though you’re still not actually approved). Also, when companies process your preapproval, they only complete a soft credit inquiry, which won’t impact your credit like a hard inquiry does. However, when you’re ready to apply, the credit issuer will conduct a hard credit inquiry.

If you’re approved for the card you apply for, you should receive your credit card in the mail within 14 days.

The Takeaway

A credit card, in simplest terms, is a physical card you can use to make purchases and pay bills. A credit card typically comes with a credit limit, and you’ll receive a statement each month that details your purchases, the outstanding balance, and the minimum payment due. You’re required to pay the minimum amount due each month in order to remain in good standing with the credit card issuer and avoid negatively impacting your credit score. Paying off your balance in full each month enables you to avoid interest charges.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What are the main differences between credit and debit cards?

Debit cards use the money in your checking account to pay for purchases. When you make a purchase using a credit card, on the other hand, you’re using a line of credit to borrow money. Therefore, you usually have to pay interest on your transactions with a credit card if you don’t repay your balance right away.

How do I choose a credit card?

It’s helpful to select a credit card that matches your needs and financial habits. You’ll also want to make sure you meet the card issuer’s approval criteria. For example, if a credit card requires a credit score of 700 and your score is 650, you may have to explore other options or take steps to build your credit before applying.

How long does it take to get a credit card?

Once you submit a credit card application, it may take just minutes before you’re approved. Usually, you’ll receive your credit card within 14 days of approval. You can call the credit issuer and request expedited processing if you need your credit card sooner.

Photo credit: iStock/Nodar Chernishev

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

This content is provided for informational and educational purposes only and should not be construed as financial advice.


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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Each tax season, married couples have a choice to make: Should they choose to file a joint return or file their taxes separately?

The overwhelming majority end up opting for “married filing jointly” status, and often that makes sense. But if you or your spouse are repaying federal student loans on an income-driven repayment plan, you may want to run the numbers to see if filing separately could potentially lower your monthly loan payments.

Read on for a look at the pros and cons of married filing separately with student loan payments and to find out if it could work for you.

Married Filing Taxes Jointly vs. Separately

When you’re married, choosing to file your taxes jointly vs. separately can make a significant difference in the size of your refund or what you owe. Most married couples decide to file a joint return for the tax advantages the IRS offers to those who select this status. But there are times when filing separately may be the better choice for your family’s financial needs.

If you took out federal student loans for help with paying for college tuition, and your student loan repayment plan is determined by the income you report on your tax return each year, for example, you might be able to lower your monthly loan payments by filing separately.

That’s because with an income-driven repayment (IDR) plan like Income-Based Repayment (IBR), Pay As You Earn Repayment (PAYE), or Saving on a Valuable Education (SAVE), your discretionary income is used to calculate your monthly payment amount.

If you file a joint return with your spouse, your payments are based on your joint discretionary income. But if you file separately, your payments will be based only on your individual discretionary income — which could mean a lower student loan payment.

You might have heard recently about the SAVE plan and married filing separately. However, the SAVE plan has been blocked by court actions and is on hold. Borrowers can still apply for the plan if they choose; those who are already on the plan have been placed in forbearance until further notice, with no monthly payments due and no interest accruing.

If you have private student loans, these loans don’t have the same repayment options that federal student loans do. That means your tax filing status won’t impact your monthly private student loan payments.

Recommended: Tax Benefits of Marriage

Spouses No Longer Need to Cosign IDR Applications

One change that will affect married borrowers is that spousal signatures are no longer required for most IDR applications, whether the couple files their taxes jointly or separately. This includes the SAVE plan for married filing jointly couples. (The only exception is when a couple is paying their student loans together using an Income-Contingent Repayment (ICR) plan.)

In the past, a spouse had to sign to verify that all information on the form, including family size and income, was accurate. Removing the requirement should make it simpler for a married borrower to file his or her application.

Tax Differences Between Filing Separately vs. Jointly

If you and your spouse are thinking about filing your taxes separately in an effort to lower student loan payments on an IDR plan, it’s important to calculate what you could save on your monthly loan bill and then compare that amount to what you might lose in tax benefits for the year.

The tax consequences of filing separately vs. jointly can vary significantly depending on each couple’s unique circumstances, and they can change from year to year. But you could lose quite a few tax advantages by choosing the “married filing separately” designation.

Filing separately can limit the availability of certain tax credits and deductions, such as the American Opportunity Tax Credit (for educational expenses), the Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Credit. Nor will you be able to claim the student loan interest deduction, which allows you to deduct up to $2,500 in interest paid on your federal and private student loans.

Filing separately may also affect your tax rates and the amount of your standard deduction. And it can restrict a married couple’s ability to offset capital gains with capital losses (a process known as tax-loss harvesting).

Another important factor to consider is that if you choose to file separately, you and your spouse must agree on whether you’ll claim the standard deduction or itemize your deductions. Both spouses must use the same method on their separate returns.

IDR Plans: Low Payments When Filing Separately

Good communication can be key for couples making decisions about how to file, how they will split their finances and manage their deductions if they file separately and other tax questions.

You may want to sit down with a tax professional who can help you run the numbers and assess how all your filing choices could impact your current and future tax bills. And you can use the Loan Simulator on the Federal Student Aid website to get help estimating loan payments based on various IDR plans as well as factors like income, family size, and tax filing status.

When might it make sense to file separately? Let’s say one spouse earns $200,000 a year and has no student loan debt, and the other spouse earns $50,000 a year and has $150,000 in student debt. Instead of using their joint discretionary income when applying for PAYE — which is open only to those on the blocked SAVE plan who want to switch over, as well as new borrowers as of October 1, 2007 who received at least one Direct loan after October 1, 2011 — the couple could file their taxes separately so that the spouse with the lower income and student loan debt could qualify for a lower monthly payment.

As mentioned above, PAYE isn’t the only IDR plan that allows couples to potentially lower their student loan payments by filing their taxes separately. The IBR and SAVE options also allow couples to separate their finances in an effort to minimize their monthly payments and/or reach forgiveness sooner. But each program has different rules regarding monthly payment caps, how long it can take to get student loan forgiveness, and more. So it makes sense to check out the pros and cons of each to find the plan that’s the best fit for your family’s needs.

Other Repayment Options

As you’re doing your research, you may also want to look into other strategies that could help reduce your payments.

One option is a Graduated Repayment Plan, which can keep your payment timeline to 10 years (or up to 30 years if you’ve consolidated your loans). Under this plan, you start out with lower payments and then the payment amount slowly increases over time based on your expected income.

If you owe more than $30,000 in federal student loans, you may be eligible for the Extended Repayment Plan, which extends your loan repayment timeline to 25 years. If you extend your loan term, you’ll end up paying more interest, but your monthly payments will be reduced.

Refinancing your student loans could be another way to get a lower interest rate or longer loan term, or both, which could help lower your monthly payments. When you refinance, you replace your current loans with a new loan from a private lender like a bank, credit union, or online lender. However, if you refinance federal student loans, you’ll lose access to important benefits, like IDR plans, so make sure you won’t need these programs before moving ahead.

Recommended: Refinancing as an International Student

The Takeaway

If you and your spouse are struggling to repay your federal student loans — or if you want to lower your payments to make room for other goals — you may want to look into switching to an income-driven repayment plan. With these plans, couples have the option of choosing the “married filing separately” designation when filing their taxes, which means their student loan payment amount can be based on just the borrowing spouse’s discretionary income instead of the couple’s combined discretionary income.

Couples who file separately may lose several tax breaks, however, which could mean a higher tax bill. So it’s important to calculate what you could save on your monthly student loan bill and then compare that amount to what you might lose in tax benefits for the year.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

Photo credit: iStock/Delmaine Donson

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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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.