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Taking out a personal loan can both help and hurt your credit. In the short term, applying for a new loan can have a small, negative impact on your scores, due to the hard inquiry by the lender. If managed well, however, having a personal loan can boost your credit profile over time by adding to your positive payment history and broadening your credit mix. This could make it easier to get approved for loans and credit cards with attractive rates and terms in the future.

Here’s a closer look at how personal loans affect your credit score, both positively and negatively, plus guidelines on when it makes sense to take one out.

How Is Your Credit Score Calculated?

Understanding how personal loans impact your credit starts with knowing how your credit score is calculated. The most common credit scoring model, FICO®, uses five components to calculate your score. Here’s a look at each factor and how much weight it’s given in FICO’s calculation.

•   Payment History (35%): Your record of making on-time payments to lenders is the most important component of your score. This helps creditors determine how much risk they are taking on by extending credit.

•   Amounts Owed (30%): This includes the total amount of debt you currently have and your credit utilization ratio, which measures the percentage of available credit you’re using. If you’re tapping a lot of your available credit on your credit cards, it suggests you may be overextended and, thus, at higher risk of defaulting on a loan.

•   Length of Credit History (15%): This factor takes into account the average age of your accounts, the age of your oldest account, and how long it has been since you used certain accounts. Generally, having a longer credit history can positively affect your score.

•   New Credit (10%): A small but still important part of your score is how much new credit you’ve recently taken out. Opening new accounts or having too many credit inquiries can temporarily lower your score.

•   Credit Mix (10%): Your credit mix looks at how many different types of credit you hold. Having a variety of credit types — like credit cards, retail accounts, and installment loans — can positively affect your score.

A personal loan can influence several of these factors, for better or worse, depending on how you manage it.

How Do Personal Loans Work?

A personal loan is a lump sum of money borrowed from a lender, such as a bank, credit union, or online lender. Personal loans are typically unsecured, meaning you don’t need to provide collateral (like your car or home), and can be used for various purposes like consolidating debt, covering medical bills, or funding a wedding.

When you take out a personal loan, you agree to repay it in fixed monthly installments over a predetermined period, usually ranging from two to seven years. The interest rate, determined by your creditworthiness, and any lender fees affect how much you’ll pay in total.

Recommended: Is There a Minimum Credit Score for Getting a Personal Loan?

Ways Personal Loans Can Hurt Your Credit

While personal loans can be beneficial, they also have the potential to harm your credit. Here’s how:

Requires a Hard Credit Inquiry

When you apply for a personal loan, the lender typically performs a hard credit inquiry to evaluate your creditworthiness, which can adversely impact your credit score. Hard inquiries remain on your credit report for two years. However, their negative effect on your score is minor (typically 5 points or less) and lasts only about a year.

Note that prequalifying for a personal loan, which involves a soft inquiry, won’t have any impact on your score. This can give you an estimate of the interest rate and loan amount you can expect in a loan offer.

Can Increase Overall Debt

Taking out a personal loan can increase your overall debt, which can negatively affect the “amounts owed” component of your credit score. This may cause you to see a slight drop in your score. However, if you’re consolidating credit card debt, you will reduce that debt by paying it down with the personal loan, and your amounts owed won’t be impacted.

Can Negatively Impact Payment History If You Miss a Payment

Since payment history is the largest factor in credit scoring, missing just one payment on your personal loan can result in a substantial drop in your score. While being just a few days late may not affect your credit, lenders can report payments that are more than 30 days overdue to the credit bureaus. Late payments remain on your credit reports for seven years.

Setting up autopay or reminders can help ensure you make your payments on time and avoid this credit score setback.

Can Shorten Your Credit History

Taking on a new loan can shorten the average age of your credit accounts, which could have a small negative impact on your score. Generally, a longer credit history is considered better than a shorter one.

How Personal Loans Can Help Your Credit

Despite the risks, personal loans can also positively influence your credit when managed wisely. Here’s how:

Can Add to Your Credit Mix

Your credit mix accounts for 10% of your score. Adding a personal loan to your portfolio — especially if you primarily have revolving credit, like credit cards — can enhance your credit profile by showing that you can manage different types of credit responsibly.

Can Improve Your On-Time Payment History

Consistently making on-time payments on your personal loan demonstrates financial responsibility, which can strengthen your payment history — the most significant component of your score. It may take a few months for the benefits to show up but over time, this can positively impact your credit.

May Help Lower Your Credit Utilization Ratio

If you take out a personal loan to pay off high-interest credit card debt (also known as a credit card consolidation loan), you can lower your credit utilization ratio, which is the percentage of your available credit you’re using. A lower ratio — ideally under 30% — is generally beneficial for your credit. However, this strategy only works if you keep your credit card spending low after paying off your balances with the loan.

When to Consider Taking Out a Personal Loan

Even though applying for a personal loan may result in a small, temporary drop in your credit score, there are times when taking on this type of debt can be a smart financial move. Here are some scenarios where you might consider getting a personal loan.

•  You want to consolidate high-interest debt: Personal loans typically have lower interest rates than credit cards, making them an attractive choice for paying off expensive credit card debt. An online personal loan calculator can help you determine how much you could potentially save. If you’re juggling several credit cards, a debt consolidation loan can also simplify repayment.

•  You’re facing unexpected expenses: Medical bills, home and car repairs, or other emergencies can sometimes justify taking out a loan. Using a personal loan may be more cost effective than putting these expenses on your credit card.

•  You have good or excellent credit: The best personal loan interest rates are generally reserved for borrowers who have strong credit. While there are personal loans for bad credit, they typically come with higher interest rates and other less-than-ideal terms.

•  You earn a steady paycheck: Getting a personal loan generally only makes sense if you have a regular income and earn enough to comfortably cover the monthly payments for the term you select.

The Takeaway

Personal loans can have a positive or negative impact on your credit depending on how you manage them. Initially, applying for a personal loan can slightly downgrade your score. This is due to the hard inquiry, as well as the loan’s impact on the average age of your accounts and (potentially) your overall debt load. However, if you repay the loan responsibly, having a personal loan can ultimately help your credit by adding positive payment history, diversifying your credit mix, and — if you use it pay off credit card debt — reducing your credit utilization rate.

Before taking out a personal loan, you’ll want to assess your financial situation, shop around for the best rates and terms, and make sure the monthly payments work with your budget.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Is a personal loan bad for your credit?

A personal loan isn’t inherently bad for your credit, but its impact depends on how you manage it. Initially, applying for a loan may lower your score slightly due to the hard credit inquiry. In addition, taking on more debt can increase your amounts owed, which might affect your score. However, consistently making on-time payments can boost your payment history, a major factor in credit scores. And if you use a personal loan to consolidate credit card debt, you’ll lower your credit utilization ratio (how much of your credit limit you are using), which can positively impact your credit.

Will a personal loan affect my credit card application?

It can. If you applied for the loan recently, the hard credit inquiry may have slightly lowered your credit scores. Having a personal loan can also lower the average age of your accounts and, potentially, increase your debt load, which can negatively impact your credit. Over time, however, having a personal loan can improve your credit profile by adding to your positive payment history and, if you use it to consolidate credit card debt, lowering your credit utilization, making it easier to get approved for a credit card.

Will a personal loan affect my car loan application?

It can. When assessing your eligibility for a car loan, lenders typically consider your credit score, debt-to-income ratio, and overall financial profile. The hard credit inquiry for the personal loan might lower your credit score temporarily. In addition, the added debt from the loan could increase your debt-to-income ratio, making you appear higher risk to a lender. On the other hand, responsible repayment of the personal loan shows financial discipline, which can improve your credit profile over time. Ultimately, this could make it easier to get a car loan with attractive rates and terms.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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.

SOPL-Q424-012

If you’re like the roughly 48% of credit card holders, you probably carry at least some debt from month to month. Indeed, the average credit card balance in the U.S. is currently $6,580 as of 2025.

Unfortunately, many consumers are uninformed and unprepared for the responsibility of paying with plastic. Credit card issuers don’t require you to take a class before they hand you that first card — or the next one, or the next. But the consequences of getting in over your head can be troublesome.

Here are some do’s and don’ts to keep in mind so you can manage your credit card usage and debt responsibly.

Just Because You Can Get Another Credit Card Doesn’t Mean You Should

Once you prove your creditworthiness, you’ll likely receive other credit card offers in the mail. Retail stores you shop in often ask if you’d like to apply for their card, offering things like special discounts, partnerships, and card-holder shopping days to draw you in.

But unless the rewards are high and the annual percentage rate (APR) is low, you may want to pass, especially if you’re in a store and won’t have time to focus on the terms and fees in the agreement.

Remember: When you apply for a credit card, it can create a credit inquiry on your report because of the hard pull on your credit report. Unless your credit inquiry qualifies as rate shopping, too many inquiries in a short time period could have a negative impact on your credit score.

A Credit Card Can Be Convenient — If You Keep Your Balance in Check

The clock starts ticking whenever you make a purchase using your credit card. Many credit card companies will give you a period of interest-free grace, but if you don’t pay off the balance within the grace period, you’ll start racking up interest.

Of course, using cash instead of credit for purchases is an option, especially for purchases made in person.

It’s also wise to keep an eye on your balance. Financial experts say that you should only utilize up to 30% of your credit limit. It’s better still to only use 10% of that limit.

Thinking Twice Before Just Paying The Minimum

It’s easy to get into the mindset that you’re on track for the month because you paid the minimum payment due on your credit card statement. But that amount is typically based on a small percentage of your balance, typically between 1% and 3%, or a fixed dollar amount.

Unless you have a 0% credit card rate, letting your balance carry over can rack up additional interest.

Checking Your Statements Every Month

A thorough monthly review of credit card statements makes it possible to find billing mistakes and be sure your purchases and returns are accurately reflected.

It’s worth reviewing your statement for any subscription services you might be making automatic payments or renewals for. You could be paying for a service or app you don’t want anymore.

Reviewing your charges can also help you determine if you’ve been the victim of identity fraud. The faster you move to report any problems , the better off you typically are. The Fair Credit Billing Act (FCBA) instructs consumers to report unauthorized charges within 60 days after the statement was mailed. So making it a habit to check your statements as they come in — or reviewing them online at least once a month — can help you be aware of any issues and report them quickly.

If you’ve made late payments or missed a payment, your interest rate may have gone up — and you could be paying a much higher rate than you thought. Keeping track of this information will give you a more complete picture of the amount you owe.

Credit card statements also include information about how long it will take to pay off the bill if you send only the minimum payment each month, as well as how much you’ll pay in interest. Think of this information like nutrition facts on food packaging — it could be an encouragement to be financially healthier.

Reporting Misplaced, Lost, or Stolen Cards

Under the FCBA , a consumer’s liability for unauthorized use of their credit card is limited to $50. However, the FCBA also says if you report the loss before your credit card is used to make unauthorized purchases, you aren’t responsible for any charges you didn’t authorize.

If your credit card account number is stolen, but not the card, the FCBA also says you won’t be liable for unauthorized use. Credit card companies are generally quick to provide customers with new account numbers, passwords, and cards.

Using a Credit Card to Get Cash

Another piece of information available on a credit card statement is the APR charged for cash advances. Most likely, the interest rate charged for cash advances is several points higher than the rate charged for purchases.

If a credit card is used at an ATM, there may also be an additional fee charged by the machine’s owner.

So unless it’s an unavoidable emergency, it’s probably much better for your wallet to stick to your debit card or go old-school and cash a check.

Using a Credit Card for Purchases Just to Get the Rewards Points

Cash back and other credit card rewards make some cards more appealing than others. But that probably shouldn’t be an excuse to use a credit card if you’re not in a solid financial position. The trade-off probably isn’t worth it if you carry a balance.

Balance Transfer Cards Can Be Appealing, But…

Again, if you have solid credit, you may be getting offers for 0% balance transfer cards. And they may potentially save you a significant amount of money, if you can realistically pay off that balance in the designated period.

If not, the interest rate will increase after the introductory 0% interest period ends. And moving the remaining amount to yet another balance transfer card could ding your credit record, as every time you apply for a credit card a hard inquiry is pulled.

Negotiating Rates and Fees

Even the most attentive person might sometimes miss a credit card due date. This oversight, however, means a late fee and interest may be added to the account balance. If this happens more than once, you might incur a higher late fee than the first one and the account’s interest rate might increase.

It may be possible, however, to negotiate credit card interest rates and fees. If you’ve only had one late payment, it’s worth a call to customer service asking for the late fee to be waived. If there have been multiple late payments and you’re faced with an increased interest rate, it might take up to six months of on-time payments before a credit card issuer is willing to consider lowering the interest rate.

Recommended: How To Lower Credit Card Debt Without Ruining Your Credit

Knowing How Much Credit Is Being Utilized

The amount of debt owed is the second largest factor that makes up a person’s credit score. It accounts for 30% of the total score, and revolving credit accounts like credit cards are important in the calculation of a credit score. Someone who is using a high percentage of their credit card limit might be seen as potentially risky by lenders. But someone who uses a lower percentage of their credit card limit may be considered to be in a favorable financial position.

Credit card companies sometimes raise the credit limit of financially responsible customers. By keeping your account balance low, it can improve the credit utilization rate used to calculate your credit score.

Managing Credit Card Debt

Credit card debt can feel overwhelming quickly. If you’ve racked up more debt than you can comfortably pay off, you might consider using a personal loan to consolidate that debt.

If your financial history is solid, getting approved for a personal loan interest rate that’s lower than your credit card rates could make your outstanding debt easier to deal with. Using a debt consolidation loan to consolidate multiple credit cards would also mean just one bill to pay each month instead of keeping track of multiple payments and due dates. A consolidation loan with a respected lender can be part of a smart overall money management plan.

Recommended: Typical Personal Loan Requirements

The Takeaway

Almost half of all Americans carry credit card debt, with the average amount being around $6,580 as of 2025. Knowing how to use a credit card responsibly, such as why paying more than the minimum due is wise, can help you avoid credit card debt. If you do find yourself with more credit card debt than you can manage, you can investigate ways to pay it off, such as taking out a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What is the 2 3 4 rule for credit cards?

According to the 2 3 4 rule, credit card applicants are limited to two new cards in 30 days, three new cards in 12 months, and four new cards in 24 months.

What is the golden rule for credit cards?

The golden rule for credit cards is to pay the full balance on time every month. This is a way to stay out of credit card debt and positively impact your credit score.

What habit lowers your credit score?

Several habits can negatively impact your credit score. Paying your bill late (or skipping payments), carrying too much debt (more than 30%) vs. your credit limit, applying for too much credit in a given period of time, having a limited credit history, and not having a robust credit mix are all considerations that can lower your score.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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.

SOPL-Q225-057

Creating a financial plan can involve a few key steps like setting goals, analyzing your cash flow, and prioritizing your savings. It’s well worth the effort: Establishing a financial plan plays a critical role in achieving financial security and such milestones along the way as buying a house, crushing your debt, or saving for retirement. Knowing that you’re prepared financially to face what’s ahead can help create peace of mind.

A solid financial plan will be different for everyone, but there are a few cornerstones to consider as you build your personal financial road map.

6 Steps To Creating a Financial Plan

A financial plan is not just another word for budget or debt-reduction plan. It’s the long-term roadmap that could help make your vision for the future a reality. The smaller pieces, like budgets and debt-payoff strategies, are tools to help you get there.

And whether you sit down with a financial planner or do it yourself, the act of writing down not only what you want, but how you plan to get it, could help take it out of your head and make it real.

While the idea of coming up with an overall financial plan for yourself might seem overwhelming, you can make the process manageable by breaking it down into these six basic steps.

1. Setting Your Goals

While everyone’s financial goals will be different based on their individual situation, these are some common goals that tend to rise to the top of the list:

•   Having an emergency fund. Generally, you’ll want to have to have at least three to six months’ worth of living expenses set aside in an emergency savings account. (If you’re self-employed or your income fluctuates, you might aim for six to 12 months’ worth of expenses.) This can be used to cover those unexpected expenses that invariably pop up, or float you through a loss of income, without wrecking your plan. You can use an online emergency fund calculator to do the math as you explore options for your fund’s amount.

•   Growing your 401(k) or other retirement accounts. If your employer offers a matching contribution, consider contributing at least 100% of what they’ll match. Combine that with the magic of compound interest, and you could see your balance grow at a nice pace.

•   Eliminating high-interest debt. It’s no secret that eliminating your credit card debt could not only save you a significant sum in the long run but also help positively impact your credit profile.

While those three objectives often top the list, here are some other goals you may want to include in your financial plan:

•   Establishing (and maintaining) good credit.
If your dreams include large purchases or even starting a small business, a bad credit score can be a deal-breaker. Generally, the minimum number needed to buy a home is 620 for a conventional loan. (If you’re struggling with bad credit, there are strategies that could help you build your credit profile.)

•   Paying off your student loans. If this is one of your financial goals, you’re in good company — more than 43 million Americans currently carry student loan debt. And while a student loan is generally considered “good” debt, it still accrues interest.

•   Living within your means. Ideally, you don’t want to put anything on your credit card that you can’t pay off in full at the end of the month (or relatively soon thereafter), since this is an expensive form of debt.

•   Saving for your kids’ education. No one can predict what the higher-ed landscape will look like when your kids are ready to start filling out applications. But as of mid-2025, the average cost for tuition and living expenses in the U.S. is $38,270 per student per year, and those costs have been rising.

•   Growing your investment portfolio. This might include items like your 401(k) or individual retirement account (IRA), but it can also mean a foray into the world of stocks and mutual funds, with the risks inherent in that realm. Becoming a smart investor can not only be a goal by itself, but one avenue to achieving other financial goals.

The goals that you choose as part of your financial plan may be on vastly different timelines, and you may need to accomplish one before you can move on to another. It can help to group financial goals into categories based on their time horizon — short term, mid-term, and long-term goals.

2. Understanding Your Resources

Knowing exactly what you have to work with might be one of the most important keys to building a plan that works. To get started, gather up all your paper and electronic bank statements, billing accounts, and portfolio documents. This might include:

Income: Salary, side hustles, investment income, alimony, and child support
Expenses: Bank statements reflecting withdrawals or other debits, monthly billing statements, and other sources of everyday spending
Assets: Savings accounts, home equity, or physical items you own (car, collectibles, etc.)
Liabilities: Credit card debt, student loans, mortgage(s), and any other sources of debt

Next, you can use these documents to calculate your net worth. While you may not think you have much or any net worth, this is a worthwhile exercise because it establishes a baseline you can later use to measure growth in your net worth over time.

To create a net worth statement, simply list all of your assets (such as bank and investment accounts, real estate, valuable personal property) and then all your debts (like credit cards, mortgages, student loans). Your assets minus your liabilities equals your net worth.

If you find that your liabilities exceed your assets, don’t panic. This is a common scenario when you’re just starting out, particularly if you have a mortgage and student loans. With a financial plan in place, your net worth should grow over time.

3. Analyzing Monthly Cash Flow

Next, it’s a good idea to get a sense of your monthly cash flow — what’s coming in and what’s going out. You can use your bank statements from the last three or so months to come up with an average cash inflow and outflow.

If you find that your monthly outflow equals your monthly inflow (i.e., you’re not adding anything to your savings account) or your outflow actually exceeds your inflow (meaning you’re living beyond your means), you’ll want to drill further down into the outflow column.

Start by making a list of all your spending categories and the average you spend on each per month. Then divide the list into two main categories: essential spending (e.g., rent/mortgage, utilities, groceries, insurance, debt payments) and non-essential spending (such as entertainment, shopping, travel, clothing). This exercise may immediately reveal some simple ways to reduce spending and expenses.

4. Updating Your Budget

While a budget sounds restrictive, it’s really nothing more than a plan to make sure that your spending aligns with your priorities. There are all different kinds of budgets but one simple approach is the 50/30/20 rule. To use this rule, you divide your after-tax income into three categories:

•   Needs (50%)

•   Wants (30%)

•   Savings and debt repayment beyond the minimum (20%)

If you found (in the above step) that your outflow equals or exceeds your monthly inflow, you’ll want to take a closer look at your non-essential spending list and look for places to cut. Every dollar your free up can then be diverted into saving for your short- and long-term goals.

5. Tackling High-Interest Debt

Getting out from under high-interest debt (such as credit card balances, payday loans, or rent-to-own payments) is an important part of any financial plan. There are several ways to go about paying down debt.

•   With the ​​avalanche method, for example, you list your debts from the highest interest rate to the lowest. You then throw all of your extra cash to the highest interest debt while continuing to make the minimum monthly payment on the others. Once you’ve paid off the highest interest debt, you move on to the next-highest interest debt, and so on.

•   With the snowball method, you list your debts from smallest to largest based on balance size. You then put all your extra cash toward the debt with the smallest balance, while making the minimum monthly payment on the others. When that is paid off, you move on the next-smallest debt, and so on. This approach can help you stay motivated by achieving early wins.

•   You might also consider debt consolidation, which involves transferring your credit card debt to a balance transfer card or personal loan with a lower interest rate — allowing you to focus on just one monthly payment.

6. Investing in Your Future

Once you have a solid emergency fund in place and expensive debt under control, you can start focusing on ways to grow your wealth over time.

Investing can be as simple as putting money in a 401(k) and as easy as opening a brokerage account (many have no minimum to get started).

Part of your financial plan might include increasing your contributions to your retirement accounts. You might also look at allocating any other available income to a taxable investment account that can add to your net worth over time. Your plan for investing should take into account your investment risk tolerance and future income needs.

Recommended: Ways to Manage Your Money

Monitoring and Reviewing

It’s been a few months since you implemented your financial plan, and so far, so good. But things may have changed a bit.

You paid off one credit card, so you need to reallocate that payment to the next debt. Or, a goal that used to be at the top of your list isn’t so important any more.

Reviewing your plan can mean not only making adjustments, but simplifying. This can include automating any new payments, consolidating new debts, or opting out of paper statements to reduce clutter.

Are There Any Downsides To Creating a Financial Plan?

Financial planning can help you feel more confident and in control over your personal finances. But it does come with a few downsides. Here are some to keep in mind:

•   It can be time-consuming. The process of going through your finances and understanding your income, expenses, and savings takes time, effort, and patience. It can also take some time to see tangible results of your efforts.

•   Financial predictions may not come to pass. You may set financial goals based on how much you expect to earn in a high-yield savings or an investment account. However, interest rates and investment returns are subject to conditions you can’t control or always predict.

•   It’s not one and done. It is not enough to make a financial plan and stick with it. It’s important to keep track of your progress and regularly reassess and adjust your plan as your financial situation, your goals, and market conditions change over time.

Is Creating a Financial Plan Viable for Everyone?

Yes. Financial planning is a tool that anyone can use, regardless of age, income, net worth, or financial goals. While it sounds fancy, financial planning is simply a way to document your personal and financial goals, come up with a plan to reach those goals, and make sure you stay on track to meet those goals.

What’s more, you can create a financial plan at any time, whether you’ve just started working or have been part of the workforce for years. You can hire a professional financial planner to help, or you can write a financial plan yourself (with the help of the steps listed above.)

The Takeaway

Creating a financial plan is an important step toward financial security. To get started with your personal financial plan, you’ll want to prioritize your financial goals, review your current income and spending, and then analyze and make changes in a way that will help you meet the financial goals you set.

Keep in mind that a financial plan isn’t set in stone. As your life changes, you’ll want to adjust your financial plan to fit your needs. You’ll also want to make sure you have the right banking partner.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How do you write a financial plan?

You can enlist the help of a professional financial planner or write a financial plan yourself. Generally, the first step is to write down your financial goals, assess your net worth, and identify your spending habits. From there, you can come up with a spending, saving, and debt reduction plan that will help you achieve your goals and build your future financial security.

What are the components of a financial plan?

A financial plan can be customized to your individual needs, but generally includes the following components:

•   Financial goals (short-, medium-, and long-term)

•   Statement of net worth

•   Cash flow analysis

•   Monthly spending budget

•   Debt repayment plan

•   Retirement savings plan

•   Investment plan for other goals

What are examples of financial plans?

There are many different types of financial plans, and you don’t need to do them all at once. Some examples include cash flow planning and budgeting, insurance planning, retirement planning, investment planning, tax planning, and estate planning.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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College visits can be an important part of the school selection process, as parents and high schoolers tour campuses of interest. These visits provide a glimpse of the campus grounds, dorms, classrooms, and more, which can be vital info when deciding whether a school is a good fit or not. Also, the tours are typically led by current students who have insights about what life at the college is like.

But what exactly should you, as a parent, look for? What questions should you ask? The checklist that follows can help you get the most out of the experience.

How to Visit Colleges on Your Lists

Sometimes, students visit college campuses to decide whether or not to apply there. In other cases, they already believe that a particular college is a perfect match for their major and they want to investigate further.

Schedule Visits Strategically

Perhaps your child has applied to — or is interested in applying to — eight colleges. At a basic level, you’ll want to make sure you have enough time to visit a good number of them. How far they are located from your home and from each other will help to dictate how much time these visits will take. As part of this scheduling, you might ask yourself these questions:

•   Which of these campuses are most important to visit? Prioritize appropriately.

•   Which of these colleges are located near (or relatively close to) one another?

•   Do I want to have an informal visit, or do I want to be part of an official open house? If the latter, check as early as possible to see when these events are being held. Are there scheduling conflicts?

•   How much time will each visit take?

•   How can I space out these visits so we can be efficient without rushing through them?

•   What is most important to see and do during each visit?

Pro tip: Once you know that you’ll be visiting a college, you can review its website and social media pages to gather intelligence ahead of time and gain key context.

When Do Virtual College Visits Make Sense?

Perhaps, as just one example, there is a college that is more challenging to visit than others on your list. Maybe it’s a significant distance from your home, or perhaps you have scheduling conflicts or financial pressure that means an in-person visit isn’t looking realistic. In that case, consider going on a virtual tour.

By doing so, you may discover that this college isn’t as appealing as you’d originally thought (which might cause it to drop on your priority list) or it may make you realize that, yes, you need to make a physical tour happen.

One option is to check the college admissions website. You may be surprised to see how many have interactive video tours available.

As a related resource, YouTube has plenty of videos if you search for such terms as “college tours,” “college tour TV,” and other similar words.

Another idea for gaining information without setting foot on campus: You can use the Rate My Professors tool, too, to find information about who teaches at a particular school, noting that ratings are subjective and can be used, as just one example, by students who aren’t happy with grades received.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

What to Bring to a College Visit

During college visits, you’ll likely be flooded with information and visual impressions, plus with thoughts, ideas, conversations, and more. So, it makes sense to bring something to help you capture all of this information to review later, as needed.

In this quest, your smartphone can be a real asset. You can use it to take pictures of intriguing places on campus or to remind you to ask questions about it. Take videos in the same way and/or record explanations given by college officials.

And, wonderful as technological devices are, don’t forget to bring old-fashioned pen and paper. You might also want to bring along a college visit planner, one where you can list crucial dates and deadlines.

Depending upon how long you’ll stay, make sure you bring enough comfortable, weather-appropriate clothing — and, perhaps most important of all, comfy shoes! You may be doing a whole lot of walking.

Also consider if you will need an umbrella. Or a warmer coat than what you would wear at home. Do you need gloves? Or will it be sunny and warm, requiring sunglasses and sunscreen? You’ll want to have these things on hand to make the visit as comfortable as possible. After all, you’re there to give your full attention to the tour, not your cold hands or soaked shoes.

Pro tip: Depending on your relationship with your child, you may want to take separate tours. You kid can go on one tour group and absorb information without your commentary swaying their opinion or without being embarrassed if you ask a lot of questions. Then you can compare notes after you’ve each seen the campus.

Key Questions to Ask

At some point during the tour, you’ll almost certainly be shown student housing options. Now is the time to ask about the range of dorm choices, how many students live on campus, what percentage of students live on campus versus off-campus, what apartment options exist for, say, juniors and seniors — and any other questions you or your child have about housing.

Other questions to consider:

•   How safe is this campus and the surrounding area?

•   What kind of security do you have?

•   What activities are available for students?

•   Who is allowed to have a car?

•   Where can they park?

•   What transportation options are available for students without a car?

What other questions to ask on a college tour? You can also ask about academics, ranging from sizes of classes, the use of teaching assistants, how much homework is assigned and how much time it typically takes to complete assignments, and more. How easy is it for students to get the classes they need? Is there an honors program? What kind of tutoring services are available?

You might also be curious about the following:

•   What college internship opportunities are available? How easy are they to obtain?

•   How many students study abroad? What opportunities are available?

•   What career services do you offer?

Recommended: What Can You Use Student Loans For?

Financial Issues to Explore

Of course, paying for college is often a key concern. This is an ideal time to get information about typical financial aid packages offered at each college. You might ask some questions of your tour guide or attend a financial aid session to inquire about:

•   What financial aid package can a typical freshman expect to receive at the college?

•   What mix of scholarships, grants, and loans can be expected, on average?

•   What work-study opportunities exist and how easy is it for a student to qualify?

•   If there is scholarship money set aside at a college for students, what are its parameters? Some, for example, may be set aside for female students or minority students.

•   What aid is available after freshman year?

•   Are enough classes offered at flexible times to help students graduate in under four years (and therefore potentially save significant sums of money)?

•   If your child doesn’t qualify for federal work-study, what other jobs are typically available on campus? Off-campus?

💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

Financing College

It isn’t unusual for students to need to borrow money to pay for their education. Scholarships and grants are available to help qualified students reduce college expenses and, sometimes, parents may help their children out financially.

Students can get jobs while in college and use their savings to help pay expenses, of course. But if that isn’t enough, many students typically end up borrowing money, with the two main sources being federal student loans (from the government) and private student loans (from private lenders).

To qualify for federal funding, you and your child must fill out the FAFSA®. It can be wise to explore all federal aid options before turning to private student loans.

Recommended: Guide to Parent Student Loans

Parent Student Loans With SoFi

If private loans seem to be a potential path for you, see what SoFi offers. Parents should consider their own financial situation and needs (like retirement) as they consider such options as borrowing a parent student loan.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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

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Millennial and Gen Z college graduates aren’t the only ones struggling to pay back their student loans. Student loan debt among adults age 60 and up has increased sixfold over two decades. Currently, about 3.5 million people age 60 and older in the U.S. hold more than $125 billion in student loan debt.

As more seniors face retirement burdened with student loan payments, many are looking for ways to repay what they owe. Fortunately, there are programs and resources that can help, including student loan forgiveness for seniors, repayment plans that can lower monthly payments, and special strategies for managing student loans in retirement. Read on to learn more.

Understanding Student Loan Debt Among Seniors

Why are so many seniors struggling with student loan debt as they enter their golden years? Some may have taken out student loans to help their children attend college; others may still be paying off their own degrees; and some may be paying off student loans for their children and for themselves. Seniors may also be on fixed incomes that make it difficult to dedicate money to loan payments. According to a January 2025 analysis by the Consumer Financial Protection Bureau, the average student loan balance for those age 60 and up is $17,857 to $44,834.

That debt is taking a financial toll: Among borrowers over age 55, 30% can’t pay all their monthly bills, and 61% don’t have three months’ worth of emergency savings.

Federal Student Loan Forgiveness Programs

Forgiveness programs may help seniors cancel their remaining student loan debt after they make a certain number of qualifying payments. Some of these programs also help reduce borrowers’ monthly payments, making them more affordable

These are some of the forgiveness plans seniors may want to consider.

Income-Driven Repayment (IDR) Plan Forgiveness

Income-driven repayment plans base a borrower’s monthly payments on their discretionary income and family size, typically resulting in lower monthly payments. By the end of the repayment period, which is 20 or 25 years, the remaining loan balance is forgiven.

While forgiveness under three of the four IDR plans has been paused, there is one IDR plan, called Income-Based Repayment, that is still proceeding with forgiveness .

The four IDR plans are:

•  Income-Based Repayment (IBR). Payments for loans borrowed after July 1, 2014 are 10% of a borrower’s discretionary income over 20 years. For older loans, payments are 15% of discretionary income for 25 years. On the IBR plan, forgiveness is still proceeding at this time, since this plan was separately enacted by Congress.

•  Pay As You Earn (PAYE). Under PAYE, payments are 10% of a borrower’s discretionary income over 20 years.

•  Income-Contingent Repayment (ICR) Plan. With ICR, payments are calculated at 20% of a borrower’s discretionary income divided by 12, or the amount they would pay on a repayment plan with a fixed payment over 12 years, whichever is less. The ICR repayment term is 25 years.

•  Saving on a Valuable Education (SAVE): As of March 2025, the SAVE plan is no longer available after being blocked by a federal court. Forgiveness has been paused for borrowers who were already enrolled in the plan, and they have been placed in interest-free forbearance.

Public Service Loan Forgiveness (PSLF)

Seniors with qualifying federal Direct loans who work full-time in public service and are employed by a government agency or a qualifying nonprofit organization may be eligible for Public Service Loan Forgiveness.

While working for an eligible employer, borrowers must also enroll in an IDR plan or the Standard Repayment Plan. After completing 120 qualifying payments, any remaining Direct loan balance they have is forgiven.

In March 2025, President Trump signed an executive order to limit eligibility for PSLF and requested an update to the program’s regulations. However, the executive order is being reviewed, and the PSLF program remains unchanged for now, according to the Federal Student Aid website.

Total and Permanent Disability Discharge

Seniors may qualify for a federal student loan discharge for their federal student loans if they are totally and permanently disabled. Total and Permanent Disability (TPD) discharge covers federal Direct loans, Federal Family Education loan (FFEL) program loans, and Federal Perkins loans, as well as the Teacher Education Assistance for College and Higher Education (TEACH) Grant, for those who received this grant.

You must complete a total and permanent disability (TPD) discharge application and documentation showing that you meet the requirements. The documentation must come from the U.S. Department of Veterans Affairs, the Social Security Administration, or an authorized medical professional. If you are approved for TPD, you will not need to repay the student loans noted above or fulfill your TEACH Grant service obligation.

State-Specific Forgiveness Programs

In addition to federal forgiveness programs, there are also state-based programs that seniors might qualify for. Here’s how to find and apply for them.

State-Based Loan Forgiveness Initiatives

Most states offer student loan forgiveness programs for residents. Many of these programs are aimed at borrowers working in public service fields, such as health care, teaching, and law, and require specific service commitments. Borrowers must typically meet a set of criteria to have student loan debt forgiven.

To find loan forgiveness programs in your state, search your state government website.

Eligibility Criteria and Application Processes

To qualify for state forgiveness programs, borrowers must meet certain criteria. In general, you will need to have outstanding education debt and be:

•  A U.S. citizen

•  A resident of the state

•  Actively working in a required profession

Each state that offers forgiveness programs has a unique set of eligibility requirements. Seniors need to apply for the program and submit the required information and documentation as stipulated by their state.

Strategies for Managing Student Loan Debt in Retirement

If you’re a senior dealing with student loan debt in retirement, there are different techniques you can use to manage and potentially lower your payments. Here are three strategies to explore.

Income-Driven Repayment Plans

As mentioned above, IDR plans base your student loan monthly payments on your income and family size. This can lower student loan payments, which could make an IDR plan an option for borrowers who are looking for student loan forgiveness for low-income seniors.

You can apply for an IDR plan online. The process generally takes no more than 10 minutes. You can select an IDR program yourself or ask your loan servicer to put you on the plan that will give you the lowest monthly payment available.

Loan Consolidation Options

Another strategy senior borrowers can consider is loan consolidation. A Direct Consolidation Loan allows you to combine federal loans into one new loan to simplify your payments, potentially lower your monthly payment amount by extending your loan term, and gain access to IDR plans and federal forgiveness programs.

Just be aware that consolidating student loans means you may have a longer repayment period and pay more in interest.

Refinancing Considerations

With student loan refinancing, you pay off your existing loans with a new loan from a private lender. Ideally, the new loan will have a lower interest rate, which could lower your monthly payments, or better loan terms. You can refinance both private and federal student loans.

There are different types of refinancing borrowers might want to explore, including Parent PLUS refinance if you took out loans for your child’s education.

To qualify for refinancing, you’ll need a good credit score, and a solid financial profile. Learn how much you might save through refinancing by using our student loan refinancing calculator.

Finally, as you explore how to refinance student loans, consider this important caveat: Refinancing federal student loans makes them ineligible for federal benefits like income-driven repayment plans. Make sure you won’t need access to these federal programs before you move forward with refinancing.

Potential Legislative Changes Impacting Senior Borrowers

Certain proposed legislative changes could impact senior borrowers. Here’s more about the proposed policy reforms, advocacy efforts, and resources available.

Proposed Policy Reforms

In March 2025, President Trump signed an executive order to close the Department of Education (DOE) “to the maximum extent appropriate and permitted by law.” The department was created by Congress, and it would take an act of Congress to close it fully. Lawsuits have been filed against the closure. In the meantime, the DOE continues to operate, though with a diminished workforce.

It’s uncertain what will happen, but there might be potential changes if the Department of Education shuts down. For instance, the following might occur:

•  Changes to forgiveness programs: Current federal forgiveness programs, including PSLF and IDR, may undergo reforms.

•  Federal student loans may be transferred out of the DOE: President Trump has announced that the Small Business Administration would take over the federal government’s student loan portfolio, though some student loan experts say that is unlikely to happen. Details and timing have not been shared.

Advocacy Efforts and Resources

Some organizations have suggested ways that policyholders could address the student loan burden on seniors. For example, the National Consumer Law Center and the New America Foundation proposed several reforms, such as safeguarding Social Security benefits if older adults default on student loans, and providing targeted loan forgiveness to seniors.

Senior student loan borrowers may want to reach out to advocacy groups like the Student Borrower Protection Center for information and resources, or join a community like the Debt Collective’s 50 Over 50: Older Student Debtors group for support and to learn about ways to take action.

The Takeaway

Carrying student loan debt as a senior can be challenging, especially for those on a fixed income. But there are federal and state forgiveness programs that senior borrowers may be eligible for that might help cancel some of their debt.

In addition, making student loan payments more manageable through IDR plans, loan consolidation, or student loan refinancing, could make it easier for seniors to pay off their loans.

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

FAQ

Can student loans be discharged due to disability?

Yes, certain federal student loans, such as federal Direct loans, can be discharged due to disability if a borrower is totally and permanently disabled and qualifies for the Total and Permanent Disability (TPD) discharge. To qualify, you’ll need to fill out an application and provide documentation from one of three sources: the U.S. Department of Veterans Affairs, the Social Security Administration, or an authorized medical professional.

Are there state-specific loan forgiveness programs for seniors?

Yes, most states have state-specific loan forgiveness programs for residents. Many of these programs are for borrowers who work in public service fields like health care, teaching, and law. Borrowers must typically meet a set of criteria to have student loan debt forgiven. To find loan forgiveness programs in your state, search your state government website.

What happens to student loan debt if it’s not repaid before retirement?

If you don’t repay your student loan debt before you retire, you are still obligated to pay off what you owe. If you don’t, you could end up in delinquency just one day after your first missed payment, and in student loan default after 270 days of missed payments. Once your loan is in default, your loan holder can take you to court. In addition, the government can withhold up to 15% of your Social Security benefits to repay your defaulted loans and also withhold your tax refunds.

If you’re having trouble making your student loan payments, contact your loan service immediately to discuss repayment options and avoid default.

How can seniors manage student loan debt on a fixed retirement income?

Seniors on a fixed income may want to switch to an income-driven repayment plan that bases a borrower’s monthly loan payment on their discretionary income and family size. This typically results in a lower monthly payment. These borrowers could also explore other options that could potentially result in lower monthly payments, such as loan consolidation and student loan refinancing.

Is refinancing a good option for senior borrowers?

Whether refinancing is a good option for senior borrowers depends on a borrower’s individual situation. For instance, if your credit is strong, you might qualify for a lower interest rate or more favorable terms through refinancing. However, refinancing federal student loans makes them ineligible for federal benefits like forgiveness. If forgiveness is an option you think you might pursue, refinancing may not make sense for you.

photo credit: iStock/shapecharge
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Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY 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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