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When you stop making payments on a loan or credit card, the creditor may eventually close the account and label it a charge-off, which can stay on your credit report for up to seven years. This can be extremely damaging to your credit report and doesn’t get you off the hook for repaying what you owe. Your debt may still be handed over to a collection agency.

Here’s what you need to know about how long a charge-off stays on your credit report and other financial implications.

What Is a Charge-Off?

A charge-off is a type of credit account closure that happens when the lender has no expectation of receiving payment. The creditor writes off the loan or credit line as a loss. Once you’re past 120 to 180 days delinquent on your account, a lender may write off your account.

But this doesn’t mean your legal responsibility as a borrower is over. The account can still be transferred or sold to a collection agency, which can take over the collection process. They can even initiate a lawsuit to recover the outstanding balance, along with fees.

How Much Does a Charge-Off Affect Your Credit Score?

A charge-off can have a considerable negative impact on your credit score. One reason why: Your payment history, meaning making timely payments, is the single biggest contributor to your credit score at 35%.

What’s more, the charge-off may be listed twice on your credit report, causing double damage. Your original charged off account with the creditor will be listed, and then it may show up as a separate account with a collection agency.

On top of that, all of the late or missed payments leading up to the charge-off could show up separately. So if you missed six loan payments before the account was closed, each could ding your score. And, as noted, since payment history is one of the most important factors affecting your credit score, this can hurt your score significantly.

It’s hard to put an exact figure on the toll this can take on your credit score. Some estimates say it could negatively impact your score by up to 100 points or possibly more, depending on the particulars.

If you end up paying the charge-off, either to the lender or a debt collector, that will show up on your credit report and could help improve your score compared to leaving the account unpaid.

How to Remove a Charge-Off

There are two reasons a charge-off will be removed from your credit report: Either the information is inaccurate, or it comes from a fraudulent account. Here’s how to handle removing a charge-off from your credit report:

•   If you see a credit score update that shows an incorrect charge-off, you can file a dispute directly with the credit bureau. They’re required to investigate and respond within 30 days, but you’ll have a better chance of success if you submit documentation to support your case.

୆   There’s usually no risk of lowering your credit score because of a dispute. The process itself should not decrease your score. However, if information comes to light that has a negative impact (such as your credit limit being lower than it was believed to be), then it might knock your score down somewhat.

If the charge-off seems like it’s from a fraudulent account due to identity theft, there are a few steps you should take:

•   First, consider freezing your credit and adding a fraud alert to your credit report to prevent more damage. Then report the event to the Federal Trade Commission and your local police; after all, financial fraud is a crime.

•   After that is complete, you can submit any relevant paperwork to the credit bureau to initiate the dispute and get the fraudulent charge-off removed.

When Removing a Charge-Off Isn’t Possible

It’s not possible to remove a charge-off if it’s accurate. You can contact your lender to get more information about the account, including how to bring it to good standing if possible. If the account has been sold to a debt collection agency, you may want to contact them and work out a payment plan to avoid legal issues.

But even though the entry stays there for up to seven years, your credit score will begin to improve before then, which you can track with a credit score monitoring service.

How to Rebuild Your Credit Rating

It can take time to build credit when dealing with a charge-off. But you can start taking simple steps to improve your credit score.

•   First, consider addressing the debt you owe, even if it has gone to collections. Even though the original account is considered a charge-off, you could face legal repercussions if you don’t work out a repayment plan with the collection agency. You may be able to negotiate with the creditor.

•   How long a charge-off stays on your credit report after it’s repaid can still be seven years. You can’t usually alter or remove the fact that this occurred. However, you’ll likely have an easier time building your credit score and avoiding a potential lawsuit if you pay it off.

The next step for how to build credit is to stay or get up-to-date on any other credit accounts. Some tips:

•   Reduce your spending by using a money tracker app or other budgeting tool, and prioritize debt payments to ensure additional late payments aren’t added to your credit report.

•   Plus, lowering your credit card utilization is another major contributor to a better credit score. The debt utilization category in general accounts for 30% of your score. The lower your amount of debt compared to your available credit, the more positive impact you may see when you go to check your credit score.

These steps can have a positive impact on your credit score after a charge-off or other negative event.

Recommended: How to Check Your Credit Score for Free

Does Removing a Charge-Off Improve Your Credit Score?

Your credit score should improve once a charge-off falls off your credit report after seven years pass or is removed because it’s either inaccurate or fraudulent.

But even before the seven-year period ends, you should be able to build your score over time by handling your debt responsibly, such as making on-time payments and keeping your credit utilization ratio to no more than 30% (preferably no more than 10%).

Do Charge-Offs Go Away After 7 Years?

Yes, a charge-off stays on your credit report only for seven years. The good news is that typically the start date is the first missed payment associated with the account, not the date the account is actually charged off. In other words, if your payment is reported past due on January 1st but it isn’t charged off for a few months (often 90 to 180 days), the seven years on your credit report would likely begin with the January 1st date.

However, the debt itself goes away at a certain point, based on the type of debt and statute of limitations in your state. Typically, a debt is deemed uncollectible after about three to six years, though the time frame could extend longer. Also, a collections agency may not be able to pursue legal action once the state’s statute of limitations is up, but they may still contact you to try and get payment.

What If the Charge-Off Is Inaccurate?

If the charge-off listed on your credit report is inaccurate, you should file a dispute with the credit bureau. Here’s how the process works.

•   Identify the specific incorrect item on your credit report.

•   Explain why you think the charge-off is incorrect.

•   Include copies of any supporting documentation.

A dispute can be submitted online or via mail. The Federal Trade Commission recommends disputing the charge-off with each credit bureau that has incorrect information.

Recommended: Budgeting App to Spend and Save Smarter

The Takeaway

A charge-off typically stays on your credit report for up to seven years, and it can have a significant negative impact on your credit score. If a charge-off is inaccurate, it’s usually a smart move to work on having it removed from your credit history. If it’s accurate, it’s wise to work on remedying the debt and taking other steps to rebuild your credit.

Tracking your credit score and your money can help improve your long-term financial health.

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.

See exactly how your money comes and goes at a glance.

FAQ

How many points does a charge-off drop credit score?

A charge-off can cause a significant drop in your credit score, but the exact number depends on your personal credit profile. For instance, the number of late payments leading up to the charge-off will affect how many points your score decreases in total.

Does your credit score go up after charge-off?

Your score will eventually begin to rebound after an account is listed as a charge-off if you use credit responsibly. You may see a faster jump if you pay the debt owed on a charged off account instead of leaving it unpaid (and potentially taken over by a debt collection agency).

Is a charge-off worse than a collection?

It’s not straightforward to compare the two because a charge-off can still be in collection if the account is sold to a debt buyer. A charge-off may be worse because the debt can be listed twice: once from the original lender and once from the debt collection agency.

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Between 2000 and 2021, the average published tuition and fees increased from the following amounts, after adjusting for inflation, according to Best Colleges:

•   $2,146 to $3,564 at public two-year schools

•   $5,638 to $9,596 at public four-year schools

•   $25,468 to $37,222 at private nonprofit four-year institutions

This article will cover the average cost of college tuition and fees in 2024, the increase in college tuition costs, the reasons for the rise of average college tuition, and college tuition options you may want to consider for yourself.

Average Cost of College in 2023-24

In 2023-24, the average published price for tuition and fees for full-time undergraduate students were as follows, according to the College Board’s Trends in College Pricing and Student Aid:

•   $11,260 for public four-year in-state institutions, $270 higher than in 2022-2023

•   $29,150 for public four-year out-of-state institutions, $850 higher than in 2022-2023

•   $3,990 for public two-year in-district institutions (including average community college tuition), $100 higher than in 2022-2023

•   $41,540 for private nonprofit four-year institutions, $1,600 higher than in 2022-2023

Recommended: Average Cost of College Tuition

Increase in College Tuition Cost Over the Last 10 Years

Generally speaking, tuition has increased in the past decade. According to data from the College Board, the average published tuition price at a four-year nonprofit university during the 2013-2014 school year was $30,094, while in 2023-2024 that number jumped to $41,540.

Reasons for the Rise of Average College Tuition

The rise of college tuition over the past few decades can be attributed to several key factors, including:

Reduced State Funding

One of the primary reasons for rising tuition costs, especially at public institutions, is the decline in state funding for higher education. As states allocate less money to colleges and universities, these institutions often compensate by increasing tuition to cover budget shortfalls.

Increased Administrative Costs

Colleges have expanded administrative staff and services, including student support, campus amenities, and compliance with federal regulations. This growth in administrative functions adds to overall expenses, which are often passed on to students in the form of higher tuition.

Expansion of Campus Facilities

Many colleges invest in new buildings, state-of-the-art facilities, and upgraded dormitories to attract prospective students and remain competitive. These capital expenditures are expensive and often lead to increased tuition to help finance the construction and maintenance of these facilities.

Rising Faculty Salaries and Benefits

The cost of faculty salaries and benefits, including health care and retirement plans, has risen steadily. As colleges strive to attract and retain top talent, these increased personnel costs contribute to higher tuition.

Student Demand for More Services

There is a growing demand from students for more comprehensive services, such as mental health counseling, career advising, and extracurricular activities. Providing these additional services requires funding, which often results in tuition hikes to cover these enhanced offerings.

Together, these factors create a complex landscape where college tuition continues to rise, making affordability a significant concern for many students and families.

Recommended: How to Pay for College

Total Cost of College Over Time

While the cost of tuition has increased over the years, the prices of room and board, books, school supplies, and other necessities have also risen. The cost of room and board has almost doubled since the 1960s, going from $6,700 to more than $12,000, according to Best Colleges.

On Campus vs. Off Campus

How much you spend on college will vary depending on whether you live at home, on campus, or off campus. The College Board found that the cost of living on campus has increased slightly faster than the cost of living off campus, such as in an apartment or house with friends.

Total Cost of College Over Time by School Type

Of course, the type of school you attend (public or private) will also affect the total cost of attendance. Over the last nearly 60 years, the average cost across all institutions has increased 135%. It increased the most at private institutions at 187% and the least at two-year colleges, at 69%.

College Financing Options

Numerous college financing options exist for students. Students can tap into various options to pay for costs. Undergraduate students received an average of $15,480 of financial aid 2022-2023, according to the College Board’s Trends in College Pricing and Student Aid.

Students may rely on scholarships, grants, work-study, and student loans, in addition to personal savings to pay for their education.

Scholarships

Scholarships refer to money received from colleges or other organizations that students don’t have to pay back. Only about 7% of students receive scholarships, with the average student who receives one getting $14,890 annually at a four-year institution.

Student Loans

Students can take advantage of federal or private loans. Federal loans are provided by the U.S. Department of Education. To apply for a federal student loan, students need to fill out the Free Application for Federal Student Aid (FAFSA®) each year.

Private student loans are provided by banks, credit unions, and other financial institutions. These are separate from any sort of federal aid, and as a result, lack the protections afforded to federal student loans — like income-driven repayment options or the ability to apply for Public Service Loan Forgiveness. For this reason, private student loans are generally considered by students only after they have reviewed and exhausted all other options for financing.

Recommended: How to Complete the FAFSA Step by Step

Grants

Students can tap into federal, state, or institutional grants. Grants can also come from employers or private sources. Like scholarships, grants typically do not need to be repaid. They are mostly awarded based on financial need, and students will generally need to complete the FAFSA to qualify for them.

Work-Study

Students can get a work-study award, which is money they must earn when they attend college. They must file the FAFSA in order to qualify for work-study and must work a job on campus to receive the money.

Personal Savings

According to Sallie Mae’s annual How America Pays for College 2024 report, 37% of students receive help from their parents to pay for college, and 11% use their own income and savings. Strategies for parents paying for college include things like setting up an account designed to help parents save for college or other educational expenses, putting work bonuses or tax refunds into savings, and setting aside funds each month to put toward college.

The Takeaway

The average college tuition continues to increase. In 2000, the college tuition at a private four-year institution was $15,470, and now in 2024 it’s $38,421. There are a number of reasons for increasing tuition rates, including factors like a decrease in state funding, lack of regulation, and an increase in operating costs at colleges and universities.

Many students rely on financial aid to pay for college. Financial aid includes federal student loans, certain grants and scholarships, and work-study programs.

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.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

How much has college tuition increased since 2000?

Since 2000, college tuition has significantly increased, jumping about 65% between 2000 and 2021. This surge reflects growing education costs, which have outpaced inflation and wage growth, making higher education increasingly expensive and contributing to the student loan debt crisis faced by many graduates.

How much has the total cost of college increased over the last decade?

Over the last decade, the total cost of college, including tuition, fees, room, and board, has increased by about 10% at public institutions and around 19% at private institutions. This rise reflects growing expenses in education and living costs, making college significantly more expensive for students and families.

How much has college tuition increased in 2024?

In 2024, college tuition increased by 1.6% over the last 12 months. However, this number will vary depending on the institution and whether it is public or private. These increases are consistent with the ongoing trend of rising education costs, impacting students’ financial planning and contributing to higher student loan borrowing.

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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.

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.

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A student loan promissory note is a legally binding contract that explains the terms of the loan and your rights and responsibilities for repaying the debt. It lays out important details you’ll need to know (both during school and after you graduate), including how you can spend the proceeds of the loan, when interest starts accruing, along with your deferment and repayment options.

If you’re a student loan borrower, it’s essential to understand what’s in your promissory note. Here, we walk you through the most common types of promissory notes for students.

What Is a Student Loan Promissory Note?

Put simply, a student promissory note is your student loan contract. It details the terms and conditions of that loan, including what you owe; how interest is calculated and charged; available repayment plans; and any late fees or other charges you may have to pay. Both federal and private student loans typically require that you sign a promissory note.

If you’re close to graduation (or recently graduated) and have any questions about repaying your student loans, your student loan promissory note is the best place to look. You’ll also want to review your promissory note if you are thinking about refinancing your student loans.

What Is a Master Promissory Note?

A Master Promissory Note (MPN) is a legal document that contains the terms and conditions for federal student loans. When you sign an MPN, you are promising to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education.

Borrowers with federal student loans can typically sign just one MPN that covers multiple years of borrowing, rather than signing a new MPN each year. This means you are accepting the amount of each year’s new loans under the terms of the existing MPN.

There are two types of MPNs:

•   Direct Subsidized/Unsubsidized Loan MPN: A student borrower must complete and sign this MPN before a school can make the first disbursement of a Direct Subsidized or Direct Unsubsidized Loan.

•   Direct PLUS Loan MPN: A graduate/professional student borrower or parent borrower must complete and sign this MPN before a school can make the first disbursement of a Direct PLUS Loan.

What to Look for on a Student Loan Promissory Note

A promissory note will provide you with a wealth of information about your student loan (or loans). Here’s a closer look at what you’ll find in a promissory note.

Federal vs Private Student Loan Promissory Note

For federal student loans, you may sign a Master Promissory Note that allows you to borrow more than one loan during a period of up to 10 years. Private student loan lenders, by contrast, typically require that you sign a new promissory note for each new loan borrowed. This typically means you’ll sign a new promissory note each year you’re in school. It’s important to review this contract carefully each time, since terms and conditions may have changed.

All MPNs follow the same basic form, while promissory notes for private lenders can vary. Another key difference between federal and private student promissory notes: A promissory note for a private loan will list your interest rate, while an MPN will not. This is because an MPN may cover multiple years and federal student loan interest rates change annually.

Recommended: Private Student Loans vs Federal Student Loans

Repayment Options

Federal loans come with several options to help you manage your debt post-graduation, such as income-driven repayment plans and forgiveness programs. These options are all outlined in your MPN. You’ll want to take time to review them, especially as you enter the repayment phase of your borrowing journey.

Your private student loan promissory note will also outline your repayment options and any borrower benefits you have access to (such as reduced-payment plans or forbearance). Before signing the contract, you’ll want to review the repayment details and make sure everything you have discussed with your lender is reflected in the promissory note.

Deferment Options

Student loan deferment lets you postpone payments on your student loans for a certain period of time. You won’t have to pay your student loan bills during a deferment, but interest might accrue during this time, depending on your loan type.

Federal loans offer deferment during a number of different situations, including being enrolled in school at least half-time (and for six months after you graduate), being unemployed, economic hardship, and active military service.

Like federal student loans, private student loans are typically placed into deferment while you’re enrolled at least half-time in school, and you may also have a six-month grace period after you graduate before you need to start making payments. Interest will generally accrue on private student loans during a period of deferment. Private loans may also offer other deferment options, but every lender is different, so you’ll need to check your promissory note.

Recommended: Student Loan Payback Calculator

Interest Rate: Fixed vs Variable

Interest rates on student loans can be fixed or variable. With a fixed-rate loan, your interest rate will remain the same for the life of the loan. With a variable-rate loan, the interest rate on the loan fluctuates based on a market benchmark or index rate.

Federal student loans have fixed interest rates, which are set each year by federal law. The exact interest rate on your loan will not be listed in your MPN. To view current interest rates for federal student loans as well as previous years’ interest rates, visit the U.S. Department of Education’s website.

Private student loans may give you a choice of fixed or variable rates. Your rate and whether it’s fixed or variable will be listed in your loan’s promissory note. If the rate is variable, it may start off lower than a fixed-rate option, but could rise over time leading to higher payments.

Student Loan Fees

Your promissory note will also detail any additional costs, such as any student loan fees. For example, federal student loans and some private student loans charge an origination fee, which is a percentage of your loan amount. This fee is typically taken from the loan before it is dispersed, which means you receive less than the full loan amount you accepted. Since the origination fee is included in the principal, you will also pay interest on it (even though you did not receive those funds).

Other student loan fees you may see listed on a promissory note include: application fees, late payment fees, and collection agency fees (in the event you default on your loan and it goes to collections).

Federal student loan fees are set by law. Private student loan fees will vary by lender, so be sure to check your promissory note to understand the fee structure for your loan.

Prepayment Penalties

Prepayment penalties are fees for paying off a loan early and are designed to help lenders make money by recouping lost interest charges. Fortunately, neither federal nor private student loans have prepayment penalties. Because of this, you can typically save money on interest by paying your student loan off early.

Recommended: Student Loan Refinancing Calculator

Cosigner Requirements and Removal

Some lenders require a cosigner for student loans. This is someone, typically a parent or guardian, who has good credit and agrees to repay the loan if the student is unable to. The cosigner is equally responsible for the loan.

Federal student loans generally do not require a cosigner (or credit check). The only exception is a Direct PLUS loan, which may require an endorser (which is essentially a cosigner) if the borrower has an adverse credit history.

Private student loans, by contrast, typically do require a cosigner, since students often lack the income and credit history to qualify for a loan on their own. Your promissory note will indicate if your loan has a cosigner. It will also state whether you can eventually remove your cosigner from the loan and, if so, what the requirements for a cosigner release are (such as making a certain number of on-time payments on the loan).

How Funds Can Be Allocated

Your promissory note will stipulate what you can spend the proceeds of your student loan on. Whether you have federal or private student loans, this typically includes: tuition, fees, books/supplies, room and board, transportation, and some personal expenses. It generally does not include off-campus dining, entertainment, and non-school services.

If you have money left over after your school uses your loan to cover tuition, room and board, and fees, you’ll want to refer to your promissory note to see what else you can spend the money on.

When Is the Promissory Note Signed?

In general, borrowers will need to sign the promissory note for their loans before receiving any funds. Students who are borrowing federal student loans are able to sign their master promissory note online by logging into their federal student loan account. Typically, you’ll need to sign only one MPN for multiple subsidized and unsubsidized loans, and it will be good for up to 10 years of continuous education.

A private student loan lender may allow you to sign a promissory note online, or you may need to print it out, sign, and send it via regular mail.

What if a Promissory Note Is Not Signed?

For federal loans, a signed promissory note is required before the loan is disbursed. So, failing to sign the promissory note could mean you won’t receive your funds, or at least won’t receive them until the promissory note is signed.

A signed promissory note is also generally required for disbursement of a private student loan, though each lender may have their own requirements.

Do You Need a New Promissory Note Every Year?

Private lenders typically require students to sign promissory notes for each loan taken out, which means you may sign a new promissory note every year. Generally, federal student loan borrowers can sign a one-time Master Promissory Note that is good for up to 10 years of continuous education.

Do Your Parents Need to Sign?

If you are borrowing a private student loan and a parent is acting as your cosigner, they will likely need to sign the promissory note.

If you’re taking out a federal student loan for your undergraduate education, you are the only borrower and your parents do not need to sign your MPN.

If a parent is borrowing a Direct PLUS Loan to help pay for your college education, however, they will need to sign an MPN. As with a student MPN, a parent needs to sign only a single MPN once every 10 years. The government can provide multiple loans based on one parent MPN.

How Long Does the Master Promissory Note Process Take?

According to the Department of Education, most people complete their Master Promissory Note online in less than 30 minutes. When you log into your account to fill out your MPN, keep in mind that the entire process must be completed in a single session, since you cannot save your progress.

The Takeaway

A student loan promissory note is a legally binding document in which the borrower agrees to repay the loan and any accrued interest and fees. The document also explains the terms and conditions of the loan, including fees, deferment options, and repayment plans. Federal student loan borrowers may be able to sign just one Master Promissory Note, which will cover all federal loans for a period of up to 10 years. Private lenders generally require a promissory note for each individual loan.

Understanding the terms and conditions laid out in your student promissory note will help you know what to expect when borrowing and ultimately repaying your student loans.

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

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Do you have to do a master promissory note every year?

No, you do not have to sign a Master Promissory Note (MPN) every year for federal student loans. Once signed, it’s typically valid for up to 10 years and allows you to borrow multiple loans under that same MPN. MPNs are also not school-specific so you can typically use the same MPN even if you transfer colleges.

How do you get your student promissory note?

For federal loans, you can complete your Master Promissory Note on the Federal student aid website. It takes about 30 minutes to fill out and two to three business days to process. You will then be able to access (and download) your student promissory note by logging into your account.

For private loans, you may be able to sign your promissory note online or you may need to print it out, sign it, and mail it to the lender. You’ll receive a copy of your promissory note along with your other loan materials.

How long does it take for a master promissory note to process?

Once you submit the Master Promissory Note (MPN) online, it usually takes about two to three business days for processing. This time frame allows for the U.S. Department of Education to verify your information and communicate with your school regarding the loan. After your MPN is processed, your school will credit the loan funds to your account, and you can check your loan status on the Federal Student Aid website.

How do I get a copy of the promissory note for my student loan?

You can get a copy of your signed Master Promissory Note (MPN) for federal student loans by logging into your account on StudentAid.gov using your FSA ID. Navigate to your loan documents to find the MPN. You can then view, download, or print a copy for your personal records.

With a private student loan, your lender will typically provide you with a copy of the promissory note, along with several other documents, when they finalize the loan. If you can’t locate a copy, you can reach out to your lender and ask them to send you one.

Do I have to pay my student loans if I drop out of college?

Yes, even if you drop out of college, you’re still required to repay your student loans. Once you’re no longer enrolled in school at least half-time, student loans typically enter a grace period, which is often six months. After that, repayment begins. Dropping out does not eliminate your obligation to repay the debt, and failure to make payments could lead to loan default.

Federal loans do offer some borrower protections, however. Options like deferment, forbearance, or income-driven repayment plans may help if you experience difficulty repaying your loans after leaving school. Some private lenders also offer assistance for borrowers who hit challenging times.

Will a student loan affect my credit score?

Yes, student loans directly affect your credit score. Once you take out a student loan, it becomes part of your credit report and, like other types of loans, can impact your payment history, length of your credit history, and credit mix. Making timely payments can help you build a positive credit history. However, missed or late payments can negatively affect your credit and score.

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

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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.

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.

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

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Credit card debt can go from zero to thousands with one quick swipe. Or it can build slowly like rising water — a nice dinner here, some retail therapy there. Before you know it, your balance is uncomfortably high. You’re not alone. Almost half of American households carry credit card debt. Of those consumers, the average balance is $6,501, according to recent Experian® data.

If you’ve vowed to pay off your credit card balance, you’re making a smart financial move. Doing so can save you money on interest, build your credit history, and help you achieve other financial goals. Here, learn the top tips and strategies for getting it done, from the snowball strategy to hardship plans to the boring but effective debt-focused budget.

What Is a Realistic Payoff Schedule?

If you’ve been carrying a balance on one or more cards, it may take longer than you’d like to pay off the debt. Determine how long you need to become debt-free while still covering your monthly bills comfortably. 

You’ll want to consider these facts:

•   A longer payoff term can allow you to continue to save and invest while paying down debt. 

•   A shorter payoff term can save you a considerable amount in interest.

Worth noting before moving on to tactics: If there’s no scenario in which you can cover your living expenses and pay off your credit card debt in five years, the standard payoff strategies may not be enough. It may be time to consider applying for credit card debt forgiveness.

7 Credit Card Payoff Strategies and Tips

There are numerous ways to tackle debt and pay off credit cards. The approaches below may work best when you mix and match several to create your own custom debt payoff plan.

1. Create a Debt-Focused Budget

Achieving financial goals usually starts with a budget. Making a budget is designed to help you discover extra cash you can put toward your credit card bill.

•   First, make a list of your monthly bills that reflect the “musts” of your life. Along with your rent or mortgage, phone, gas, food, and other required living expenses, include your credit card payment and other minimum debt expenditures. You can leave the amount blank for now. This is your “Needs” column.

•   Next, look at your “wants.” These are things that you can survive without — restaurant meals, new clothes, gym membership, travel — but that often make life better. Which items can you do without temporarily so you can put their cost toward your credit card bill? The idea is to trim spending so you can pay down your debt.

It’s OK if your budget isn’t the same from month to month — flexibility is good. While you’re at it, build the following into your budget:

•   Look ahead for unavoidable big purchases (that upcoming destination wedding) and occasional bills (annual home insurance premiums, for instance, or holiday gift shopping). 

•   Leave some wiggle room for unexpected expenses. You might need to dip into your emergency savings for this kind of cost, but it’s good to have a cushion in your budget (say, for a rent increase).

•   Recognize that your credit card payment may be lower some months to accommodate the fluctuating costs noted above. Just always pay at least the minimum payment.

Your new budget should prioritize your credit card payment on par with other bills and above nonessential treats. One way to make budgeting easier on yourself is to download a financial insights app, which pulls all of your financial information into one place.

2. Zero-Interest Credit Card

The frustrating thing about credit cards is how interest can take up more and more of your balance. Zero-interest credit cards, also known as 0% APR cards, allow card holders to make payments with no interest on transfers and purchases for a set period of time. The promotional period on a new credit card can usually last from 12 to 21 billing cycles, long enough to make a large dent in the card’s principal balance.

Consolidating your credit card debt on one zero interest card serves to simplify your monthly bills while also saving you money on interest payments. The key here, of course, is to avoid racking up even more credit card debt.

One drawback to these cards is that you often need a FICO® Score of 670 or above to qualify. And once the promo period expires, the interest rate can climb to 29% or higher. In an ideal world, you’ll want to achieve your payoff goal before the rate rises.

A credit card interest calculator can give you an idea of how much your current interest rate affects your total balance.

3. The Snowball, the Avalanche, and the Snowflake

The snowball and avalanche debt repayment strategies take slightly different approaches to paying down debt. Both involve maintaining the minimum payment on all but one card.

•   The debt snowball method focuses on the debt with the lowest balance first, regardless of interest rate, putting extra toward that payment each month until it’s paid off.

Then, that entire monthly payment is added to the next payment — on top of the minimum you were already paying. Rinse and repeat with the next card. It’s easy to see how this method can quickly get the snowball rolling.

•   The debt avalanche is based on the same philosophy but targets the highest-interest payment first. Getting out from under the highest debt can save a lot of money in the long run. Just like the snowball method, applying that entire payment to the next highest interest debt can lead to quick results.

•   The third snow-related strategy, the debt snowflake, emphasizes putting every extra scrap of cash toward debt repayment. If you have extra money to throw at your debt, even $20, that can still make a difference in your overall amount owed. So this method encourages you to chip away at debt with any small amounts available.

4. Make More Money

Sure, increasing your income is easier said than done. But if you have the time to spare, it can make paying down debt a whole lot easier. Here are the top ways that people can bring in more cash:

•   Start a side hustle (or monetize an existing hobby)

•   Get a part-time job (on top of your current job). Two shifts a week can help you bring in another $500 to $1,000 per month.

•   Sell your stuff. Reselling clothes, books, old electronics, and jewelry can help bring in cash.

•   Negotiate a raise. In some cases, labor shortages may give workers extra leverage to ask for more.

5. Negotiate with Your Credit Card Company

If your large credit card balance is the result of unemployment, medical bills (yours or a loved one’s), or another financial setback, inform your credit card company. You may be able to negotiate a lower interest rate, lower fees and penalties, or a fixed payment schedule.

Hardship plans have no direct effect on your credit rating. However, the credit card company may send a note to the credit bureaus informing them that you’re participating in the program. 

One point to be aware of: Your credit card issuer may also close or suspend your credit card while you’re paying off the balance. This can leave you without a means to pay for purchases and could also ding your credit score.

6. Change Your Spending Habits

Changing how you spend your money is key to paying down debt — and to avoid racking up more in the future. You can approach this in two ways: as a temporary measure while you pay off your cards or a permanent downsizing of your lifestyle.

•   The advantage of the temporary approach is that people are generally more willing to give things up when it’s for a limited time. For instance, can you suspend your gym membership during the warmer months when you can work out outdoors? Perhaps you can challenge yourself to cook at home for 30 days to save on restaurants. Or you might go without paid streaming services for six months.

String enough of those small sacrifices together to cover a year or two, and see how quickly you might be able to increase your credit card payments. That in turn can make your payoff term shrink.

•   Downsizing your lifestyle for the long term has its own appeal, even for people who aren’t paying down debt. Living below your means is key to accumulating wealth. How exactly you accomplish that isn’t important. For instance, you can frequent cheaper restaurants, reduce the number of times you go out each month, or merely avoid ordering alcohol and dessert. The bottom line is to save money, avoid debt, and enjoy the financial freedom that results.

7. Personal Loan

Similar to a zero-interest credit card, a personal loan is a form of debt consolidation. Personal loans tend to have lower interest rates than credit cards, saving you money. And if you’re carrying a balance on multiple credit cards, a personal loan can allow you to simplify your debt with one fixed monthly payment.

Personal loans can be a great option for people with good to excellent credit. That’s because your interest rate is determined largely by your credit score and history. You can typically borrow between $1,000 and $100,000, and use the money for just about any purpose, from paying off debt to funding travel or a home renovation.

You will usually find fixed-rate personal loans, though some variable-rate ones are available as well. Terms usually run from two to seven years for personal loans.

The Takeaway

Credit card debt can sneak up on you. If you’re carrying a balance on one or more cards, there are numerous ways to approach paying down your debt. You might start with a new budget that prioritizes your credit card payment along with your other monthly bills, and trim your spending accordingly. You could then combine a broad payoff strategy (the snowball, the avalanche) with other tips and tactics (zero-interest credit cards) to minimize your interest payments and shorten your payoff term. And remember: You’re not alone, and you can do this!

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

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

How to pay off a huge credit card bill?

There are a variety of ways to pay off a large credit card bill. These include making (and sticking to) a budget, trying the debt avalanche or snowball method, applying for a zero-interest balance transfer card, or taking out a personal loan.

How to get rid of $30,000 credit card debt?

To pay off a $30,000 credit card debt, it’s wise to create a smart budget, look into cutting your expenses, develop a repayment plan, and see about consolidating your debt. If these don’t seem likely to lead to getting rid of your debt, you might talk to a certified credit counselor and/or consider a debt management plan.

What is the best tip to pay off credit cards?

The best tip for paying off credit card debt will depend on a variety of factors, such as how much debt you have vs. your available funds. For some people, the debt avalanche method of putting as much available cash toward the highest interest debt can be a smart move. For others, consolidating debt with a personal loan may be a good option.

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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.

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

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

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.

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

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

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If you, like many people, cringe when it’s time to pay the check after dinner out with friends, there are solutions. It can get tedious and frustrating to try to figure out who had how many drinks, but dividing it evenly may not be fair to the person who just had an appetizer. Or you might find that there’s often one person (or more) who doesn’t have cash, making payment tricky. 

To avoid ending a fun evening by doing a lot of math or risking hurt feelings, try these strategies. Splitting the check can be easily wrangled with just a little advance planning.

6 Tips for Splitting the Bill With Friends

These tactics can help you split the bill and keep everyone happy. The next time you go out to dinner as a group, try one.

1. Pick a Place Where You Order at a Counter

You could go to a fast-casual restaurant that allows you to order at the counter on separate tabs and then enjoy your meal together at the table. If you’re on a tight budget and are trying to save money or you’ve had difficulty splitting checks with friends in the past, this allows you to avoid a sticky situation. Or you might have a local food hall where each guest can grab their own meal from a multitude of stalls and then dine together. 

As these styles of dining continue to grow in popularity, you and your friends can have your choice of cuisines — without blowing your budget or haggling over the bill.

2. Ask for Separate Checks — Before You Order

Having everyone in your party get their own separate check is another simple solution. The key is to ask your server for separate checks before you start ordering. That way, your server can track everyone’s order separately from the get-go. This can help you avoid the confusing chore of splitting the bill (“Who had the cappuccino?” etc.) after the meal has ended.

Still, be mindful of the extra work you’re asking your server to do. Some experts recommend limiting the number of separate checks you request to no more than four. Some restaurants may honor a request for more or less; you might ask and see.

Recommended: How to Manage Your Money: Tips to Do It Right

3. Have One Person Put the Bill on Credit

Another strategy for splitting the bill is to agree that one person will pay the bill with their credit card, and the rest of the group will reimburse them. This makes things easier for the server. Be sure to include the tax and tip in your calculations so that everyone pays their fair share.

Instead of cash, since most people don’t carry as much money around as they used to, you could use an app to transfer money from one friend to another. Or you can likely move funds from your checking account to the bill payer’s using tools your bank offers.

There can actually be perks to being the person who pays the bill. You might earn rewards when you charge the amount or you might qualify for other bonus offers. 

4. Use an App to Track Your Outings

There are a few apps, like Splitwise and Tab, that allow you to track and split purchases with friends. These bill-splitting apps divide the cost of the bill and assign each person what they owe. 

A number of these apps connect to payment platforms so that everyone can pay their share or transfer money to others in the group. If not, you might then designate one person to pay the bill, as described above, and then others pay them back.

In addition, many payment apps, including PayPal and Venmo, have bill splitting features that can help a group split a bill evenly or with custom amounts. And some apps allow a group to split a bill and pay their share from their bank account. 

Recommended: Guide to Mobile Wallets: What They Are and How They Work

5. Use Different Credit Cards to Pay

If you forgot to request separate checks at the start of the meal, you still have options for dividing the check. Confirm that the restaurant will take the number of credit cards you wish to pay with, then have everyone go through and tally up what they ordered.  Then ask for those amounts to be charged to the appropriate card card.

For instance, one person might say, “Can you please put $38 on this card?” and another would say, “Can you put the remaining $50 on mine?” Then you would each pay your bill, adding any tip you wish to leave.

Just be forewarned: Many restaurants will only want to split a bill two or three ways with this method. If there are eight of you out for the night, this is unlikely to be a good option. 

6. Split the Bill Evenly

Say there are three of you dining out and the bill comes to $120. You might not get into the details of which person had the two pricey mocktails vs. the others each having a single glass of wine. If each person just puts in $40 (plus tip), you’ve split the bill evenly and politely.

This concept works especially well when you’re ordering small plates, which are designed to be shared. After all, when you’re sharing all the food, even bill-splitting makes sense.

If there are certain dishes you’re not going to eat, you might want to speak up at the beginning of the meal and ask if it’s possible for you to get a separate check.

Recommended: 10 Personal Finance Basics

Splitting the Bill Etiquette

Here are a few tips to ensure that things stay polite when you split the bill.

Ask for a Separate Check ASAP

As noted above, if you’re watching your spending, mention upfront your interest in a separate check. You might tell your group that’s your plan or simply request a separate check from your server when they start taking the order. However you approach it, it can spare you bad feelings later or having your bank account take a major hit by getting stuck splitting a big bill evenly.

Don’t Splash Out if You’re Splitting the Bill Evenly

Be mindful of what you order if you are splitting the bill evenly. If everyone else is ordering $15 hamburgers and you order the $32 steak special, that’s not fair to others when the tab is divvied up. If you’ve got to have that steak, ask for separate checks, or else perhaps volunteer to pay the tip on the entire tab to compensate.

Share the Meal Appropriately

If you are splitting the bill evenly, keep an eye out to make sure everyone gets their share of the meal. For instance, just because the guacamole and chips were placed on the table next to one person, that doesn’t mean you can’t politely say, “Please pass that to our end of the table once you’ve had some.”

Try Not to Worry About Every Last Penny

Recognize that splitting bills can be less than precise. There’s a chance you may pay a couple of dollars more or less than the exact amount you owe. Sometimes, simplicity is the best path rather than getting into advanced math calculations which might yield a couple more dollars in your savings account but trigger bad feelings. It may be best not to contest amounts down to the last penny for the sake of preserving the good vibes.

The Takeaway

There are several ways to split a bill when dining out with friends. Some methods are to request separate checks, to eat at a restaurant where you order at a counter, or to have one person pay and then the others reimburse their share. These tactics can allow you to keep everything polite among your group while enjoying good food and good company. 

Consider opening a bank account that makes it easy to send money and split a bill. 

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

How do you politely split a bill?

How to split a bill politely can be accomplished in a variety of ways. You might request separate checks if your group is on the small side, or you might divide the bill evenly. Another option is for one person to pay the bill, and others pay them back. Or you could dine at a restaurant where you order at a counter or at a food hall. In these settings, each person can pay their own way and then eat with their group.

Is there a polite way to ask to split a bill?

A polite way to split the bill is to bring it up before you and the other diners begin ordering. That can simplify matters. You might say something like, “Before we order, does anyone have any ideas for splitting the bill?” or “I am just going to have an appetizer tonight, so I will ask for a separate check.”

How do you divide a bill?

There are usually two methods for dividing a bill. You can divide the bill evenly among all guests, so that each person pays the same amount, regardless of what they ordered. Or you can divide the bill so that each person only pays for their share, whether they ordered three courses or just had dessert. The latter, as you might guess, involves more math. As you decide on a method of splitting the bill, don’t forget to account for tax and tip.

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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.

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.

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