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Credit card debt is an increasingly severe problem in the U.S. As Americans become more dependent on their small plastic cards, the amount of debt seems to just get bigger. And bigger.

According to Experian , the average American has a credit card balance is almost $6,200. Along with individual and household debt, the total amount of credit card debt in the U.S. has reached its highest level ever.

Whether debt has got you down, or you’re wanting to consolidate your existing credit cards and opt for ones that have the best perks and benefits for your circumstances, the question of canceling a credit card can be an extremely sticky one.

Many of us find ourselves wondering the best course of action to reduce credit card debt without affecting credit score, and the concern is valid.

While closing an account may play a role in getting a better handle on any existing debt, it’s important to understand ways to cancel a credit card in a way that doesn’t end up setting you back even more.

Ahead are some common steps that are typically needed to be taken in order to fully cancel a card, including sending a written confirmation and keeping a watchful eye on your credit report after you’ve put through a cancelation request.

Do You Really Need to Cancel?

It can be tempting to cancel cards or close accounts when things get overwhelming. But sometimes this may not be the best option.

In many cases, canceling a credit card can actually damage one’s credit score. In fact, canceled accounts may remain on a credit history for several years after the date they are closed. (With a card in negative standing, it will remain on your credit history for up to seven years, and a cancelled card in positive standing typically remains for 10 years.)

It’s important to take the time and analyze your motivations behind canceling an account before you actually do. After all, it may be smarter to simply cut up or hide a credit card rather than officially canceling.

As always, the decision is up to you, but it’s helpful to take these considerations into account before finalizing a decision that may have a long-lasting impact on your credit health and your long-term financial future.

Closing One Account at a Time

If you’ve decided that canceling your card is the best way to go for you, there are some things you may want to keep in mind before getting started.

First of all, when it comes to canceling credit cards, it’s important to remember that not all of them are created equal.

Depending on the exact reasons that led you to wanting or needing to cancel a card, you may want to consider a few things before pulling the trigger.

For example, if you’re thinking of canceling a card, you may want to consider canceling new ones instead of old ones to avoid impacting your credit score.

In the world of credit, older, more established credit in good standing is looked upon more favorably than new, and so you may want to keep this in mind when choosing which card you would like to cut.

On top of this, some credit cards may offer more appealing rewards programs for your lifestyle than others, so you may want to take stock of the perks that come with each card before deciding which one you want to stop using.

Paying Off or Transferring Your Balance

Depending on the total amount of credit you have available, closing a card account with a high credit limit could run the risk of damaging one’s credit score.

If you are carrying high balances on other cards or have active loans, this damage could be especially noticeable, since your debt-to-credit ratio (also called your credit utilization ratio) may affect your credit score. (Typically, you’d want to stay at 30% or below.)

If you’re planning on canceling a credit card, you will likely want to ensure that you’ve paid off any remaining balances on that account. If you fail to do so, you may end up having to pay interest charges on any remaining balance.

If you normally carry a balance from one month to another, you may need to take extra care to pay the full statement balance before canceling a card in order to make sure there is no money left in your balance and avoid future interest charges.

You may also want to take some time to brush up on your knowledge of credit card utilization, as it can be important to understand when it comes to canceling your credit cards smartly.

In order to lessen the negative impact of closing one of your credit card accounts, you may want to pay off all of the balances you carry on all of your cards first.

If you cancel a card while carrying zero balances on all your cards, your credit utilization rate should stay at zero, so even if you cancel a card and remove its balance, your rate shouldn’t be impacted.

Contacting a Credit Card Company

Once you’ve paid off your credit card balance, you will want to contact your credit card company to put through your request to close your account.

Sometimes, you will be able to cancel a credit card without making a phone call. It may be helpful to look up how to cancel a particular credit card online to see if your credit card company offers this option.

In most cases, you will want to contact your credit card company by phone. Usually, your customer service number will be printed on your credit card.

From there, you’d inform your credit card company that you are canceling your card. Keep in mind that some companies require you to speak to a customer service representative in order to complete this process, while others are more flexible.

It’s helpful to know that credit card representatives may be trained to try to convince you to keep your account open. Remember that you have the right to close your account at any time.

Before you hang up the phone, you may want to ask your representative for their name so that you can include it along with your written notice of cancelation.

Sending Written Confirmation

Once you’ve called and canceled your card, you may choose to mail a written confirmation letter to your credit card company. This can be a good option in order to protect yourself generally, but also in the event that the customer service representative made a mistake while putting through your card cancelation request.

In the letter, you would write things like your name, phone number, address, and account number as well as the details from the call you had with your credit card representative. If you got their name, you may want to also include it here.

You might choose to also state that you’d like your credit report to show that the account was closed at your request.

If you choose to mail a letter, consider sending it via certified mail so that you can ensure the company receives it, and make sure to keep a copy for your records.

Keeping an Eye on Your Credit Score

When canceling credit cards, patience is key. From the moment you begin the process to the moment your credit card is officially canceled, it may take one month or even longer, depending on the company.

After your account has officially been canceled, you may wish to keep tabs on your credit report to ensure that your credit card has in fact been listed as closed.

If, for some reason, the card is still marked as open, you may need to get back in touch with your credit card representatives and, possibly, repeat some or all steps in this process.

Know that it can sometimes take several weeks for changes to show up on your credit card report. For this reason, it’s good practice to get into the habit of checking your credit score regularly, whether or not you’ve recently closed a card.

Of course, if you did just cancel a card, you may want to wait a month or so to see whether or not closing your account impacted your credit score.

Keep in mind that, every twelve months, you can get one free copy of your credit report online through AnnualCreditReport.com . Some credit card companies may also offer apps that allow you to check your score for free.

Destroying Your Card

Once you’ve confirmed that your card is canceled, then you’re almost done with the process.

If you’ve ensured that the account is in fact closed, then you can officially destroy your card in the manner of your choosing.

Though cutting up a credit card may provide a feeling of freedom and catharsis, it’s important to be careful to choose a method that makes sure the information on your card is not recoverable.

If you have access to a shredder, shredding your card may be the most efficient and secure way of destroying it.

If you’re using scissors, make sure that you properly cut up all the identifying pieces of information on the card, including your signature, the expiration date, CVV number, and the credit card number itself.

From there, ensure you properly dispose of the shards. For an added layer of security, consider throwing them away in more than one garbage can.

Maintaining a Healthy Relationship with Credit

Despite the array of credit card-related woes many Americans experience, it is possible to leverage credit cards in a healthy and productive way.

Depending on your needs and financial circumstances, finding ways to use credit to your advantage is a great way to ensure that you don’t wind up with more debt than you can handle.

A credit card cancelation can often offer an opportunity to take stock of the way you’re using credit, and establish better practices moving forward.

Once you’ve familiarized yourself with your credit utilization, and taken a look at the rewards you are currently signed up for, you may choose to go about things differently in the future.

One of the best ways to help you keep tabs on your credit is to build a practice of checking your balance and your credit score regularly.

This may look like downloading an app that lets you see all of your savings, checking, and credit card accounts in one place, or just getting into the practice of logging into all of your account on a regular basis.

Whichever way you choose to go about it, there are several strategies you can try out that may help you to keep your credit in check.

From leveraging balance transfers to using the snowball method to help pay off any debt balances you currently have, there are ways to help you get your credit card debt and finances under control—regardless of whether or not you decide to get rid of some of that seemingly precious plastic.

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

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

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.

SOPL19079

You might have heard the phrase “there’s no such thing as free money.” You may also have heard that “money doesn’t grow on trees,” but we’re pretty sure money is still made of paper. While cash back from your credit card isn’t exactly free money, using credit wisely can be beneficial.

How Does a Cash Back Perk Work?

Cash back is the rebate of the credit card world. The money that you get back, depending on the card and the deal you’ve gotten, may come in the form of a check, statement credit, or deposit with your financial institution.

With points, you might end up with $10 off your next Starbucks purchase; but you might actually prefer The Coffee Bean and Tea Leaf, so a Starbucks card may hold no value for you. With a cash-back reward, you typically get to decide how you want to spend the money: your mortgage, your lunch, your boyfriend’s birthday present, or even your credit card debt.

While some credit card companies offer a flat cash-back rate, other cards offer some combination of a flat cash back rate, and a specialized cash back rate for certain categories (often ones you can choose).

Card holders may be eligible to receive varying amounts—typically a percentage of spending in a certain category, e.g., dining, hospitality, airlines, or groceries.

But choosing a cash-back card with the best rewards isn’t so simple. There are many different kinds of cash-back rewards which may be available.

What’s Available

•   Cash back on a monthly, quarterly, or annual basis.

•   The cash back could be for any kind of purchase or for particular purchases in certain categories like dining, gas, groceries, etc. Sometimes it might be a combination of these two with higher rates of return on certain categories.

•   Timed spending bonuses: If you spend a certain amount within a certain prescribed time you may be eligible for even more cash back than the base amount.

•   Certain cards might also offer non-cash benefits like flight upgrades or extended warranties on purchases made with that card.

Why Do Cash Back Rewards Even Exist?

How is this even possible? Getting paid to spend money sounds like the kind of job you invented when you were twelve—it couldn’t possibly be real.

It turns out that the money you’re getting back comes from some very real places. Of course, credit card companies will try to get you sign up with them instead of their competitors. It’s dog-eat-dog out there. Credit card companies have since come up with a variety of tools to attract customers, and cash back is a common reward.

But where does the money come from? If you’ve ever been asked to fulfill a credit card minimum purchase amount you know where it comes from. The $10 minimum at the cafe is not there entirely to keep you adding extra shots to your morning latte (although you’re totally going to anyway).

The Pros

With so many kinds of credit cards out there, why would you consider a cash-back card?

•   Credit cards with cash-back rewards might actually help you earn more money than a low-interest-rate checking account with a debit card. Some checking account interest rates can often be less than 1% APY. Getting 5%—or more—cash back on your purchases is a lofty difference. Credit card spending, though, is still spending—not saving—an important difference to keep in mind when making purchases. Buying within a budget is still an important consideration.

•   Some cash-back cards offer sign-up bonuses or bonuses for spending over a certain amount or in a certain categories. When used responsibly, these types of bonuses could be used for special purchases a buyer might not have been able to afford otherwise. Two tickets to Paris please!

•   Consumers with credit scores of 740 and higher are typically the ones who qualify for cards with the highest cash-back rewards, which could be up to 6% when purchasing items from designated categories. Yet another reason to pat yourself on the back for your high credit score.

The Cons

Okay, so maybe some of the maxims are correct. Nothing in life is free and money doesn’t grow on trees. Like anything good in life, there can be a downside (we’re looking at you, cupcakes).

•   Many cash-back programs actually come with a maximum on rewards. While it seems that the more you spend the more you get, eventually you might just be spending more.

•   Some cash-back credit cards have annual fees. While this may seem small compared to the money you’ll be getting back, it might be worth it to do the math and make sure the pros outweigh the cons before you are convinced that this card is worth your spending power. Some cards with hefty fees reward the cardholders with perks beyond the cash-back bonus.

•   Like any other credit card, if the balance due is not paid on time, there are typically interest charges and fees added to the principal balance. That amount may negate any cash-back rewards you earned during that statement cycle.

•   Perhaps the biggest con: Choosing and managing a credit card can be complicated. Lots of homework, (i.e., research online, with your bank, has to go into this one before you may feel ready to commit to this endeavor. With occasional fees and sometimes hard-to-acquire gains, your research is key to making sure you find one that works for your spending habits. Cash-back credit cards can pay off, but it might take some digging to find the right one.

Unfortunately, at the end of the day, there’s no free lunch. Credit card companies are in the business of making money and they rely on your debt to fund their businesses.

Using credit wisely—and reaping all the rewards—typically means paying the balance due in full each billing cycle. Getting to that point can take some time, though.

New and existing Checking and Savings members who have not previously enrolled in direct deposit with SoFi are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 25-day period. Cash bonus will be based on the total amount of direct deposit. The Program will be available through 12/31/23. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.

SoFi members with direct deposit can earn up to 4.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 3/17/2023. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet

¹See Rewards Details at SoFi.com/card/rewards.


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

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

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

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

SOPL19062

Student loan repayment often begins after a six-month grace period. In that time, you’ve (ideally) settled into a job and a new, post-school routine. That means you’re ready to take on all your financial responsibilities—including building up a savings account—right?

If that sounds daunting, you’re not alone. One in five Americans report that they save less than 5% of their yearly earnings, and another 20% save no part of their annual income.

Building up an emergency fund is an important step toward financial stability, but paying your student loans is required, too.

Is it better to pay off student loans than to save? When both feel important, what do you choose?

Unfortunately, there may not be one right answer—but it is possible to do both. Here are some moves to help make both student loan repayment and saving more manageable.

Considering Refinancing Your Student Loans

In the last decade, interest rates on federal student loans have ranged between 3.4% and 8.5% . Rates on private loans—those provided by private institutions such as banks, credit unions, or schools themselves—can be even higher.

Refinancing your student loans is an opportunity to lower your interest rate. If you can refinance at a rate lower than your existing one, you may pay less on interest throughout the life of your loan.

Alternately, you could elect to lengthen your loan term in refinancing, which could lower your monthly payment and may allow more wiggle room in your budget to pay down other debts or save more. That said, lengthening your loan term can mean you’ll pay more interest over the life of the loan.

Considering Consolidating Your Student Loan Debt

Another reason to consider refinancing student loans is that doing so can simplify the repayment process. If your initial loans are with multiple institutions, you are keeping track of several due dates and recipients. Refinancing gathers all of those loans into one place—with one lender—leaving you with a single bill to pay each month.

Refinancing can consolidate both private and federal loans. However, if you only have federal loans, you can also consolidate them with the government through a Direct Consolidation Loan.

This may not reduce your interest rate, but it would combine all of your loans into one. And with a Direct Consolidation Loan, you’re able to keep your federal student loan benefits. On the other hand, refinancing means you’ll no longer be able to take advantage of federal loan benefits.

Paying Student Loans On Time Can Help Build Your Credit Score

A silver lining to student loan debt is diligently paying your student loans on time may help build your credit score, which is a number that reflects your credit risk at a
given time. On-time student loan payments in the long term are an opportunity to show a long history of consistent payment, which may positively affect your credit score.

Consider setting up automatic payments or an electronic calendar reminder to avoid missing student loan payments. If you do miss a payment, you may want to call your lender immediately to ask how you can rectify the situation.

In some cases, a lender may be willing to waive the fee on a missed payment if it’s your first one, and if you pay it before 30 days have passed, you may be able to avoid getting the missed payment reported to the credit bureaus.

Trying Increasing Your Student Loan Payment Each Month

Paying more than the minimum on your monthly student loan bill can lessen the amount of interest paid over the life of your loan, and may help you pay off loans earlier than your original loan term.

If you get a windfall of extra cash—from a holiday gift or professional bonus, for example—consider using a portion of it to send in one extra payment on your student loan. There are no prepayment penalties for federal or private student loans. Manage to do this every year and you can help reduce the interest you pay and therefore the total cost of your loan.

Finding a Way to Save In Addition To Your Payment Plan

Even if it feels like a negligible amount in the moment, you can try to prioritize putting some money in a savings account each month.

None of us is exempt from the unpredictability of the future, so growing an emergency fund can help you weather an unexpected financial strain, such as a medical bill or car repair.

Saving between three to six months’ worth of expenses is a common goal suggestion. But if that sounds overwhelming on an entry-level salary, remember that even a small start is just that—a start.

Trying to Paying Your Savings Account Like a Bill

There is urgency in the word “bill,” so trick yourself a little by thinking of your monthly savings as a bill to be paid. Or you can consider setting up automated monthly payments, so that you don’t need to lift a finger to save.

Considering a Side Hustle

If you’re already working a full-time job, chances are you’d want a side hustle that requires minimal effort or that brings you a good deal of joy. If you’re social and happy to meet new people regularly, renting out a room in your home via Airbnb is one way to earn extra cash.

If you have a car, you can rent that, too, via companies like Turo and Getaround . Or use your wheels and join the ride-sharing economy, offering transport via Lyft .

It isn’t necessary to try all of the above strategies at once. But the more ideas you have, the more likely you are to find the ones that work for your life and financial situation.

And striking a balance between saving, spending, and paying down debt is a win in itself.

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

SOSL19018

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

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

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

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

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

Why You Shouldn’t Ignore Missed Payments

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

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

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

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

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

Review Your Spending by Making a Budget

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

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

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

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

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

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

Looking into Deferment or Forbearance

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

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

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

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

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

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

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

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

Considering an Income-Driven Repayment Plan

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

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

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

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

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

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

Refinancing Your Student Loans

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

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

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

Getting Your Loans Back on Track

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

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

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

SOSL18217

Does the thought of possibly shelling out tens of thousands of dollars to sit in a classroom for four more years after graduating from high school make you groan? While college is a good option for many people, it isn’t for everyone—and not going to a four year college doesn’t mean you can’t have a meaningful career.

More people than ever before have a college degree, but a four-year program isn’t the only way to be successful. The truth is that college may not be the right path for all high school grads.

There are many colleges you can consider, but for some people, sitting in class for another four years to get an expensive degree doesn’t hold interest. And for many, family or work obligations make it difficult to pursue full-time education.

There are certain jobs for which you need a college degree, like engineering or counseling, but there are plenty of careers out there that might be a better fit for you. And, as we mentioned, college degrees can be pricey.

In the 2019–20 school year, the average in-state college tuition and fees was just over $10,000 , and for private school, it was about $36,000. The cost of college has actually grown eight times more quickly than wages from 1989 to 2016. That means that an expensive college degree may not be a strong return on investment for certain career paths.

Alternatives to a College Degree

Just because you aren’t interested in a four-year degree doesn’t mean you need to forgo higher education entirely. The popularity of alternative educational models, like trade schools, is rising, and community colleges offer many practical certification and two year associate degree programs that can help you get ahead.

It is important to know that even if you’re not planning to pursue a four-year degree, you still have options when it comes to creating a career that is right for you.

Trade School

Sometimes known as technical or vocational schools, trade schools can prepare you for a specific job, such as truck driving, nursing, or medical assistance. These programs are normally much shorter than four years, and certain programs may allow you to finish in only a few months. There are both public and private trade schools, with some operating on a for-profit basis.

Trade schools don’t award bachelor’s degrees. Instead, when you graduate from a trade school, you typically receive a diploma or certificate indicating that you are trained and certified to perform a specific job. Some trade school programs do offer associate degrees, which are the same type of degrees offered by many community colleges.

Community College

And that brings us to community colleges, which, as we mentioned above, usually offer two-year degrees called associate degrees. These degrees can either stand alone or be a stepping stone to obtaining a bachelor’s degree at a four-year school. But many community colleges offer career preparation programs that are designed to help students jump into the workforce without the need for a bachelor’s degree.

Community college could also be a great way to test out college life and see if you want to continue pursuing higher education. They tend to be much less expensive than four-year universities, which means it won’t cost you an arm and a leg before you decide if higher education is right for you.

Apprenticeships

Though you may not have realized it, apprenticeships are not just something you read about in a history book on the Middle Ages. Currently, the U.S. has a robust network of training programs and apprenticeships that are designed so you can learn a trade while working a paid job.

Apprenticeships can be a win-win for employers and employees because they allow those starting out to begin working immediately—that way, employers can fill vacant jobs and you can receive a paycheck right away.

Described as “learn while you earn,” they can help you learn how to use industry-specific tools and technologies and help you develop your skills over a period of time. According to the U.S. government, workers who train in apprenticeships earn about $300,000 more in earnings over their careers than workers who don’t go through or complete an apprenticeship program.

Starting a Business

Another option for those who aren’t interested in all-night cram sessions and dorm rooms is starting your own business. In fact, a 2017 study showed that more than half of business owners don’t have a four-year college degree.

If you are already passionate about—and have a lot of knowledge about—a specific field or industry, you might consider skipping college altogether and jumping into that business.

Starting your own business takes a lot of hard work, but it could mean that you get to be your own boss and work in an industry you love. And because you could quickly become an expert on the products or services you provide, you aren’t necessarily at a disadvantage because you lack a degree.

If You Do Go the College Route

There are plenty of options if you choose not to attend a four-year college. However, there are also options within the world of college: the type of college you choose, the major you decide to pursue, and how you pay for college.

There’s no denying it: Higher education is expensive. If you go that route, and you take out student loans, there are ways to help you manage the debt you are paying on. For some grads, loan refinancing can be a big help.

Refinancing your student loans with a private lender, like SoFi, may help you snag better repayment terms that can help facilitate a quicker payoff, such as a shorter term—or you could qualify for a lower interest rate.

One important thing to note is that refinancing federal loans with a private lender could make you ineligible for some federal loan benefits, like Public Service Loan Forgiveness (PSLF), so it’s important to do your research when deciding what the best program fit is for you.

Got that four-year degree and looking to pay off those loans? With SoFi, refinancing is fast and easy, and there are no hidden fees. Learn more and find your rate today.

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

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