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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 $5,315.

If you’ve vowed to pay off your credit card balance, you’re making a smart financial move. You’ll save money on interest, boost your credit history, and position yourself to achieve other financial goals. Here, we reveal 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. A longer payoff term will allow you to continue to save and invest while paying down debt. But a shorter payoff term can save you a considerable amount in interest.

If there’s no scenario where you can cover your living expenses and pay off your credit card debt in five years, these strategies may not be enough. In that case, 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 will 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 always starts with a budget. This exercise is designed to help you discover extra cash you can put toward your credit card bill.

First, make a list of your monthly bills. Along with your rent payment, phone, gas, and other required living expenses, include your credit card payment. You can leave the amount blank for now. This is your “Needs” column.

Now look at your “Wants.” These are things that you can survive without — restaurants, new clothes, gym membership — but that often make life better. Which items can you do without temporarily so you can put their cost toward your credit card bill?

It’s OK if your budget isn’t the same from month to month — flexibility is good. While you’re at it, look ahead for unavoidable big purchases (that upcoming destination wedding) and leave room for unexpected expenses. Your credit card payment may be lower some months to accommodate these other costs. 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 an app like SoFi Relay, 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 last as long as 18 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 690 or above to qualify. And once the promo period expires, the interest rate can climb to 27% 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.

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 and 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. It’s easier than ever to resell clothes, books, old electronics, and jewelry.

•   Negotiate a raise. Labor shortages have given 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. They may also close or suspend your credit card while you’re paying off the balance, which can 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. Imagine going without paid streaming services for six months.

String enough of those small sacrifices together to cover a year or two, and see how quickly your credit card payments grow. And your payoff term shrinks!

Downsizing your lifestyle 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 allows you to simplify your debt with one fixed monthly payment.

Personal loans are 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 anything.

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. Start with a new budget that prioritizes your credit card payment along with your other monthly bills, and trim your spending accordingly. 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!

If you’re thinking about consolidating credit card or other debt, a SoFi Personal Loan is a strong option to consider. SoFi’s Personal Loan was named NerdWallet’s 2022 winner for Best Personal Loan for Good and Excellent Credit, and Best Online Personal Loan overall.

Compared with high-interest credit cards, a SoFi Personal Loan is simply better debt.

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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.

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

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

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

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A deposit account — such as a savings account or interest-bearing checking account — can be an attractive place to park your cash. It’s safe, allows relatively quick access, and even helps you earn a little bit of money, thanks to what’s known as the deposit interest rate.

The deposit interest rate is the amount of interest that a bank or other financial institution will pay you when you make a deposit. (You may also hear it referred to by such terms as simply the interest rate or the APY, for annual percentage yield.) Understanding deposit interest rates can help you choose among banking products and find the one that best suits your needs.

To help you with that knowledge, we’ll dive into the topic here and explore:

•   What is a deposit interest rate in banking?

•   How does a deposit interest rate work, and how is it calculated?

•   What kinds of deposit interest rate accounts are there?

What Is a Deposit Interest Rate?

When you put money into a deposit account, your bank or financial institution will pay you interest. Why? Banks use a portion of the money that’s deposited with them to make loans to other customers, perhaps as a mortgage, business loan, or personal loan.

The bank pays you interest for the privilege of lending out your money. They will then charge a higher interest rate on the loans they make, which is how the bank turns a profit.

Incidentally, just because a bank is loaning out your money doesn’t mean your cash won’t be there when you need it. Banks typically carry a cash reserve to cover withdrawals their customers need to make.

How Does a Deposit Interest Rate Work?

Deposit interest rates in banking are expressed as percentages. The amount of interest you earn will be based on how much cash you’ve deposited in your account, also known as your principal.

The interest rate you’re offered will vary by account. For example, a simple savings account may offer a relatively low interest rate, while a high-yield savings account or a money market account may offer a higher rate.

Your interest rate will also be determined in part by the federal funds rate. That rate is the amount the Federal Reserve suggests banks charge to lend each other money overnight.

Recommended: How Does a High Yield Savings Account Work?

How Is Deposit Interest Rate Calculated?

Wondering how interest rates are calculated? It usually is done in one of two ways: as simple interest or compounding interest.

Simple interest is a matter of multiplying the principal by the interest rate. As the name suggests, it is easier to calculate. However, most banks will use compounding to calculate interest rates. Compounding interest essentially allows you to earn a return on your returns, which can help your money grow exponentially. So your principal earns interest, and that amount of interest is added to the principal. Then the interest rate gets calculated again at a certain interval based on that pumped-up principal. This keeps happening, helping your savings grow. Interest can compound at various rates, such as continuously, monthly, or annually, depending on the product and financial institution.

Ways Deposit Interest Rates Are Applied by Institutions

Financial institutions can apply interest rates in a variety of ways. First, they can be fixed or variable. A fixed interest rate guarantees that you will receive an interest payment equal to a certain percentage of your principal. This percentage won’t change over the life of the account. So if your interest rate on your money is set at, say, 2%, that is what you will get, period.

A variable interest rate, on the other hand, may change according to shifts in a benchmark interest rate, such as the federal funds rate. As the benchmark rises, so too will the interest rate. What if the benchmark drops? That means you’re paid less interest.

Additionally, some deposit accounts will offer higher interest rates for larger balances. A certificate of deposit, or CD, may offer you better interest rates if you agree to park your cash in the account for a longer term.

Real-Life Example of Deposit Interest Rate

Let’s take a look at how to do the math on a couple of examples of deposit interest rates. If you’re a bank customer with $10,000 to deposit, here are two scenarios:

•   Bank 1 is a bricks-and-mortar bank offering 0.01% interest. (Remember, one percentage point is one-hundredth of a whole.) If you deposit your $10,000 for one year, you’ll earn: 10,000 x 0.0001 = 1. At the end of 365 days, you will have the principal plus the interest, or $10,001.

•   Bank 2 is an online bank offering 1.0% interest. If you deposit the same $10,000 for a year, you’ll earn: 10,000 x 0.01 = 100. You’ll have $10,100 at year’s end.

Types of Deposit Interest Rate Accounts

There are a variety of different deposit account types that you might encounter. Here are four of which you should be aware. We’ll explain how each one works.

1. Savings Accounts

Savings accounts are designed specifically as a place for you to put cash you might need in the short-term. For example, you might keep your emergency fund in a savings account, since you’d need quick access to cash if your car’s transmission failed or you had to cover an unexpected medical bill.

Not only does your savings account allow you to earn interest, it is also one of the safest places you can put your money. That’s because the Federal Deposit Insurance Corporation (FDIC) guarantees your money, up to $250,000, as it does with the deposit accounts below. That means in the rare case that your bank fails, you will still have access to your money.

You can deposit cash at an ATM, in person, or through mobile deposits. You can deposit checks or cash into the account, too. When you make a deposit, your funds may not be immediately available for use. Check with your bank to understand their rules around fund availability.

2. Interest-Bearing Checking Accounts

Many checking accounts have very low fees and don’t pay interest. As a result, it doesn’t make sense to keep a lot of money in this type of account. In fact, you may want to keep just enough to pay your bills.

Interest-bearing checking accounts are an exception. They allow you to collect interest on your account, which could be a nice perk. After all, you may well have your paycheck deposited there by setting up direct deposit, which can make your funds available quickly. Whatever remains in your account after paying your bills could be earning you some interest.

However, these accounts may be more complicated and expensive, with higher fees and minimum balance requirements. It’s important to make sure that the expense of holding the account doesn’t outweigh the interest paid.

3. Certificates of Deposit

A certificate of deposit, or CD, is a product offered by financial institutions that offers a higher interest rate if you agree to keep your funds in place for a period of time. Typically, the length of time is from six months to a few years, but it could be anywhere from one month to 20 years. The longer the period, the higher the interest rate you will probably be offered.

Here’s the rub: If you find that you need the money in the CD before the account matures (meaning the agreed-to time period passes), you’ll likely have to pay early withdrawal penalties. That said, it is possible to get CD’s with no-penalties, but you may have to compromise, such as by accepting lower interest rates.

4. Money Market Accounts

Money market accounts, on the other hand, pay interest and allow for withdrawals. They often pay higher interest rates than traditional savings accounts. However, in return, these accounts may require you to make higher initial deposits and they may have minimum balances, which could be $10,000 or more.

Like checking accounts, money market accounts can offer checks and debit cards, though they may limit the number of transactions you may make per month.

The Takeaway

There are a number of different deposit accounts that offer a deposit interest rate, ranging from checking and savings accounts to CDs and money market accounts. The interest rates will likely vary. For example, with CDs, the rates may depend on factors such as account minimums or term of deposit. Understanding these kinds of “fine print” differences will help you find the right match for your needs, whether your goal is the highest possible interest or having enhanced access to your funds.

If you’re in the market for accounts with a super-competitive interest rate, come check out what SoFi offers. Our online bank accounts, when opened with direct deposit, offer a competitive APY, no-fees, automated savings, and more great perks.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Do you get interest when you deposit money?

When you deposit money in an interest-bearing deposit account, you will start to earn interest. In other words, your money makes money.

Which deposits pay more interest?

The amount of interest you earn will depend on your interest rate and the amount of money in the account. The more money you deposit and the higher the interest rate, the more interest you will earn. Also, online banks typically pay interest rates than bricks-and-mortar banks.

Do all banks have deposit interest rates?

Banks that offer interest-bearing deposit accounts will always offer a deposit interest rate.

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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

Photo credit: iStock/AsiaVision
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Online savings accounts function similarly to traditional savings accounts, except you will manage your account entirely online. If you like keeping things digital, you’ll probably appreciate how convenient these savings accounts are. Plus, they may offer you a healthier interest rate than accounts held with a bricks-and-mortar bank.

So, what is an online savings account, and could one be right for you? Keep reading for more insight into how online savings accounts work and their advantages and disadvantages. We’ll answer:

•   What is an online savings account?

•   How does an online savings account work?

•   How can you deposit money into and withdraw from an online savings account?

•   What are the pros and cons of an online savings account?

•   How do online savings accounts and traditional savings accounts compare?

What Is an Online Savings Account?

Here’s one definition of an online savings account: It’s a savings account that functions similarly to one offered by a bricks-and-mortar bank, except you manage your banking needs online. With an online savings account, you won’t have the option of walking into a bank when you need support, but you will be able to quickly click your way ahead and complete most transactions.

As a refresher course, savings accounts are a type of bank account designed to help you save. They keep your savings separate from the money you spend on essentials like rent and groceries, which is usually held in a checking vs. savings account.

Since the principle is that your money will sit and grow in these accounts, rather than flow in and out constantly, banks pay you interest on these funds. They get to use your money, and they give you interest in return for that privilege. As your cash grows in the account, you can achieve different goals, such as building up an emergency fund, saving for a vacation, or getting a down payment together for a house. It’s your choice!

How Does an Online Savings Account Work?

You start an online savings account with an opening deposit, and then you’re ready to start saving. With an online savings account, you can manage your savings from anywhere in the world at any time of day. While there are plenty of banks and credit unions that have online account management services, purely online savings accounts often come with unique perks. For example, online banks usually don’t have a minimum balance requirement like traditional banks do. They often pay a higher interest rate, too.

You can transfer funds in and out as needed, as with any savings account. Typically, savings accounts allow six or fewer transfers per month. Initiate more than that, and you might have to pay a fee. However, many banks have stopped following this guideline in recent years. Check with your bank to know the details.

It’s also worth mentioning that with an online account, you won’t be able to deposit or withdraw cash into your account by strolling into a branch. There aren’t physical banking locations to visit. You’ll need to transfer funds in and out electronically, or you may be able to use ATMs. There’s a silver lining, though. In exchange for not having to pay for the overhead that comes with running an in-person bank, online banks often offer lower fees and higher interest rates.

Depositing Funds Into an Online Savings Account

As mentioned above, it’s not possible to deposit cash into an online savings account by visiting a branch. Instead, you can deposit money in the following ways:

•   Transfer money from a linked account into your online savings account. (If you’re really committed to saving, you may want to automate recurring transfers).

•   Use a check; this deposit can be done by mobile deposit or by mail.

•   Complete a wire transfer into your online savings account.

•   Set up direct deposit of funds (say, your paycheck or other benefits) to go into the account.

Withdrawing Money From an Online Savings Account

Now, let’s look at the other side of your financial life: withdrawing and spending money from a savings account. When you have an online savings account, here are your options:

•   Transfer funds into another account (say, one held at a traditional bank), and then take out cash in person.

•   Use an ATM. Some online banks allow you to link your savings to a debit card, which makes this possible.

•   Initiate a wire transfer.

•   Put in a check request.

•   Digitally send money to other people (say, by a P2P transfer) so you don’t need to take out cash.

Cash Deposits

Unfortunately, online don’t banks normally enable you to deposit cash, as there is no physical banking location available. See above for some of the other ways you can move your funds around so your cash gets where you want it to go.

Benefits of Using an Online Savings Account

Now, let’s look at some of the key benefits you may enjoy with an online savings account. These are among the reasons why you may opt for and enjoy this way of stashing your cash.

•   Higher interest rates and lower fees. Online savings accounts often have lower fees and higher interest rates, which means you’ll earn more on your savings. These higher interest rates are possible because the financial institution doesn’t have to pay for expensive bricks-and-mortar banking locations.

•   Manage accounts anywhere, anytime. It’s possible to do all of your basic savings account management whenever and wherever you like. The only requirement: a good, secure wifi connection.

•   Helpful mobile banking apps. Plenty of traditional banks have mobile apps, but online banks tend to have high-tech apps with better features.

•   More accessible customer service. You are likely to be able to get all of the banking support you need from the comfort of your own home. Online banks were built to be responsive in this way.

Disadvantages of Using an Online Savings Account

On the flip side, there are some disadvantages when you bank online. Here are some of the cons of using an online savings account.

•   No face-to-face interaction. With online savings accounts, you can’t go into a physical banking location, ask questions, or sit down with a bank representative. For those who like face-to-face interaction, this can be a disadvantage.

•   Can lose account access. When a savings account is entirely online, you may lose account access if the bank’s system goes down.

•   ATM access is constricted. Some online banks don’t have their own ATMs. They may try to provide greater access with some independent ATM networks or by reimbursing customers for ATM fees incurred when using out-of-network ATMs.

•   Limited services. Online banks tend to offer more limited product selections than larger traditional banks. If you’re looking to manage your savings account, loans, and other financial products in one place, you may find that an online savings account doesn’t meet your needs.

Pros of Online Savings Accounts	Cons of Online Savings Accounts
•   Higher interest rates and lower fees •   Ability to manage accounts anywhere, anytime •   Helpful mobile banking apps •   More accessible customer service	•   No face-to-face interaction •   Can lose account access •   ATM access is constricted •   More limited services

Opening an Online Savings Account

If you decide you want to open an online savings account, here are the steps you will likely take.

1.    Fill out the application. This process will happen entirely online. Generally, you will be expected to provide such information as your name, proof of address, Social Security number, and government-issued photo ID (say, a driver’s license or a passport).

2.    Choose account type. There may be an option to choose between different savings account types, such as an individual account or a joint account that you can share with a family member.

3.    Designate beneficiaries. Next, you will need to choose a beneficiary to whom the savings account would go if you were to pass away.

4.    Deposit funds. Some online banks won’t require a minimum initial deposit or will only request $1. Whatever the amount may be, you will need to make that minimum deposit. (There’s no typical online savings account minimum balance to maintain, by the way. Check with banks to understand their particular guidelines.)

5.    Create login information. All online savings accounts will need a username and password. It’s important to make the password a secure one that includes one or more capital letters, numerals, and symbols. Also, it bears repeating: Don’t reuse passwords. Unique passwords will help keep you secure from hackers. This is a big issue if you are wondering whether or not online savings accounts are safe.

Online Savings vs Traditional Savings: Which Is Best for You?

There are both advantages and disadvantages to consider when choosing between an online savings account and a traditional savings account. Being aware of the unique advantages and disadvantages of each can make it easier to find the right fit.

Online Savings	Traditional Savings
•   Better rates and fees •   Stronger digital tools and features •   Limited product offerings •   Minimal ATM access •   Hard to withdraw cash •   No face-to-face customer support	•   In-person banking locations •   More ATM access •   Broader range of products •   Fewer online resources •   Lower interest rates and higher fees

The Takeaway

If you’re considering an online savings account vs. a traditional one, it’s wise to carefully consider the pros and cons of each. Online savings accounts can be more convenient, have more digital features, and offer lower fees and better interest rates. Traditional banks, however, can make it easier to withdraw and deposit funds, and they can be the right choice for people who like face-to-face interaction when it comes to their finances. Figuring out the right fit depends on your money style and goals; consider which factors matter the most, and you’ll be ready to make your choice.

If online savings is right for you, check out what SoFi has to offer. We help you bank better when you sign up for our mobile banking app with direct deposit. You won’t pay any of the usual account fees, you’ll earn an impressive APY, and you’ll have access to a network of 55,000+ fee-free ATMs.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How do I use an online savings account?

Exactly how does an online savings account work? With access to a computer or a smartphone, consumers can access their online savings accounts from anywhere at any time by simply logging in.

What is the typical minimum balance for an online savings account?

That depends. Some online savings accounts have minimum balance requirements while others don’t. Check at the banks you are considering.

Is my money insured in an online savings account?

Your money should be safe in an online savings account, as long as the online savings account is insured by the FDIC. If so, your account is automatically insured for up to $250,000.

What is the typical interest rate for an online savings account?

Interest rates vary over time and from bank to bank. Generally, online savings accounts have higher interest rates than traditional savings accounts, such as a rate of up to 1.25% APY at press time.

How can online banks offer such good interest rates?

Because online banks don’t have the expensive overhead that comes with managing in-person banking locations, they can afford to pass their savings to their customers in the form of higher interest rates.

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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.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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One of the best things to do for your anxiety and your credit score is to pay off credit card debt. People who commit to a payoff strategy (like Snowball or Avalanche) will make quick progress while building their credit history. People in financial crisis may benefit from negotiating with creditors to freeze their account or lower their interest rate, though their credit rating may suffer. Simplifying payments with a debt consolidation loan is also an increasingly popular tactic.

We’ve compiled several strategies that can help you consolidate credit card debt without hurting your credit score. Find the one that best suits your circumstances.

What Not to Do: Ignoring Credit Card Debt

When it comes to credit card debt, the consequences of avoidance and procrastination are steep. If you miss payments, your creditor will likely reach out and notify you of your delinquency.

Miss enough payments and your account might be closed. Your credit card issuer will report your missed payments to credit reporting agencies, which can negatively impact your score. Remain delinquent long enough and your account might be sent to collections (either in-house or third-party). Needless to say, this is not good for your credit score and history.

What You Should Consider: Paying off Credit Card Debt Using a Planned Approach

We mentioned anxiety earlier. Well, trying to pay down a large credit card balance without a debt payoff strategy is a recipe for more anxiety. Sure, making a plan may require taking a close look at your bad habits, which is stressful. But trust us when we say, a good plan is the best way to set yourself up for smooth sailing. Two common approaches to getting out of credit card debt without ruining your credit rating are the Snowball and the Avalanche.

With the Snowball method, you work to pay off your debts from smallest balance to largest, regardless of the interest rate. As you pay off each card, you roll that monthly payment over to the next smallest balance. Meanwhile, it’s important to make minimum payments on your other cards. (Take a deep dive into the Snowball method here.)

The Avalanche method advises focusing on the debt with the highest interest rate. Let’s say you have two credit cards, one with an interest rate of 8% and the other of 15%. Start with the balance accruing 15% interest. When you pay off that card, turn your attention to the debt with the next highest interest rate. And of course, be mindful that you’re making credit card minimum payments on all your debts.

Both strategies serve to build a positive credit history as you get out of debt. Not only will they not ruin your credit, you may even end up with a higher FICO Score.

Negotiating and Settling Credit Card Debt

If you have been struggling to make payments on your credit cards, there is a good chance your credit score has dropped. Before the debt is sent to collections, you may be able to negotiate with the credit card company.

Like any business, the primary goal of a credit card company is to make a profit. When it becomes apparent that a cardholder is unable to pay their bills, companies are sometimes willing to find an arrangement that will enable the customer to make payments based on their situation. Three possible options are a debt settlement, a hardship repayment plan, and temporary forbearance.

In a debt settlement, the credit card company agrees to reduce the balance owed in exchange for a lump sum payment. If your balance is $15,000, the company may agree to a payment of $8,000 and “forgive” the rest. There are two disadvantages with this scenario: The card holder has to come up with $8,000, and their credit score can be negatively affected.

With hardship repayment, the company freezes the current debt and works with you to create a repayment plan based on your current income and circumstances. The company may lower your interest rate and waive fees during the repayment period. You may qualify for a hardship program if your debt is the result of unemployment, serious illness, family emergency, or a natural disaster. In hardship cases, your credit rating is usually not affected, though your participation in the program may be reported to the credit bureaus.

Finally, in a temporary forbearance, the credit card company freezes any combination of the current debt and interest rate, and eliminates late fees and penalties for an agreed upon period of time. This is usually reserved for card holders who are currently in financial crisis. One drawback is that your debt isn’t resolved but merely put on hold while you sort out your finances.

You should know that most forgiven debt is considered income by the IRS. So if you had $15,000 in debt but settled for $8,000, the IRS may consider that extra $7,000 to be taxable income.

Recommended: What Is Credit Card Debt Forgiveness?

What Is the Statute of Limitations on Credit Card Debt?

The statute of limitations governs how long a creditor can sue you for nonpayment of a debt. The statute of limitations on credit card debt varies from state to state, but is typically between three and 10 years.

You can find out yours by requesting a debt verification or validation letter from your creditor. The statute of limitations clock starts from the last moment the debt was active. When you contact your creditor, don’t agree to any payment plan until you confirm the statute of limitations on your debt. Otherwise, you may inadvertently restart the clock.

Even if your debt is past the statute of limitations, it may still be within the credit reporting time limit. This is the amount of time delinquent account information can appear on your credit report. In most cases, the credit reporting time limit for negative information is seven years.

If your debt is sold to a third-party collections agency, try to negotiate a payoff amount to close the collections attempt. Debt collectors buy debt from the company you owed for a fraction of the original unpaid balance. Because of this, collectors might take less than what you owe if you have strong negotiation skills.

Say Goodbye to Credit Card Debt with a Personal Loan

Personal loans are a type of unsecured loan. There are a number of uses of personal loans, but paying off credit card debt is one of the most common. Loan amounts vary by lender from $1,000 to $100,000, and are paid out as soon as the loan is approved. The borrower then pays back the loan — with interest — in monthly installments.

Many unsecured personal loans come with a fixed interest rate. An applicant’s interest rate is determined by several factors, including credit score, income, and debt-to-income ratio, among other factors. Typically, the higher an applicant’s credit score, the better their interest rate will be, as the lender may view them as a less risky borrower.

When using a personal loan for credit card debt, the loan proceeds are used to pay off the cards’ outstanding balances, consolidating the debts into one loan. This is why it’s also sometimes referred to as a debt consolidation loan. Ideally, the new loan will have a much lower interest rate than the credit cards. By consolidating credit card debt into a personal loan, a borrower’s monthly payments can be more manageable and cost considerably less in interest.

In the long run, the borrower’s credit history and rating is strengthened by paying off the personal loan.

The Takeaway

To pay down a large credit card balance, it’s essential to have a strategy. Two of the most popular are the Snowball and the Avalanche. The Snowball entails working to pay off the lowest balance card first, while making minimum payments on the others. The Avalanche advises paying off the highest-interest card first, while making minimum payments on the others. Neither method will hurt your credit rating, and may help it. It’s also fairly common to take out a debt consolidation loan to pay off cards.

If you are considering consolidating your credit card with a personal loan, check out SoFi. SoFi Personal Loans offer low fixed rates and no fees required. And if you lose your job, SoFi will temporarily pause your payments and even provide career coaching. SoFi’s Personal Loan was even named NerdWallet’s 2022 winner for Best Online Personal Loan.

If you’re ready to get your credit card debt under control, see how a SoFi personal loan can help.

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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.

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.

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

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

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

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Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

This summer, President Joe Biden announced that individuals who earn $125,000 or less per year will be eligible for $10,000 in federal student loan cancellation. A big caveat: You cannot benefit from forgiveness from the federal government if you’ve refinanced your entire federal student loan amount.

We’ll go over the details of who qualifies for the new, one-time student loan forgiveness plan, how refinancing affects eligibility for federal benefits, and reasons why some individuals may want to refinance anyway.

How Federal Student Loan Forgiveness Works

Student loan forgiveness means that you are no longer required to pay back all or a portion of your federal student loans. Federal student loans are student loans that come directly from the federal government. President Biden’s proposed forgiveness will be available only to people paying down federal loans, not private loans.

The plan includes important updates to the federal student loan system:

•  Individuals who earn less than $125,000 per year ($250,000 for married couples) will be eligible for $10,000 in student loan cancellation.

•  Pell Grant recipients can receive up to $20,000 in debt cancellation.

•  The pause on federal student loan payments has been extended through Dec. 31, 2022.

•  Borrowers with undergraduate loans on income-driven repayment plans could cap their payments at 5% of their monthly expenses, down from 10%.

•  Loan balances would be forgiven after 10 years of payments, down from 20 years, for loan balances of $12,000 or less.

Further details will be released in the weeks ahead. For a deep dive into the announcement, including reactions from the plan’s supporters and critics, read Student Debt Relief: Biden Cancels Up to $20K for Qualifying Borrowers.

How Refinancing Affects Forgiveness

When you refinance a student loan, a new, private lender pays off your old loan (or multiple loans) and replaces it with a new loan. A private lender may replace either a federal loan(s) or another private loan. Both federal loans and private loans are converted to a new private loan — you cannot refinance to another federal student loan.

It’s important to understand that the portion of a federal student loan that is refinanced (meaning you don’t have to refinance the entire amount) would lose federal loan benefits. Those benefits include:

•  Eligibility for federal student loan forgiveness.

•  Income-based repayment plans: payment plans intended to be affordable based on your income and family size.

•  Deferment: a temporary pause in student loan payments where no interest accrues on your loans.

•  Forbearance: also a temporary pause, but one during which interest may accrue on your loans.

See below for details on each of these benefits.

How Student Loan Refinancing Works

Borrowers refinance student loans for several reasons, including:

•  Lowering your interest rate: Lowering your interest rate means you’ll pay less in interest over time, which can save you money in the long run.

•  Changing to a fixed or variable rate: A fixed interest rate is a rate that doesn’t change throughout the loan term. On the other hand, a variable interest rate will change depending on the underlying interest rate benchmark. Refinancing can give you the option to choose between either a fixed or variable rate.

•  Lowering your monthly payment: If you prefer to pay a little less on your loan payments per month, you may want to consider lowering your monthly payment. In this case, your lender will extend your repayment period. This means that it will take you longer to repay your loan — and note that you’ll pay more in interest over time.

•  Shortening your repayment period: If you choose to shorten your repayment period, your monthly payment will go up. However, you’ll save money in interest over the life of the loan.

To refinance, you can shop around with different lenders to check their interest rates and terms. You’ll need to supply private lenders with your name, address, degree type, student loan debt totals, income amounts, housing costs, and more. The information you’ll need to supply generally depends on individual lenders. After that, the lender will run a soft credit check. Lenders should then present you with several offers, including various terms and interest rates (both fixed and variable rates).

Before you decide on the right private lender for you, check on origination fees (the upfront charge to process an application), any prepayment penalties if you were to pay off the loan early, customer service capabilities, and the overall costs to you.

Next, you’ll offer further information to your lender, including proof of citizenship, a valid ID, and pay stubs and/or tax returns. The lender will likely then run a hard credit check, and you’ll go through a final approval process.

Check out our guide to student loan refinancing for a complete overview of how to refinance a student loan.

Recommended: 7 Tips to Lower Your Student Loan Payment

Protections for Federal Student Loans

When you trade federal student loans for a refinance, you give up certain federal student loan benefits, including guaranteed postponement and income-driven repayment options.

Guaranteed Postponement

As mentioned earlier, postponement options include deferment and forbearance. In both cases, you can contact your loan servicer for information and instructions on how to defer your loans. In most cases, you’ll have to fill out a form.

Here are some details about both deferment and forbearance to understand what you’d be giving up by refinancing:

•  Deferment: As mentioned earlier, deferment means you access a temporary pause in student loan payments during which no interest accrues on your federal student loans. Federal Direct Loan, Federal Family Education (FFEL) Program loan, and Perkins Loan borrowers can access deferment options. You may qualify for deferment in a few different ways, including while undergoing cancer treatment, during economic hardship, during a graduate fellowship program, while you’re in school, while completing military service or through post-active duty, if you are a Parent PLUS borrower and your student is still in school, while in a rehabilitation training program, and/or if you’re unemployed.

•  Forbearance: While you can get a temporary pause on your federal student loans through forbearance, interest might accrue on your loans. You must continue to pay any interest that accrues during the forbearance period. There are two types of forbearance: general and mandatory.

•  General forbearance: You may be able to obtain general forbearance if you experience financial difficulties, medical expenses, a change in your employment status, and other factors. If you have federal Direct Loans, FFEL Program loans, and/or Perkins Loans, you may be able to use general forbearance for no more than 12 months at a time. You can request another general forbearance later. However, over time, you can only obtain three years’ worth of general forbearance.

•  Mandatory forbearance: Your loan servicer must grant a mandatory forbearance for federal Direct Loans and FFEL Program loans under the following circumstances: You receive a national service award while serving in AmeriCorps, under the U.S. Department of Defense Student Loan Repayment Program, during a medical or dental internship or residency program, or as a member of the National Guard activated by a governor. You can also access a mandatory forbearance if the amount you owe each month for all the federal student loans you received is 20% or more of your total monthly gross income or if you qualify for teacher loan forgiveness. You can qualify for mandatory forbearance for no more than 12 months at a time but may request mandatory forbearance when your current forbearance period expires.

Income-Driven Payment

As mentioned earlier, through an income-driven repayment plan, your monthly student loan payment gets set at an amount that reflects your income and family size. You can consider four income-driven repayment plans and fill out an application to be considered for one:

•  Revised Pay As You Earn Repayment Plan (REPAYE Plan): When you access a repayment plan, your monthly payment is recalculated based on a percentage of your discretionary income. In this case, the REPAYE Plan will whittle down your payment to 10% of your discretionary income, and you’ll pay your loans back over 20 years (for loans for your undergraduate education) or 25 years (for loans for your graduate or professional education). If you have an eligible federal student loan, you can generally make payments through the REPAYE Plan.

•  Pay As You Earn Repayment Plan (PAYE Plan): Your monthly payment will generally amount to 5% of your discretionary income and never more than the 10-year Standard Repayment Plan amount. You’ll repay your loans over 10 years. You may qualify if you have higher debt than your annual discretionary income or if your debt represents a significant amount of your annual income. Additionally, you must be a new borrower in order to be eligible.

•  Income-Based Repayment Plan (IBR Plan): Under Biden’s new plan, your monthly payment will generally amount to 5% of your discretionary income if you’re a new borrower (on or after July 1, 2014) but will never amount to more than the 10-year Standard Repayment Plan amount. If you’re not a new borrower (on or after July 1, 2014) your monthly payment will generally amount to 15% of your discretionary income and will never add up to more than the 10-year Standard Repayment Plan amount. For new borrowers, the plan will last for 10 years. If you’re not a new borrower, your plan will last 25 years. You’ll generally qualify if your federal student loan debt is higher than your annual discretionary income or represents a large portion of your annual income.

•  Income-Contingent Repayment Plan (ICR Plan): Your payment will be calculated based on the lesser of these two factors: 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over 12 years, adjusted based on income. You’d repay for 25 years as long as you qualify with an eligible federal student loan.

Recommended: REPAYE vs PAYE: What’s the Difference?

Are There Any Protections for Private Student Loans?

Private loans generally don’t qualify for forgiveness and offer fewer protections than federal loans. However, it’s worth looking into the protection and hardship options for various private lenders.

Based on a search of top private lenders, check out the table below to walk through the types of programs offered by various private student loan lenders:

	Ascent	SoFi	Laurel Road	Earnest
Forbearance	X	X	X	X
Graduated repayment	X
Academic deferment	X	X		X
Reduced repayments for dental/medical residents	X	X	X
Military deferment	X	X	X	X
Death or disability discharge	X	X	X	X
Disability deferment		X
Unemployment protection		X
Maternity leave forbearance			X
Skip-a-payment option				X
Extended payment option				X

Can Private Student Loans Be Forgiven by the Federal Government?

As noted above, private student loans do not qualify for federal loan forgiveness. However, there are several other alternatives that you can consider through your private loan lender. Though you can’t apply for income-driven repayment plans or take advantage of federal student loan forgiveness, your private loan lender can walk you through your options in order to avoid delinquency or default on your loans.

Can Refinanced Student Loans Be Forgiven by the Federal Government?

You may be wondering, “does refinanced student loan forgiveness exist?” Since refinanced student loans turn into private loans, refinanced student loans cannot be forgiven by the federal government, one of the key differences between federal vs. private student loans. That said, when refinancing, you choose the amount. So if you refinance everything but the $10,000 or $20,000 you expect to be forgiven, that remaining amount of federal student debt still has federal protections and is eligible for forgiveness.

You may have also have heard about the possibility of the Biden administration offering loan forgiveness on a wide scale and may wonder, “Will refinanced student loans be forgiven in addition to non-refinanced private loans?” Unfortunately, the current plan applies only to certain federal student loans, and there is no proposal to include refinanced student loans in the future. The administration would likely not be able to forgive the loans of private student loan borrowers or in the case of refinanced student loans.

Options to Consider When You’re Unable to Make Your Student Loan Payments

As mentioned, it’s a good idea to contact your loan servicer to calmly explain how you’re having trouble making your student loans. In most cases, your lender will work with you to discuss a schedule for affordable payments.

Here are a few other options you may want to consider in this situation:

•   Put together a budget: Putting yourself on a budget may help you allocate the right amount toward all of your expenses, including your student loans.

•   Get an extra job: Consider getting an extra job in order to generate more income to put toward your student loans.

•   Cut expenses: It’s easy to spend too much on subscriptions, cable, or other things. Cutting expenses could free up money so you have more to put toward your student loans.

•   Explore student loan modification: You may also pursue a student loan modification, or a change to the terms and conditions of the repayment of an existing student loan. Learn how student loan modification works.

•   Refinance: Finally, consider refinancing your student loans to a private loan lender to lower your interest rate or your payments. You can use our calculator for student loan refinance rates to see how much refinancing could potentially save you.

Recommended: Passive Income Ideas

Explore Student Loan Refinancing With SoFi

Because refinancing federal student loan(s) means converting them to a private student loan, the amount of federal debt that you refinance will no longer be eligible for federal forgiveness or other federal benefits. So if you are eligible for Biden’s one-time forgiveness, you can leave out the amount you expect to be forgiven — and refinance the rest.

If you think a refinance fits your needs, don’t forget to look into all of the benefits and drawbacks that apply to your particular lender. For example, if you’ll owe a penalty if you pay off your student loans early, you may want to explore other options. Check out refinancing student loans now with SoFi, which offers competitive rates and charges no prepayment penalties.

FAQ

Can private student loans be forgiven?

You cannot access the same loan forgiveness options for private student loans that you can get with federal student loan forgiveness. However, don’t discount the private student loan protections you can take advantage of when you want to refinance your student loans.

Can you get your student loans forgiven if you can’t afford them?

Yes, you can get your federal student loans forgiven as long as you meet the eligibility requirements — but it’s important to remember the key words “federal student loans.” You cannot get private student loans forgiven.

When will student loans be forgiven?

On Aug. 24, 2022, President Joe Biden announced that individuals who earn less than $125,000 per year will be eligible for $10,000 in federal student loan cancellation and Pell Grant recipients are eligible for an additional $10,000 of forgiveness. Since then, there have been legal challenges to the student debt relief, and a court-ordered stay.

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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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