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If you’re overwhelmed by credit card debt, you might consider credit card debt forgiveness, which can involve paying less than you owe. This type of credit forgiveness is rare, however, and it usually comes with some financial consequences.

Still, if you’re unable to repay your credit card balance, it may be an option worth exploring. Read on to learn how to get credit card debt forgiven and what options there are to credit card forgiveness.

What Is Credit Card Debt Forgiveness?

Credit card debt forgiveness occurs when a portion of your credit card debt is effectively erased. However, this rarely happens. And when it does, it usually comes at a high cost.

As part of the terms and conditions you agreed to when signing up for a credit card, you likely committed to repaying your credit card debt accrued from swiping your card to make purchases. For this reason, it’s unlikely the credit card company will forgive your debt unless you have a compelling reason for why you don’t have to repay it.

(If your identity was stolen and a fraudster ran up your credit card bill, for instance, you’re probably not responsible for repaying the outstanding balance. In this case, you may consider disputing a credit card charge.)

When you don’t pay your credit card bill for an extended time, the credit card company may sell your debt to a debt collector. At this point, the debt collector will reach out to try to get you to repay all or a portion of the debt you owe. However, if you agree to repay a portion of your debt, they may forgive the rest, resulting in credit debt forgiveness.

Recommended: Charge Card Advantages and Disadvantages

How Does Debt Forgiveness Work for Credit Cards?

If a debt collector forgives your debt, you’ll generally still have to pay off a portion of the amount you racked up. Here’s a look at how credit card debt forgiveness works:

•   Say that you owe $10,000 in outstanding credit card debt. If you haven’t paid your bill for the last six months — not even your credit card minimum payment — your credit card company may have sold the debt to a debt collector.

•   At this point, you’ll no longer communicate with your credit card company about debt negotiations since the debt collector is now responsible for recouping the loss.

•   If you agree to repay $5,000 of the debt, your debt collector may require you to make a lump sum payment or installment payments over a set period of time.

•   This means that the other $5,000 of your outstanding credit card balance is now forgiven, meaning you don’t have to pay it.

While this may seem like a relief, here’s one important point to note: You’re still responsible for paying taxes on the amount of credit card forgiveness you receive in most cases. Essentially, you will claim the forgiven debt as taxable income and report it on your tax return.

When Does Credit Card Debt Forgiveness Work Best?

When you’ve fallen behind on your credit card payments and your creditor sells your debt to a debt collector for a fraction of the total balance, this is usually the best time to request credit forgiveness. Typically, debt collectors are more willing to settle some of your debt since they purchased your debt for a portion of what you owe. In other words, any debt you agree to pay back will help the debt collector make a profit from the transaction.

However, if your debt has not yet gone to a debt collector and the creditor is about to charge-off your account, you could still consider credit card forgiveness. A charge-off means that the creditor is accepting your debt as a loss. Therefore, they can recoup the funds by selling your debt to a debt collector. So, before they sell the debt, they might be willing to negotiate credit card debt forgiveness with you.

How Credit Card Debt Forgiveness May Affect Your Credit

The most significant financial implication of credit card debt forgiveness is the negative impact it can have on your credit. When you don’t pay your credit card bill for an extended amount of time, the creditor may report this as a charge-off to the three major credit bureaus (TransUnion, Equifax, and Experian). A charge-off indicates that you didn’t follow through with your financial commitments to a lender, and it can stay on your credit report for up to seven years.

Because credit bureaus use this information to calculate your credit score, a charge-off could lower your score for a while. A lower credit score may make it challenging to qualify for future loans or credit cards. And if you do qualify, you may have to pay a higher than average credit card interest rate, which can make borrowing more expensive.

To avoid this situation, it’s best to contact your credit card issuer as soon as you get behind on payments. Credit card companies may be willing to help you if you’ve fallen on hard times. They may offer a hardship plan, which can lower your monthly payments or reduce your interest for a set amount of time and ultimately help you get back on your feet. This is only a temporary solution though, so if your financial issues are more significant, you may need to explore another solution.

Pros and Cons of Credit Card Debt Forgiveness

If you can’t make your credit card payments, credit card forgiveness might be a viable option. But, while getting your debt forgiven can help alleviate the financial burden, it also can harm your credit and cost you financially.

Here’s a breakdown of the pros and cons of pursuing credit card debt forgiveness.

Pros	Cons
Potentially avoid bankruptcy	Can harm your credit score
Repay only a portion of the debt you owe	Will remain on your credit report for up to seven years
Pay off debt in a shorter time frame	Must pay income tax on forgiven debt

Alternatives to Credit Card Debt Forgiveness

An alternative to credit card debt forgiveness may make more sense for your financial situation. Exploring all of your options in advance can help ensure that you make the best decision for your needs.

Debt Management

Third-party credit counseling agencies offer debt management plans that help you establish a plan for debt repayment. Working with one of these agencies may help you lower the fees you owe as well as your interest rate. However, you usually must agree to repay the total amount of outstanding debt before moving forward.

With a debt management plan, you’ll make one monthly payment to the credit counselor, who will then distribute the funds among the creditors you owe. Most plans help you repay your debt within three to five years. During this time, your account will still accrue interest, though your creditor might be willing to offer a lower rate.

To use one of these plans, you usually have to close your credit card account. This can negatively impact your credit score since it lowers your total credit card limit, thus increasing your credit utilization rate. Your credit utilization ratio is one of the most significant factors credit bureaus use when calculating your credit score.

Also, you will likely have to pay a monthly fee to your credit counselor. If considering this option, carefully vet the counselors you are considering and make sure the one you are working with has a good reputation.

Debt Settlement

Working with a debt settlement company can help you to lower the amount of debt you owe. For example, if you owe $10,000 as your credit card balance, the credit debt settlement company may try to help you settle your debt for $5,000 instead. But, of course, this strategy will only work if the creditor would rather have some of your debt repaid instead of having you default on the account.

Debt settlement also can harm your credit. Usually, debt settlement companies require you to stop making credit card payments while they negotiate with your creditor. At this time, your payments will go toward the debt settlement company so they can offer your creditor a lump sum payment as an incentive to settle your debt. However, pausing payments can negatively impact your debt since payment history is another factor used to calculate your credit score.

While debt settlement may sound good in theory, you should use it as a last resort option before filing bankruptcy. This solution is risky since it doesn’t guarantee that you’ll settle your debt. Your creditor could reject the offer.

Debt Consolidation

If your credit isn’t damaged too much, you might be able to qualify for a debt consolidation loan. While this isn’t technically a debt relief option, it can help you to consolidate your debt and potentially lower your interest rate, allowing you to save money.

To consolidate your debt, you’ll apply for another loan, ideally one with better terms than your existing debt. You’d use the loan to pay off your outstanding credit card debts. Then, you will make installment payments to the lender instead of paying the creditors.

Before you apply for a debt consolidation loan, compare your options to identify the loans with the most competitive terms and interest rates.

Declaring a Chapter 7 or Chapter 13 Bankruptcy

Depending on your situation, declaring Chapter 7 or Chapter 13 bankruptcy may make the most sense. For instance, if you can’t make the payments with a debt management or debt settlement plan, bankruptcy could be an option to avoid going deeper into debt. But before you declare bankruptcy, consider speaking with a bankruptcy attorney to weigh out the pros and cons of this solution.

Bankruptcy should be one of your last resorts since it can drastically harm your credit. Also, it will stay on your credit report for up to 10 years after the filing date. To settle your debts with bankruptcy, you may also be forced to sell some of your assets.

The Takeaway

Credit card debt forgiveness involves paying less than the full amount you owe. While this prospect may sound great in theory, in reality it can harm your credit and end up costing you financially. If you find yourself starting to struggle with debt repayment, contact your credit card company to see if they will offer a hardship plan. If they’re unwilling to help or your financial troubles require a more long-term solution, you can explore credit debt forgiveness and other alternatives.

While credit cards can land you in a heap of debt, they can also be a great financial tool when used responsibly.

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

FAQ

How long does it typically take before a debt is forgiven?

Depending on the route you go, the time frame for debt forgiveness may vary. For example, bankruptcy can take four to six months, while debt settlement can take 36 months or more.

Does debt forgiveness hurt your credit score?

Yes, once you become delinquent on payments, your credit score can be negatively impacted. Then, when your credit card company sells your debt to a debt collector, they may report your balance as a charge-off or a complete loss, which can also impact your credit drastically.

How do you get your credit card balance forgiven?

Usually, once a creditor sells your outstanding debt to a debt collector, the debt collector may agree to forgive some of your credit card debt. But, you must agree to repay a portion of the debt for this to happen.

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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.

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

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Photo credit: iStock/damircudic
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A CVV number is a three- or four-digit number on the front or back of a credit card that helps prevent fraud. Given that credit cards are a form of payment frequently targeted by fraudsters, it’s crucial to understand how to protect them. One way that credit card companies attempt to secure your personal information is with the CVV number.

Here, you’ll learn more about what a CVV number is on a credit card, where to find it, and how to protect it.

What Is the CVV Number on a Credit Card?

A card verification value, also known as the CVV, is a three to four-code printed on your credit card, and it’s a crucial part of understanding how credit cards work. The CVV (sometimes referred to as a CID) on credit cards adds an extra layer of protection when you’re making a purchase online or over the phone since it’s harder to prove your identity when you’re not making a purchase in person.

While not every online merchant that accepts credit card payments may require the CVV in addition to your credit card number and expiration date, asking for this number helps the merchant to verify that you have the card in hand and that it’s not stolen. In other words, CVVs on credit cards are used to protect you against fraud.

CVV vs PIN: What’s the Difference?

Here’s how these two short series of numbers differ:

•   PINs are personal identification numbers that you create when you open an account. Usually, PINs are four digits, though some may have more digits. If you need to withdraw money from your debit card or take a cash advance from your credit card, for example, that’s when you will use your PIN.

•   A CVV is a number provided by your bank or credit card issuer on your physical credit card. You may be asked to provide the CVV number when completing a purchase over the phone or online as an added layer of security.

While some banks or card issuers may give you a PIN to use initially, you’ll typically have to change it within a certain amount of time. (You don’t have the same luxury with the CVV, since the financial institution generates the number for each card.

How to Find the CVV on Credit Cards

Different credit card issuers print the CVV in different locations.

•   Mastercard, Visa, and Discover credit cards place a three-digit CVV to the right of the signature box on the back of your card.

•   American Express places a four-digit CVV on the front of the card above your account number. American Express refers to the CVV as the card identification number, or CID.

The Purpose of CVV Numbers

In 2023, the Federal Trade Commission received more than 2.2 million fraud reports, totaling $10 billion in losses, with online shopping being the second most commonly reported type of fraud.

To help combat fraud, many merchants require a CVV to complete a transaction.

•   While merchants can store your card information, they are not allowed to store your CVV. Therefore, if hackers were to break into a merchant’s system, they wouldn’t get ahold of your CVV.

•   If someone were to attempt to use your card fraudulently, they would have to provide a CVV if the merchant requires it in order to complete the purchase.

Thus, when making a purchase online or over the phone, the CVV on credit cards can act as a way to verify that you have the card in hand and aren’t making a fraudulent purchase.

However, it’s important to note that not all businesses are required to request the CVV number. In those cases, a thief may still be able to make a purchase using just your credit card number. If that were to happen though, there are steps you can take to get your money back, such as a credit card chargeback.

How Your CVV Protects You From Identity Theft

CVV numbers are designed to protect your card from identity theft. While a fraudster may be able to gain access to your other credit card information in a hack or through credit card skimming, merchants cannot keep your CVV or CID on file after a purchase is authorized.

So, in other words, if a fraudster hacks a merchant’s database, they might be able to pull your account number and credit card expiration date, but the CVV or CID is a lot more challenging to access.

Is CVV a Fail Safe?

CVVs and CIDs are not fail-safe. As of now, merchants are not required to request the CVV or CID. So, unfortunately, if a fraudster has your card number, it’s possible they can use it at retailers that don’t require the CVV or CID number.

Some retailers may require a CVV or CID once if you frequently make purchases through their online shop. Other merchants may not require your CVV beyond your initial purchase.

A couple of scenarios to consider when thinking about security:

•   If a cybercriminal gains access to your account at that store, they may have free range of your credit card, potentially spending up to your credit card limit.

•   Cybercriminals can use software like malware to run off with your CVV or CID through various merchants.

•   They may also use phishing techniques to steal your CVV number directly from you. For instance, they might send you an email that may appear official at first glance requesting this information.

•   Additionally, if someone steals your physical card, they will have access to all its information.

Fortunately, however, some credit card issuers are toying with the idea of using dynamic CVVs that change frequently. Using a dynamic CVV would make it even harder to use your credit card for fraudulent shopping sprees.

In the meantime, it’s worth taking a look at a credit card issuer’s security measures when applying for a credit card.

How Can I Protect My CVV?

No one wants their credit card information stolen. So, to protect your personal information from getting hacked, there are a few things you can do to protect your CVV. Whether you’ve just become old enough to get a credit card or you’re a longtime cardholder, these tips are important to keep in mind.

•   Protect your home WiFi with a password. Without a password, you leave your WiFi open to anyone who wants to join. Cybercriminals can use your WiFi to access some of your personal information, including your CVV.

•   Monitor your account activity frequently. If you keep close tabs on your purchases, you can quickly identify when something seems out of sorts. Every time you receive a statement, take the time to carefully review it before just going ahead and making the credit card minimum payment. If something is off, contact your bank or card issuer immediately.

•   Install antivirus software. This type of software can scan your computer for any fraudsters’ tools that could steal your personal information.

•   Avoid unsolicited or phishing requests for your personal information. Don’t quickly hand out your personal information if someone contacts you over the phone or via email requesting your personal information. For example, a scammer may send you an email requesting you verify your credit card information to keep your account open. Contact your card issuer or bank directly instead of sending information over email if you need to verify any information.

•   Steer clear of unsecured websites. If a website doesn’t have “https:” in the address, it’s best not to use your credit card information on the site. Also, check all websites for the SSL padlock. If the website doesn’t have it, you’ll likely want to avoid using your information on the site.

•   Skip saving your credit card information when shopping online. Many websites offer you the option to save your credit card information to expedite checkout next time you make a purchase with the retailer. While it may seem convenient for you, it also makes unauthorized purchasing more convenient for potential thieves.

•   Avoid sharing photos of your credit card with loved ones. Sending photos of your credit card or posting them on social media gives people access to the information on your card.

•   Consider a VPN when using your computer outside of your home. Using a VPN while traveling and using public WiFi can help to keep your personal information secure.

The Takeaway

The CVV helps protect your credit card from fraud and theft. But, while your CVV adds an extra layer of security, it’s up to you to protect your personal information the best you can. For example, avoid giving your personal information out to just anyone or saving your credit card information when shopping online. That’s part of using your credit card carefully and responsibly.

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

FAQ

Is it safe to give out your CVV number?

It’s usually safe to give your CVV number to merchants you trust. However, you should guard your CVV and make sure you’re only giving it out when you’re in a secure environment.

Can you use a credit card without a CVV?

Yes, some merchants don’t require a CVV to process online or by phone purchases. However, some retailers may require the CVV to complete transactions.

Can I change my CVV number?

As of now, the only way to change your CVV is when you request a new credit card. When the bank or credit issuer sends you a new card, they will generate a new CVV to coincide with the card.

Is a CVV number confidential?

Technically, your CVV should be confidential. However, if it gets into the hands of the wrong people, they could have access to your credit card information, which they may use at their discretion.

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Photo credit: iStock/Kateryna Onyshchuk

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.

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

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

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If you’re young and looking to access and build credit, opening a credit card can be a great step. However, you need to be at least 18 years old to open your own account. If you’re under the age of 18, you can’t open your own credit card, but you can be an authorized user on someone else’s account.

Even if you’re old enough to get a credit card, when you’re under the age of 21, you may face additional requirements when applying. Read on for tips on getting a credit card when you’re young and options you might consider to be able to start building your credit.

At What Age Can You Get a Credit Card?

To open your own credit card, you must be at least 18 years old.

However, if you’re between the ages of 18 and 20, you may encounter stricter verification requirements, including showing proof of ability to repay, such as through income, or getting a cosigner. This is due to regulations from the Credit CARD Act of 2009, which is intended to protect young consumers from taking on more debt than they can handle.

After age 21, these regulations won’t apply to you, but card issuers may still review your income as part of your application. It’s also important to pay attention to the terms and conditions of the credit card, such as the APR on a credit card, as you consider your credit card options and apply.

If you’re younger and have a limited credit history, you may only get approved for a card with a higher APR. Do your research before applying to have an idea of what is a good APR on a credit card.

Tips for Getting a Credit Card When You’re Young

Once you understand what a credit card is and how credit cards work, you may see the appeal of a credit card and want to open one. If you’re under the age of 18, the best things you can do to work toward being able to get your own credit card are to start building credit and to learn the basics of financial management.

Start Building Credit

Building credit when you’re young may be hard, especially if you’re under 18 and not yet eligible for your own credit card. One way to do so, however, is by becoming an authorized user on a credit card account.

A responsible parent or guardian can add you as an authorized user for their account, even if you’re still under the age of 18. Being added to the primary cardholder’s credit history can help build your credit.

Learn the Basics of Financial Management

It’s also important for young people to learn the basics of financial management. Learning about things like budgeting, credit card interest, and credit scores before you even own a credit card can help put you on the path to financial success. That way, when you do eventually get your own credit card, you’ll know how to stay on top of credit card minimum payments and avoid debt.

This can also be a good time to familiarize yourself with common financial scams, such as credit card skimmers, so you’ll know what to be aware of when you do get your own card.

How to Get a Credit Card If You Are 18 to 20 Years Old

Many young people between the ages of 18 and 20 are attending college or trade school or working. They may not have a lot of income yet, and their credit history may be limited. Still, first-time cardholders do have options for getting a credit card, which can be an important step toward building their credit history and score.

Secured Credit Cards

One option is secured cards, which are a type of credit card that require the cardholder to make a refundable security deposit. The security deposit typically becomes the amount of the card’s credit limit.

Secured cards are often marketed toward people who want or need to build their credit, so they can be a great choice for young people who are age 20 and under. Once you make the initial minimum security deposit (which usually serves as your credit limit), you can use your secured credit card in the same way that you would use any other credit card. Like any other credit card, your credit card will have a credit card expiration date and a CVV number.

A few points to note:

•   Since your credit limit is often equal to the amount of your security deposit, secured credit cards often don’t have very high credit limits compared to the average credit card limit. However, having a lower credit limit can help prevent young people from overspending.

•   With a secured card, your money is tied up temporarily in the security deposit. While you get your security deposit back when you close or upgrade the account, that’s money you otherwise can’t use in the meantime.

Become an Authorized User

Young cardholders could also become an authorized user, which is someone who’s added to a credit card account with authorization to use that account. The authorized user typically has their own card and can use it to make payments as usual. However, only the primary account holder is held responsible for payments.

The authorized user benefits from this arrangement because the primary cardholder’s account history and activity are reported on the authorized user’s credit report, which can help build their credit history.

Apply for a Student Credit Card

Student credit cards are designed and marketed for students roughly between the ages of 18 and 22 years old. Students generally have different needs than other credit card customers, so it may make sense for them to get a credit card designed specifically for them.

As an added bonus, some students may qualify for credit cards with rewards, such as cashback on categories that students may spend more on, like restaurants and grocery stores.

Consider Credit Builder Credit Cards

There are also some credit cards that are available to applicants with poor credit who are looking to build their credit. Responsible use of a credit card can be a great way to build or improve credit, as your payment history will be reported to all three major consumer credit bureaus. Just keep in mind that these cards can have higher than average credit card interest rates and more fees due to their availability to those with lower credit scores.

Get a Cosigner

Another option for young applicants is to get a cosigner for a credit card. Indeed, applicants within the 18 to 20 age range must get a cosigner if they can’t provide proof of employment or income when applying. Also, people in this age may not have much of a credit history, if any, which can be a downside.

A cosigner can be a parent, guardian, or other family member who assumes legal and financial responsibility for the applicant if they are unable to pay off the balance of the card. Ideally, the cosigner should have a decent credit history to improve the chances of the credit card application getting approved. If the cardholder fails to repay a card or falls in debt, it will negatively affect the credit score of both the cardholder and the cosigner, so this is an important responsibility.

Check with your bank or credit card issuer before using a cosigner, since not all banks allow cosigners on credit cards.

The Takeaway

Once you reach the age of 18, you will be able to get a credit card of your own. You can make sure you’re ready for this responsibility by building your credit history, getting down the financial basics, and knowing how to apply for a credit card when the time comes. You’ll have options as a young credit card applicant, from secured credit cards to student credit cards to credit builder cards and more. Learning how to use a credit card responsibly is an important part of your financial life.

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

FAQ

Can I get a joint card?

Some card issuers allow cosigners on credit card. If you’re not able to qualify for a credit card on your own, you could also explore becoming an authorized user on someone else’s credit card account.

Does a student credit card affect credit score?

Yes, a student credit card affects your credit score. A student credit card is a regular credit card that’s just designed with students’ unique needs in mind, so it will affect your credit like any other credit card would.

What is the limit on a student credit card?

Credit limits on student credit cards vary by issuer and card. However, credit limits on student cards are often lower than the average credit card limit due to the fact that students generally have more limited credit histories and lower incomes.

Do you need credit for a secured credit card?

Most secured credit cards have less restrictive requirements for an applicant’s credit. In fact, many secured credit cards consider applicants with very poor or limited credit.

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Photo credit: iStock/RgStudio

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.

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 .

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When it comes to selecting a college, one big consideration is whether to attend a private vs. public college. A key difference between private and public colleges lies in how they are funded and operated. Public colleges get much of their funding from local and state governments, while private ones are largely sustained with tuition, fees, and donations.

Going the public route is the most common scenario. In the fall of 2023, approximately 13.5 million students attended public institutions while 5.1 million were enrolled in private institutions, according to the National Center for Education Statistics.

Students who are debating between private and public colleges may want to consider factors like cost, quality of education, campus life, and how they plan to pay for college. Read on for more information on each of these categories.

Public vs Private Colleges: Factors to Consider

Choosing a college is a personal decision, so it’s important to factor in individual goals and needs as you compare private vs. public colleges. In addition to the factors below, things like what you hope to study and how close you’d like to be to home will influence how you choose a college.

Now, let’s dig into more about potential advantages and drawbacks of public vs private colleges.

The Cost of Public vs Private Colleges

Many students wonder if they should choose a college based on price. One reason that attending public colleges is the more popular route is that they are often less expensive than private institutions. Public institutions are often especially affordable for in-state students, who typically get a break on tuition.

According to research by the College Board, the average cost of tuition and fees at a public college with in-state tuition during the 2023-2024 school year was $11,260, and $29,150 for out-of-state students. At private colleges, the average tuition and fees was $41,540.

That said, private colleges and universities may also offer scholarships, fellowships, and other kinds of need- or merit-based financial aid. And, even some top-tier universities have virtually done away with tuition for students whose families have certain levels of family income. So, high-achieving students might actually get a better or comparable deal at a private institution depending on their family’s financial situation.

Recommended: The Average Cost of College Tuition in 2024

Differences in Educational Quality

According to U.S. News, the highest ranking public schools in the country include UCLA, UC Berkeley, the University of Virginia, the University of Michigan Ann Arbor, and the University of North Carolina at Chapel Hill. At these schools and many others, students can get a top-notch education at a fair price if they qualify for in-state tuition.

However, many public schools have enormous student populations, which can mean large class sizes, difficulty getting into your most desired classes, and less personal attention from faculty and administrators. For example, the University of Central Florida has just over 59,000 undergraduates, resulting in a student-to-faculty ratio of 29 to 1.

By comparison, Pomona College in Southern California has a population of just under 1,800 students (fall 2022) and a student-to-faculty ratio of just eight students to one faculty member, according to U.S. News. Beyond class size, some private institutions are often able to deliver a world-class education. In fact, every one of the top 10 highest-ranking schools in the country are all private schools.

Specific Majors or Programs of Study Available

Private colleges, particularly smaller liberal arts colleges, may have fewer majors or programs available to students than larger public universities. As you are evaluating schools, consider the field(s) of study you are most interested in and understand the options available at the schools you are considering.

On a related note, students interested in pursuing research opportunities may have a better chance of conducting research at a larger university. However, private universities are likely conducting research, too. It’s best to consider the programs you are specifically interested in and ask an admissions counselor what research opportunities are available to undergraduates in that field or major.

Recommended: A Guide to Choosing the Right College Major

Campus Life

For some students, the large size of many public institutions is a factor in the pro column. This environment means there are a great variety of potential groups to join, activities to participate in, or classmates to become friends with.

A large school means many different classes and majors to choose from. If this appeals to you, it can expand your network and make your college experience much more interesting. Private schools are also likely to have clubs and activities available for students, too, though it may be on a smaller scale.

Both public and private schools can be a great choice for students interested in athletics. Public schools are most likely to have a wide variety of active sports teams, and most of the top-ranking colleges for student athletes are public.

However, many private universities have successful teams, as well. If it’s important to you, or you’re a student athlete yourself, you could check out the strength of specific sports programs at the colleges you’re considering.

Financing Your Education

Some students and their families cover tuition costs (or a portion of costs) with savings, but there are a variety of other sources of finances to help students pay for college. As mentioned, public universities generally have a less expensive sticker price than private schools, but private schools may offer more financial aid to students. So, don’t rule out a private school on cost alone.

To apply for federal student aid, the first step is filling out the Free Application for Federal Student Aid (FAFSA®). Colleges will use this information to help determine how much aid, and what types, a student qualifies for. Federal aid includes things like Pell Grants for low-income students, work-study, and federal student loans. Both private and public schools may offer scholarships to students, as well.

Federal Student Loans

Federal loan options include Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.

For the 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%, the rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and are set annually by Congress.

Private Student Loans

For students who still need additional funding, a variety of lenders offer private student loans. Private student loans typically take the borrower’s credit history, and that of any cosigner, into consideration. And while federal student loan interest rates are always fixed, private student loan interest rates can be fixed or variable.

Keep in mind, though, that private student loans do not offer the same benefits as federal student loans, such as income-driven repayment plans and student loan forgiveness. If possible, it’s wise to exhaust all federal aid options before seeking private student loans.

The Takeaway

Both public and private colleges and universities can offer an excellent education to students. Differences to consider when deciding between a private or public school include the cost, the programs of study available to students, the quality of education, campus life, and sources of funding for school. Depending on individual preferences and circumstances, students may find a public school better suits their needs or vice versa.

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

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

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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.

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.

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

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

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Life insurance policies are available for children and are often marketed as paying out a death benefit if the child were to pass away as well as potentially providing a savings vehicle for the insured.

It’s a lot more comfortable to contemplate these policies funding, say, a child’s education than handling expenses at the time of death. But both are facets of these products. In addition, these policies can help prove a child’s insurability later in life. Let’s take a closer look if this coverage might be right for your family.

What Is Child Life Insurance?

Life insurance for children is similar to a policy for an adult. If premiums are paid regularly, then there’s the guarantee of a death benefit if the child dies. A parent, legal guardian, or grandparent takes out the policy (making them the policyholder). This person can be the beneficiary who would receive the death benefit, if applicable, but they don’t have to be.

Before getting into more detail about policies for children, here’s a brief overview of the two types of life insurance: term and permanent. Each is available for children as well as adults.

Term Life Insurance

As the name implies, term life insurance comes with a pre-determined term, often 10, 20, or 30 years. If the insured person dies within that time frame, then a death benefit is paid out to beneficiaries (people designated to receive those funds). At the end of the term, the policy may be able to be renewed, allowed to lapse, or converted into permanent life insurance. If the insured is still alive at the end of the term (and we hope they are), there is not a refund of the premiums paid. The service was there waiting but wasn’t tapped.

For a child, this would typically be an add-on to a parent’s insurance policy. It would be a death benefit-only policy, but it might be able to be converted into an adult policy when the insured reaches adulthood.


💡 Quick Tip: Term life insurance coverage can range from $100K to $8 million. As your life changes, you can increase or decrease your coverage.

Permanent Life Insurance

Unlike a term policy, permanent life insurance doesn’t expire as long as premiums are paid. Whenever the insured dies, a death benefit is paid. These plans also involve a savings vehicle, in which part of the premiums paid go into a cash account which can later be tapped or borrowed against. Premiums are typically higher than term life insurance (often several multiples of the term life insurance price).

When getting this kind of policy for a child, yes, there’s the death benefit for a worst-case scenario, but there’s also a component that builds a savings account, which is like a gift to the child. When the insured individual reaches adulthood (typically at 18 or 21 years of age, these policies often allow the now-adult to either take the policy’s cash value or continue payments and coverage.

How Does Life Insurance for Children Work?

The adult who plans to take out the policy will fill out an application. There isn’t a medical exam involved like there can be for adults, which streamlines the process.

Life insurance policies for children are often permanent life policies, meaning coverage can last their entire lives if premiums are kept up. Premiums stay the same over the lifetime of the policy, and part of the premium is invested and becomes a cash value that can be withdrawn during the child’s life. These are usually whole life policies, meaning the cash earns a fixed rate of interest.

Check the parameters of a policy that you’re considering buying. Many allow you to buy one for a child who is 17 years old or younger, although some policies won’t go up to age 17. The policyholder commonly transfers the policy to the child when they become adults, but this can be done at any time and some policies automatically transfer into the child’s name at a designated time.

For term life insurance for kids, an option is to add a rider (an optional add-on) to your own term life insurance policy. This can be an affordable option, and one rider may cover all of your children in incremental amounts. The child would be insured to adulthood, at which point the policy would lapse or could be extended by the now-grown child, if they assume paying the premium.

When Does Life Insurance for Kids Make Sense?

Here are four reasons why you might decide to buy life insurance for kids include:

•   Investment purposes

•   Because of health issues or concerns

•   To enhance future insurability

•   In case the worst happens

Here’s more about each.

Investment Purposes

As premiums are paid, the cash value of a whole life policy (a kind of permanent insurance) gradually increases. When your child takes over the life insurance policy, they can surrender — or cancel — it and collect the cash value.

They might choose to use it as collateral for a loan. Or they could keep paying for the policy, which will continue to increase the cash value. If this is your primary motivation, you may want to consider whether this goal is better served by another vehicle, such as a 529 savings account for college costs).

Health Issues or Concerns

If a child is born with health issues or your family has a significant, genetically determined health condition, having a life insurance policy may give you more of a sense of security.

Enhance Insurability

When purchasing a life insurance policy for a child, you are ensuring they have some insurance if they have a major health-altering diagnosis during the term of the insurance. There may be the possibility of extending this coverage.

The Worst Happens

Nobody likes to think about losing a child. If this traumatic event does occur, life insurance will help to cover funeral expenses without being subject to income tax. This can help to eliminate the financial worry of funeral costs and allow you to grieve without this concern. The policy may also cover therapy in this worst-case scenario and/or loss of wages if you were to take a leave of absence from work in the aftermath of this situation.

Recommended: Life Insurance Definitions

Benefits of Child Life Insurance

What you’ve just read outlines some of the reasons why it can make sense to buy life insurance for kids. It can serve as an investment vehicle; provide security if health is a concern; boost future insurability, and cover expenses if the worst situation happens.

Here are some other benefits to consider:

•   Life insurance for children tends to be very affordable. The younger a child is when you purchase the policy, the lower the premium.

•   With whole and term life insurance, premiums remain the same, guaranteed, as long as payments continue being made.

•   With a guaranteed insurability rider on the policy, more coverage can be purchased for that child without the need to answer health questions. This is true even when they’re adults depending on the policy type.

•   If the child later accesses the cash value in the policy, they can use the money for their own unique needs — whether that’s for college tuition, a wedding, a car, or house.

Recommended: 8 Popular Types of Life Insurance for Any Age

How Much Is Life Insurance for Children?

Premiums are based upon the amount of the policy and the age of the child when the policy is first taken out. In some cases, this may be as young as birth or 14 days. Price varies based on gender.

Coverage amounts are typically much lower than for a policy that insures an adult. After all, the goal here isn’t to replace the loss of earning power. Instead, the limits usually range from $10,000 to $100,000, but some companies may allow more than $100,000. At the time of writing this post, a child who is four years old or younger can often be insured for a $10,000 policy for under $5 a month, and a $50,000 one for under $20 a month.

Prices increase incrementally as the child ages. By the time that they’re ages 15 to 17, a $10,000 policy may be closer to $8 per month and a $50,000 one about $35 monthly.


💡 Quick Tip: With life insurance, one size does not fit all. Policies can and should be tailored to fit your specific needs.

The Takeaway

Child life insurance allows parents, legal guardians, and grandparents to apply and pay for a policy on behalf of a child. While a child doesn’t have earning power you are seeking to protect, there are benefits to this kind of policy, including creating a savings vehicle for the child. Take a careful look at the insurance options and your family’s financial goals to determine if this is the best path for you.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

Explore your life insurance options with SoFi Protect.

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Photo credit: iStock/FatCamera

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.

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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