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Modular homes are often misunderstood, but these homes are built to the standards of their site-built brethren, are typically more affordable, and go up faster.

Just like other homes, they may appreciate in value.

Read on to learn whether or not a modular home might tick all your boxes.

Characteristics of a Modular Home

Remember the Sears mail-order kit homes? The catalog, debuting in 1908, offered all the materials and blueprints to build a house. Sears is estimated to have sold around 75,000 kit houses by the time the catalog was discontinued in 1940.

They were prefabricated homes, meaning some or all of the home was built in a factory. The term applies to modular, panelized, and manufactured homes. (Kit homes are still sold, and appeal to DIYers who don’t need a general contractor to handle everything.)

Modular homes are born almost entirely in a factory. Boxlike modules — complete with walls, floor, ceiling, wiring, light fixtures, cabinets, and HVAC system — are trucked to the homesite, lifted by crane, and put together.

Manufactured homes, formerly called mobile homes, also are built in a factory and meet a federal code, but modular homes must meet the same state and local building codes as stick-built homes. They’re permanently attached to a standard foundation and are real property.

Modular houses come in a huge variety of designs and styles, from accessory dwelling units, or ADUs, to three-bedroom homes with sleek, contemporary designs. Many companies offer a menu of layout options, or buyers may be able to customize the features.

Recommended: Guide to Buying, Selling, and Updating Your Home

Pros and Cons of a Modular Home

Here are some upsides and downsides of modular construction.

Pros

Speed: A modular home or apartment building can go up within half the time of site-built residential buildings, whose construction averages 7.6 months, according to the U.S. Census Bureau’s most recent data. Or faster than that: Some modular home factories can finish a home in a few weeks. The foundation is being prepared while the modules are being built offsite. Weather delays are far less of a concern.

Cost: Modular homes are typically cheaper than stick-built homes. The climate-controlled factories are specialized, and production processes are streamlined.

Greener: Modular construction results in fewer carbon emissions than traditional building methods: It requires less transport of workers and materials and fewer carbon-intensive products like concrete and steel. Producing buildings in a factory setting promotes recycling and reuse. In addition, modular buildings can be designed to achieve LEED certification.

Homes may well appreciate: A well-built modular home, like any stick-built home, will tend to appreciate. The value holds up better in communities where modular homes are not uncommon.

Seen as a way to ease the housing crisis: Urban cities are looking at prefab housing to mitigate the U.S. housing shortage, and many prefab-housing startups have sprouted. MiTek, a startup owned by Warren Buffett’s Berkshire Hathaway is, it says, “making modular mainstream.” It plans to ship kits of manufactured building parts to be assembled by general contractors. President Joe Biden announced a plan in May 2022 to increase the housing supply over five years. That included modular housing.

And a smarter way of doing business: PulteGroup, the country’s third-largest home construction company, is investing in offsite manufacturing of parts for most of the homes the company builds each year. A lack of labor has been contractors’ biggest challenge. Modular construction can help a company do more with fewer workers.

Recommended: Home Affordability Calculator

Now for the not-so-great news.

Cons

Zoning hurdles: Modular builders face pushback from many cities, as offsite construction isn’t mainstream and each city has its own zoning laws.

Financing: If modular-home buyers can’t pay cash, many will have to finance the build with a construction-only or construction-to-permanent loan (aka one-time-close loan). The down payment on land and the home for a construction loan will often be 20% or more, unless it’s one of the government-backed loans described below. A modular-home buyer who already owns the land can use the land as equity and may be able to borrow all of the construction cost if they meet the criteria for the loan.

You and the contractor usually need to be approved for the loan. Money is disbursed based on a draw schedule. Payments are typically interest only and start out small.

With the construction-to-permanent loan, some lenders, for a fee, will let you lock in a fixed rate with a “float down” option if rates have fallen. If you chose a variable rate, you’ll pay the current rate when the mortgage converts.

A two-time-close loan is composed of a short-term loan for the construction phase and a permanent mortgage for the completed home. You’re essentially refinancing when your home is complete; you’ll need to be approved and pay closing costs again, but the rate could be better. In most cases you can compare other lenders’ offers to get the best rate and terms on the permanent mortgage.

An FHA One-Time Close Loan is a government-backed home loan program that applies for modular homes and the land. The minimum down payment is 3.5%.

A VA One-Time Close Loan allows eligible service members to finance modular construction, lot purchase, and permanent mortgage with no money down.

A personal loan, sometimes for up to $100,000, could fund part of the modular construction or the purchase of the land. Keep in mind that unsecured loan rates are higher than rates on secured loans.

Qualified homeowners may be able to use a home equity line of credit (HELOC), home equity loan, or cash-out refinance to give rise to their modular aspirations.

HOA blockage: Some homeowners associations may not allow modular construction in the neighborhood.

Still need a contractor: You still have to find a contractor and a piece of land, if you don’t own the land already.

All the extras: Among the disadvantages of modular homes is the difficulty determining the total price. Buyers pay not only for the home but also the land, foundation prep, and transportation.

Possibly a big upfront payment: A builder may want payment in full before construction begins.

Finding a Modular Home

You may want to search for “modular home companies by state” or “prefab homes by state.” Of course there are Facebook and Reddit modular discussions. Word of mouth is another avenue to find a modular home builder.

Some modular home manufacturers sell directly to homeowners, and others work through a network of retailers.

At least one modular company has developed factory relationships across the United States.

Keep in mind that this style of construction is still pretty rare, in this country at least. In 2021, only 24,000 U.S. homes were built offsite. That’s about 2% of all homes completed that year.

Who Should Get a Modular Home?

People who want a new home up and ready more quickly and less expensively than a stick-built home might be smart to think modular.

Environmentally conscious buyers might find modular construction a breath of fresh air. Folks who want a modern ADU or primary or vacation home might want to go modular.

People who appreciate efficiency and innovation might be drawn to modular construction.

It helps to already own the land. If not, and this will not be a cash deal, it’s important to understand the pros and cons of construction loans and other financing options.

The Takeaway

Modular homes are faster to complete and less expensive than site-built homes, but perceptions and financing can be challenges. If you do plan to build even an ADU out back, check your local zoning, compare modular vs. stick-built construction, and know your terms (manufactured vs. modular, real property vs. personal property). It all can be confusing.

SoFi can lend a hand. Do you plan to use a construction-only loan and need a permanent mortgage after the build is done? SoFi offers mortgages with competitive rates and a variety of repayment terms.

SoFi also offers personal loans of $5,000 to $100,000, which could fund the land or more, and brokers a HELOC that may allow you to access up to 95% of your home equity to fund your modular vision.

Tap your home equity or find a mortgage to build something out of the old-school box.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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.

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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When you’ve decided on a house to buy and entered into escrow, you can expect to receive a preliminary title report. The report will verify ownership and reveal any lurking issues that will not be covered under a subsequent title insurance policy.

This is an important step: When you’re buying a home, the preliminary title report gives you the chance to remove or eliminate problems before you close on the property. This can help you avoid any legal headaches that arise from those issues.

Here’s a look at how to read these documents and what kind of information you can expect to find in them, including:

•   What is a preliminary title report

•   How to read a preliminary title report

•   How to get a title report for a property

•   What is a title report vs. title insurance

•   What are the limitations of a preliminary title report.

Title Insurance 101

First, you’ll need to understand what title insurance is. A title is the set of legal rights you have to a property once you buy it. A clear title is the goal, meaning you want the property to be free of liens and other ownership claims.

Title insurance protects both buyers and lenders against any problems with a title when ownership of a property transfers from one person to another.

During or after a sale, if there is a title dispute, the insurance company may be responsible for paying certain legal damages. If you don’t have title insurance, you could be responsible for any issues that crop up.

There may be two forms of title insurance involved in a sale. If you are borrowing money to buy a home, you may purchase lender’s title insurance, which protects the lender. Owner’s title insurance, less common, is usually purchased by the seller to protect the buyer.

Recommended: How to Qualify for a Mortgage

Reading a Preliminary Title Report

When you receive the preliminary title report, look for the following information:

Owner of Record

The preliminary title report will start with the name of the owner of record. If you’re buying a home, this should be the seller’s name. If it isn’t, that’s a major red flag, and you should let your escrow or title officer know.

Statement of Vesting

Next, the report will lay out the extent of the current owner’s interest in the property. The fullest type of ownership, and the most common, is known as “fee simple” or “fee.” This means a person wholly owns a piece of land and all the real estate on it.

There may be other types of ownership that will show up in this section. For example, you might see a leasehold estate, which gives a tenant exclusive rights to use a property owned by someone else for a set period of time.

Legal Description

The legal description details the property location, lot size, boundaries, and any easements or encroachments.
For condominiums and planned unit developments, the legal description might include common areas, parking, storage, and easements that convey.

A plot map, which shows how land is divided into plots, may be included as well to show the general location of a property.

Exceptions

Exceptions will be listed numerically and are matters that your title insurance policy will not cover. They may include:

•   General tax issues. Are there unpaid taxes? Property taxes will show up as the primary “lien” and as due or paid in full. Property taxes must be paid for the property sale to go through. And tax classifications could affect the new owner. For instance, if land is classified as agricultural, there could be penalties for withdrawing from that classification.

•   Assessments. Are there delinquent water or sewer bills owed to the city that need to be paid before closing?

•   Encumbrances. These might include liens from creditors or lenders, or liens for the payment of federal taxes or assessments. They might also include liens against a property because of back-due child support or spousal support. Are there loans against the property you weren’t aware of, such as additional mortgages?

•   Covenants, conditions and restrictions, also known as CC&Rs. These are rules that homeowners must follow in a planned community or common interest development. They might determine whether you are allowed to park on the street, what kind of fence you can put up, or what color you can paint your house.

•   Easements. An easement is the right another party has to the property you’re interested in buying. For example, neighbors may have a right of way that allows them to access their property through yours. Or a utility company might have the right to install, access, or maintain equipment on the property, such as power lines or cable.

•   Other issues. There are other matters that may appear on the preliminary title report, such as bankruptcies or notices of action, which are court proceedings that are underway and involve the property.

The transfer of property is subject to these exceptions unless they are dealt with by the seller before the sale.

If any liens or encumbrances crop on your preliminary title report, you have the chance to clear them before the sale goes through. Together with your real estate agent you can work with the sellers and their agent to clear the title before you take it on.

If you have any questions about your preliminary report, you can contact your real estate agent, an attorney, or your escrow or title officer.

Standard Exceptions and Exclusions

In addition to the list of exceptions that are particular to the home you want to buy, there are standard exceptions and exclusions that a title insurance policy won’t cover.

Building codes and restrictions are exempt from title insurance coverage, as are zoning restrictions or other regulations for how land can be used in certain areas.

Sometimes a building is subject to zoning restrictions. For example, it may be in a historical district that restricts how a buyer can develop the property.

Recommended: How to Make an Offer on a House

How to Get a Title Report for a Property

As part of the home-buying process, your lender will likely require a preliminary title report and title insurance.

In many cases, the seller will request the title report from a title company once an escrow account is opened. The seller includes this information as part of their disclosure package.

Recommended: Mortgage Pre-Qualification vs. Pre-Approval: The Differences

Title Report vs. Title Insurance

As mentioned above, once you open escrow, an order is placed with the title company to produce your preliminary title report. The company will assemble and review records having to do with the property you want to buy. The title report will give you insights into whether the property has, say, any liens on it or other issues.

Title insurance, on the other hand, is indemnity insurance. It protects both lenders and homebuyers from enduring financial loss if there were any defects in a property’s title.

Recommended: What’s the Difference Between Homeowners Insurance and Title Insurance?

Limitations of the Preliminary Title Report

Be aware that the preliminary title report only shows the matters that the title company will exclude from coverage when and if a title insurance policy is issued.

It is not a complete picture of the condition of the property. And it may not even list all of the liens and other encumbrances that may affect the title of the property.

The Takeaway

Think of a preliminary title report like a background check on a home, revealing tax, lien, or ownership poltergeists lurking. Knowing how to read a preliminary title report helps prevent spooky surprises.

Speaking of clean titles and clean starts, if you’re shopping for a home or investment property and need a mortgage loan, SoFi’s home loan options are worth a look. With competitive rates, a quick and easy application process, and low fees, they can offer a smart, affordable path to homeownership.

Check out SoFi’s competitive rates today.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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.

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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With all the talk of a possible recession, you may be thinking this is a good time to get an advanced degree. You can wait out the tough times and unpredictable job market while learning new skills that put you in a better position in the future.

You’re not alone. Historically, times of economic turmoil have seen big upticks in graduate school enrollment. But is this the right move for you now?

We hope the following information will help you decide whether the cost of earning a master’s will pay off in greater career opportunities — and higher salary — down the line.

Why People Go Back To School During Recessions

Periods of decline in economic activity (aka recessions) are commonly accompanied by corporate layoffs, rising unemployment, and dwindling wage growth. Because there are fewer employment opportunities, job hunting and career advancement become more competitive. Many workers decide a return to school, often to earn a master’s degree, makes sense in a tough employment market.

Earning an advanced degree can boost your earning power in your chosen field (more on that below) or provide an opportunity to change fields. Career changers may gravitate to growing, “recession-proof” industries and fields that they are passionate about.

Who Should Get a Master’s Degree?

The answer depends on your professional and academic goals. The first level of graduate study, a master’s degree indicates a high level of knowledge in a profession or research area. It takes anywhere from one to three years of full-time study to complete a master’s. A bachelor’s degree is required to apply for a master’s program.

For academics, a master’s is usually a stepping stone to a Ph.D. or other doctoral degree. Professional master’s degrees can also be the first step toward advanced degrees required for doctors, pharmacists, and lawyers, and are a necessary part of education for those careers.

Master’s degrees can also be required or particularly helpful in education, social service, healthcare, business, and STEM fields (science, technology, engineering and mathematics).

Recommended: What Should I Do After My Master’s Degree?

Pros of Getting a Master’s Degree in a Recession

For many people, a recession is a good time to go back to school, either full- or part-time. Here’s why.

Potential Salary Boost

In many careers, a master’s degree will command a higher salary and increase job security. According to the Bureau of Labor Statistics (BLS), workers with graduate degrees (master’s, professional, and doctoral) have the highest earnings.

The median weekly earnings for full-time workers over 25 with a master’s degree is $1,574, compared to $1,334 for employees with a bachelor’s degree only.

Increased Job Security

Workers with graduate degrees also experience lower levels of unemployment, according to BLS data. The unemployment rate in 2021 for people with a master’s was 2.6%, compared to 3.5% for workers with bachelor’s degrees.

People who have been negatively affected by a recession — either laid off or unemployed for an extended period — often find that an advanced degree can lead to more job security and advancement. As mentioned above, recessions can also be a good time for workers in hard-hit industries to gain skills and knowledge through a master’s in a fast-growing field.

Many grad school students find that networking with other students, faculty, and alumni helps them find new opportunities, especially in a competitive job market.

Easy Access To High Quality Programs

Hundreds of high-quality MBA, MSW, engineering, and other in-demand graduate degree programs are now available online from prestigious colleges and universities. Remote learning makes these programs accessible to students anywhere in the country. Online programs often cost less than in-person learning and can offer more flexibility for students who need to continue working full- or part-time.

Cons of Getting a Master’s Degree in a Recession

Grad school isn’t right for everyone, and making this move demands careful consideration.

Costs and Potential Debt

The average cost of a master’s degree is $66,340, according to a 2021 report from the Education Data Initiative. That does not include living expenses or lost wages from taking time off work. And people with a master’s degree carry an average of $46,798 in student loan debt.

Determining whether taking on federal or private student loan debt is worth the increased earning potential or career satisfaction is an important step in your decision-making process.

Increased Competition for Admissions

You’re not the only one debating whether to ride out tough economic times by going back to grad school. That can mean increased competition for the best programs. If a degree from a particular college or university is part of your career plan, carefully consider your timing.

Missed Work Experience

If you’re considering leaving a job to attend grad school, keep in mind that you may miss valuable work experience that can put you in a better position when the recession ends. Working part-time can help pay for grad school and sometimes alleviates missed work experience, but not always. That’s because part-time employees don’t always encounter the same opportunities to gain valuable experience as full-time staffers.

Recommended: Undergraduate vs. Graduate Student Loans: How They Differ

How Much Does a Master’s Degree Cost?

Depending on the field of study and institution, master’s programs range from $12,000 to $75,000. Unlike many doctorate programs that waive tuition and fees and even offer a stipend, master’s degrees are not fully funded.

Ways To Pay for a Master’s Degree

Most students rely on a combination of savings, scholarships, grants, federal loans, private loans, and help from employers to pay for graduate school.

Federal Grants

Federal grant programs include the Pell Grant, which is generally available only to undergrads who demonstrate exceptional financial need. However, it may be possible to receive some grant funding to help you pay for graduate school. Remember, this time around you’re an independent student, and you won’t be tied to your family’s income to determine need.

Another federal grant that may be available to graduate students is the Teacher Education Assistance for College and Higher Education, or TEACH grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduation.

Filling out the Federal Application for Student Aid (FAFSA) is the first step to determine whether you’re eligible for federal grants.

Scholarships

The FAFSA also gives you access to many scholarships. There are scholarships offered in every field imaginable. Start your search with these online tools:

•   Graduate School Scholarship Search at Sallie Mae

•   Scholarship Search Engine at CollegeScholarship.org

•   SoFi’s State Scholarship Search

Recommended: Finding and Applying to Scholarships for Grad School

Federal Student Loans

Grad students may be offered loans as part of their financial aid offer. A loan is money you borrow and must pay back with interest. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources.

The lifetime limit for Direct Subsidized and Unsubsidized student loans is $138,500 for graduate or professional students. Of this amount, no more than $65,500 can be in subsidized loans. This includes student loans borrowed during undergraduate study.

Private Student Loans

Many students also rely on private student loans to help pay for graduate school. The maximum amount that students can borrow with a private student loan varies by lender, but can’t exceed the cost of attendance.

The “cost of attendance” is the combined total of tuition and fees, books and supplies, living expenses, transportation, and miscellaneous expenses. This estimate may also include dependent care, study-abroad, and costs related to disabilities.

The Takeaway

Pursuing a master’s degree can be a great way to enhance your skills and career opportunities. Taking advantage of a slow or troubled economic time to do so can help ensure your job security in the future. That said, it’s important to consider the tuition costs associated with a graduate degree, the potential for taking on debt, and the effects of missed earnings and opportunities if you take time off work to go back to school.

SoFi can help students manage the cost of tuition with its private student loans for grad students. SoFi private student loans offer competitive interest rates for qualified borrowers, flexible repayment plans, and no fees. SoFi makes it fast and easy to pay for a grad degree – and now, even a grad-level certificate — so you can focus on what matters the most: your education.

FAQ

Is grad school a good place to ride out a recession?

It can be. Recessions are usually accompanied by high unemployment and layoffs. For many people, gaining new skills and expertise in a graduate program can be a good way to make yourself recession-proof in the future.

Do more people head for grad school during a recession?

Yes, historically more people apply to and attend graduate school during a recession. The Great Recession starting in 2008 is a good example of that trend.

What are worthwhile master’s degrees to get during a recession?

Master’s degrees that give you the credentials and skills to move forward in your career can be well worth the cost through future salary increases and advancement opportunities. But pursuing a passion that will give you career satisfaction for years to come can be just as worthwhile.

Photo credit: iStock/izusek

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.

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.

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.

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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When your high schooler starts thinking about college, one of the best things you can do is to have The College Talk: a frank discussion about education, career, and life goals. The College Money Talk — the dollars and cents of the process — should be a part of the conversation. This will help you and your child stay on the same page during the college search.

We’ve assembled a list of topics you may want to include, such as how much you, as parents, can contribute toward college. We’ll also guide you through how to structure the conversation, explain financial aid, and more.

Figure Out How Much You Can Afford

First and foremost, parents should look at their finances as a whole: retirement savings, other investment accounts, monthly budget, upcoming large expenses, etc. Also think about the current economy, especially inflation and the bear market.

“Parents need to keep in mind their own financial security first and foremost,” says Brian Walsh, senior manager of financial planning at SoFi. “We don’t want parents to take on too much debt or put themselves in a sticky situation because they helped their kids too much.”

Walsh adds that it’s essential for parents to figure out on their own how much they can contribute before talking to their kids. One way to do that is to see how their retirement savings stack up against suggested amounts:

Recommended: Inflation and Your Retirement Savings

Consider the Timing

You may wonder when, and how often, you should have the college and money talk. Walsh says you can relax during the early high school years.

“Things will heat up junior and senior year,” Walsh says. “That’s when you’re looking at schools the kids are interested in, and determining how realistic it is they’ll get into those schools and secure financial aid. Senior year is when everything comes together — making decisions about where to go and ultimately coming up with a plan for how to pay for college.”

Consider blocking out time to have the conversation freshman year in high school, then intermittently throughout junior and senior year. Use your best judgment in broaching the conversation, and choose a time when your kids seem receptive.

Structure the Conversation

Walsh suggests beginning with a discussion of the paths available to your child after college. This may involve different professions and careers and how to attain them, even jobs that don’t require a college education. Your child may also have no idea about the potential earning power of various professions — a great segue into the cost of college.

According to Walsh, it’s best to have this talk in an environment where everyone feels comfortable. That may be a favorite coffee shop or the living room couch. If you’re not sure, ask your student what they prefer.

If you want to make it a more collaborative process, you can give your child assignments. For example, you may work with your child to search for colleges, look up financial concepts, debate the trade-offs of a big-name school vs. a lesser-known institution, and more.

Your student may also want to research the graduation rates of colleges. Walsh suggests having students identify the schools where students tend to graduate in four years or close to that.

When you start the money conversation, consider bringing up the average “net cost.” That’s a college’s cost of attendance (which factors in tuition, fees, books and supplies, and living expenses) minus any grants and scholarships. According to the College Board, the average net cost for 2022-2023 of a private college was $32,800. The average net cost for public college was $19,250.

Avoid looking at the sticker price, or what school websites say tuition and room and board will cost. Instead, kick off the affordability conversation based on net price.

Explain About Financial Aid

Financial aid can come from various sources: colleges and universities, the government, and private lenders. Financial aid can include grants, scholarships, work-study, and loans:

•   Grant: A type of need-based aid that you don’t have to repay.

•   Scholarship: A financial award based on academics, athletics, other achievements, or diversity and inclusion. It may or may not be based on financial need, and doesn’t have to be repaid.

•   Work-study: An on-campus job that helps cover the cost of school. You must file the Free Application for Federal Student Aid (FAFSA) to qualify for work-study.

•   Federal Student Loan: A loan is money you borrow to pay for college or career school. You must pay back loans with interest. Federal student loans come from the federal government by filing the FAFSA.

•   Private Student Loan: These loans come from a private bank or online lender. Private student loans do not offer the same federal protections that come with federal student loans, such as loan forgiveness and income-driven repayment plans. Consider these factors before you decide to pursue private student loans.

For detailed information on all available financial aid options, reach out to the guidance office or college office at your child’s high school. Online resources, like StudentAid.gov and SoFi’s FAFSA Guide, are also helpful.

“When you’re down to the final couple of colleges, work with the admissions and financial aid offices at those schools,” Walsh says. “They will be the best resources during senior year and going forward.”

Recommended: Scholarship Search Tool

Talk About Debt (and Debt Repayment)

Many high school students don’t have experience with loans or understand them at all.

“One of the risks of student loan debt is that it can feel like Monopoly money — it’s not real,” Walsh says. In your discussion, try to make student debt more concrete for your child.

Walsh recommends going through a sample budget based on the average starting salary of a career related to your child’s preferred major. (Also check out our guide to ROI by bachelor’s degree.) Calculate the amount your child may earn each month. Estimate what they may pay for rent, utilities, groceries, transportation, student loans, and more. How much will they have left over after those expenses?

Although it may feel awkward, it’s worth talking to your kids about student loans to help them understand how to handle them.

Discuss Parent / Child Contributions

“Be transparent with the student so they know what to expect when they look at different schools,” Walsh says. He urges parents not to overextend themselves or feel guilty if they can’t contribute as much as they’d like. Just 29% of parents say they plan to foot the entire bill for their kids to go to college, down from 43% in 2016.

Look for Ways to Cut Costs

During your college money talk, you may want to explore strategies for cutting expenses. Walk through a sample college budget, and look for ways to save on living arrangements, transportation and travel, Greek life, computers, books and supplies, dining out, and Wi-Fi. Doing all this ahead of time allows you to pick and choose what’s important and plan how parents and kids will spend their money.

You might also suggest that your child begin at a two-year school to save money, then transfer to a four-year institution.

Recommended: Money Management for College Students

The Takeaway

Paying for college often involves an emotional tug-of-war between a student and their parents. Walsh urges families to use The College Money Talk as a teaching moment. “It’s an opportunity for your child to learn valuable lessons on how debt and savings work,” he says. “And that can help them make better financial decisions in the future.” Parents should examine their finances and agree on their family contribution before discussing it with their student. Because high schoolers have little experience with money, parents can make it more concrete by walking through sample budgets: one for their expenses while in college, and another that projects their income and student loan debt after graduation.

SoFi private student loans can help families bridge the gap between financial aid and the cost of college.

FAQ

How do you tell your kid you can’t afford their dream college?

It may come as a surprise to your child when The College Money Conversation takes a turn and you reveal that you cannot pay for their dream school. However, it’s best to answer the question early on in high school while they can still consider other, more affordable colleges.

Do most parents pay for their kids’ college?

About 29% of parents plan to pay the full college costs. However, that doesn’t mean you must follow suit, particularly if it will put a strain on your finances. Consider all aspects of your financial situation before deciding how much you can put toward the cost of college.

How do middle class families pay for college?

Paying for college involves planning and research, and that’s the case for families at any income level. Most families cover the cost of attendance through a combination of personal savings, need-based grants, scholarships, work-study, and student loans. This involves filing the FAFSA to see the amount of need-based financial aid your child may receive. You can also arrange to set up a payment plan, in which you make payments over the course of 10 or 11 months during each school year.

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Bitcoin miners rely on high-powered computer systems to validate blocks of digital transactions on the blockchain network and earn Bitcoin (BTC). Learning how to mine Bitcoin isn’t hard, but it can be expensive and time consuming.

Once a miner has completed a certain number of calculations (1 MB) to verify a block of transactions, they may be rewarded with new Bitcoins — if they are the first to verify the block.

This competitive process in turn helps to secure the system and prevent fraud. And it enables a network-wide consensus that essentially backs the validity of each Bitcoin, even without a central authority.

What Is Bitcoin Mining?

Mining Bitcoin is more than just the creation of Bitcoin tokens; it’s also the decentralized global system by which miners validate and secure all Bitcoin transactions — and earn Bitcoin themselves.

How does Bitcoin mining work exactly? It goes back to the blockchain technology that Bitcoin and other types of cryptocurrencies are built on. For many blockchain-based crypto networks to run, miners rely on super-charged computer systems — or in some cases cloud-based technology — to validate blocks of digital transactions that are then appended to the blockchain ledger.

How Bitcoin Mining Works

When a Bitcoin transaction is executed, it gets sent to miners for verification. Bitcoin miners use special computer hardware to do the complex mathematical calculations or hashing, required to confirm each item on the blockchain — an immense undertaking called proof-of-work (PoW) that involves literally trillions of calculations.

Many different types of crypto use a PoW algorithm, including Dogecoin, Litecoin, Bitcoin Cash, Monero, and others. It can be useful to understand the differences between certain types of crypto, like Bitcoin vs. Dogecoin, in order to learn more about mining crypto.

Understanding Bitcoin Hashing and Hash Rate

To solve these problems, each machine or node has to make millions of guesses per second — called hashing. This requires a lot of electricity. Estimates vary, but Bitcoin miners consume around 129 Terawatt-hours of energy, which is around 0.6% of the world’s total.

To successfully mine a block and receive bitcoin rewards, a miner has to hash the block’s header, which is a summary of the information contained within a given block. In order to keep the timing of each block consistent, the difficulty of solving each block has to increase over time. This keeps the number of Bitcoins entering the market steady. (If it got easier to validate each block, miners would get more rewards faster, which would quickly deplete the existing supply of Bitcoins).

The Bitcoin hash rate is a measurement of how many times the Bitcoin network attempts to complete those calculations each and every second. It’s the approximate average of all the hash rates of each individual miner in the network.

When a miner has a higher hash rate it increases the miner’s chances of finding the next block and receiving a Bitcoin reward. More hashing power also is an indication of a network’s overall security.

It takes about 10 minutes for miners to successfully confirm a block of transactions (1 MB) and get rewarded with new Bitcoin. But mining is intensely competitive, especially because the reward is halved every 210,000 blocks and now stands at 6.25 BTC.

What Is Bitcoin Halving, Why Does It Matter?

Every type of cryptocurrency follows its own protocol. Bitcoin is a deflationary crypto, which means the number of coins being minted is steadily decreasing.

How many Bitcoins are left? The number of Bitcoins that can be produced is capped at 21 million. That’s where the halving of Bitcoin rewards comes in.

Since mining rewards create Bitcoin, the number of Bitcoin you can earn from mining is decreased over time through the process called halving. In June of 2024, the Bitcoin block reward for mining is slated to drop to 3.125 BTC from 6.25 BTC.

Understanding Proof of Work

The process of mining Bitcoin actually helps secure the network, and the transactions that fly across it every day. For a hacker to take control of the blockchain, to commit fraudulent charges, and to steal Bitcoin, they’d have to control over 51% of the network.

It’s an important insight into the decentralized world of mining cryptocurrency: Rewarding miners creates a competitive environment that encourages more miners to join the network. This increases the size of the network, making it harder to get more than 51% control of it, which in turn makes transactions more secure for users who are sending Bitcoins back and forth.

Can Bitcoin Work Without Miners?

The short answer is no. Bitcoin relies on a proof-of-work consensus mechanism that requires miners and mining for transaction verification and block creation, for minting new coins, and for helping to secure the network. That’s how the system is built.

If Bitcoin were to switch to a proof-of-stake system, the way Ethereum did with the Merge in 2022, then miners would no longer be needed.

There is an ongoing debate about the value of crypto staking vs. mining. While mining uses special hardware to solve complex computational problems, staking locks up crypto for a fixed period. PoW is energy intensive, whereas PoS requires less energy. PoW relies on a high hash rate to secure a network, whereas PoS relies on a large amount of tokens (money) — a high level of market capitalization.

In a proof-of-stake network, transactions aren’t validated by miners running vast computer rigs, but validators who stake a certain amount of their crypto in order to help monitor and run the network — and earn crypto rewards.

Recommended: Is Crypto Mining Still Profitable in 2022?

Mining Bitcoin: What You Need

With the right equipment, nearly anyone can mine Bitcoin — in theory. The catch? As just discussed, Bitcoin mining has become highly competitive because of the potential rewards — and the complexity of the calculations and technology involved.

When Bitcoin was first launched in 2009, all miners needed was a sturdy PC and they could potentially get in the Bitcoin-mining game. Things progressed quickly, though. In 2010, software was released that let miners mine with graphics processing units (GPUs), the technical name for a video card.

The Evolution of Bitcoin Mining Hardware

This was a major shift in Bitcoin mining because a single GPU was 100 times faster than a central processing unit (CPU), which was how most people were initially mining.

Next, miners built computers specifically for mining Bitcoin, as well as other cryptocurrencies. These “crypto mining rigs” typically featured motherboards, the main hub of a computer, which supported four to eight graphics cards.

If a single card was 100 times faster than a CPU, it’s easy to see how the average user looking to mine Bitcoin might be left in the dust by a high-powered crypto rig that featured anywhere from four to eight GPUs churning away at blockchain calculations.

From there, as is the case with many things tech, the hardware got better, faster, and more specialized. In 2013 the first Bitcoin ASIC miners hit the scene. ASIC stands for application-specific integrated circuit. These mining tools are built to do one thing — mine cryptocurrencies (including Bitcoin), and they are far more powerful than GPUs.

Mining-Specific Hardware

How do you mine Bitcoin with your own rig? A mining rig is basically a super custom PC. The fundamental components are what you’d expect: You need a motherboard, RAM, a CPU, and storage.

The key enhancements are either the added GPUs, as noted above, or using an ASIC. Generally, using an ASIC is the preferred mining tool. GPUs are no longer considered fast enough to solve Bitcoin calculations and earn rewards; you’re up against far more powerful machines.

While ASICs are more effective at processing Bitcoin transactions than their GPU and CPU predecessors, and they’re generally more energy efficient, they can come with some upfront costs. And this doesn’t include the potentially high utility costs needed to maintain them (read: keep them cool enough to function).

The cost of electricity is a significant one for most miners, and something to include in your calculations, as it can impact your profits.

Miners also need to take into account the cost of mining fees.

Mining Software and a Bitcoin-Compatible Wallet

Selecting the best software to mine Bitcoin doesn’t have to be complicated or expensive. While mining Bitcoin can be costly in terms of hardware and electricity, the software to mine Bitcoin usually isn’t. Most Bitcoin mining software is free and open-source.

Once you have the hardware and software in place to mine Bitcoin, next you’ll need to set up a type of crypto wallet that’s compatible with Bitcoin.

Another option to consider may be a mining pool.

How Bitcoin Mining Pools Work

A bitcoin mining pool is a group of users who have decided to join forces to validate Bitcoin transactions (create a new block). Users who join mining pools contribute their own CPUs, GPUs, or ASICs to a network and when rewards are paid out, they all get a share.

If you’re going solo, mining software will try to verify transactions with just the processing power of whatever hardware (CPU, GPU, or ASIC) that you’ve got. That said, many people agree that the computations have gotten so complex, it’s less likely that a solo miner will create a new block on their own. If you’re joining a pool, the mining software will help you connect to your pool.

Many mining pools these days are located in China because of the cheaper electricity. Some of these pools are actually companies, including F2Pool, AntPool, BTCC, and BW. While these are some of the biggest pools, there are pools based in the U.S. and Europe as well.

While pools might seem appealing to miners with less computing horsepower, there may be some things to consider before joining. Pools may charge users a fee. And miners might be paid out their shares based on the level of their contribution, which could mean that miners with fancy ASICs take home more of the rewards.

Since this is Bitcoin, there’s probably another innovation around the corner.

Cloud mining is an example — an option if you don’t want to own your own mining hardware and would rather mine with someone else’s. However, cloud mining may also come with its own costs and risks that have left some members of the Bitcoin community less than impressed with this approach to mining coins.

What’s Cloud Mining?

Much like storing data or running applications in the cloud, cloud mining is the process of paying someone else to use their crypto mining hardware. This could save a miner the upfront cost of setting up an ASIC system.

To get started, a miner would likely open an account with a cloud mining company, decide how much they want to spend, and how much they want to mine.

While cloud mining may seem like an easier way to get started with Bitcoin mining, it’s worth mentioning that there have been reports of cloud mining companies that might not be on the up and up. Miners looking to get started might consider doing a fair bit of research before deciding if cloud mining is right for them — as well as what company to go with.

Recommended: A Closer Look at Bitcoin Cloud Mining

Is Mining Bitcoin Legal?

The question of whether Bitcoin mining is legal is still fairly complex and can vary from region to region. The short answer is that Bitcoin itself, as well as Bitcoin mining, are both legal in many developed countries, including the U.S., U.K., and Japan. In general though, it’s wise to consider the use of any cryptocurrency within the context of the laws and regulations in a specific jurisdiction, as many are still in flux.

In some countries, the use of cryptocurrencies is forbidden and mining Bitcoin is illegal. In others, like China and India, the use of crypto is restricted. In Canada it’s not illegal to use cryptocurrencies, but they are not considered legal tender — which is a key distinction in how crypto is treated in the U.S. as well.

The question of Bitcoin’s legality is increasingly complex and depends on a wave of cryptocurrency regulations around the world that seem to fluctuate week to week, region to region. These may include how Bitcoin is defined (e.g. as a commodity or a currency); how it can be used (e.g. for some purchases or payments but not others); how it’s taxed.

According to IRS guidelines issued in 2014, cryptocurrencies like Bitcoin are considered property, and are taxed as such. Also, if an employer compensates an employee using a cryptocurrency, the employee will get a W2 or 1099 tax form and may owe income taxes on their crypto trading.

The status of cryptocurrency mining as well as crypto’s legal standing can shift as new regulations come into play.

Is Bitcoin Mining Right for You?

Despite some hurdles, learning how to mine Bitcoin is still an intriguing and potentially lucrative opportunity for some. With the right equipment, it’s possible to validate enough transactions to earn actual Bitcoin tokens. That said, mining Bitcoin is not the gold rush it once was. Even if you invest in some serious Bitcoin mining ASICs, mining itself keeps getting more complex and competitive.

That doesn’t mean you can’t do crypto mining, though. There are thousands of cryptocurrencies that could use help from eager miners willing to donate some processing cycles from their CPUs or GPUs, and even if you don’t hit the mother lode, you could mine for a better understanding of how cryptocurrency works. Whether or not you want to grab a metaphorical hat and mining pick is up to you.

The Takeaway

Bitcoin mining requires a substantial investment of time and energy on the part of any would-be miner. The equipment alone can set you back thousands. And while the payoff — assuming you earn actual BTC — could make the overhead cost worth it, there are no guarantees. Bitcoin mining has become highly competitive.

FAQ

How do you start mining for Bitcoin?

The most important step if you want to mine Bitcoin is to look into the cost of setting up your own mining rig (or computer hardware and software) and comparing that to the cost of joining a mining pool or cloud mining. Next, it would be a good idea to compare potential rewards and risks of different mining options, since Bitcoin mining is expensive and competitive, and there are no guarantees of “striking it rich.”

How hard is it to mine one Bitcoin?

It’s very difficult. Miners are rewarded when they are the first to confirm a 1 MB block of Bitcoin transactions. Currently the reward is 6.25 BTC. Being able to get that reward takes considerable time and energy — and there are no guarantees.

What are the steps to mining Bitcoin?

The first step is to decide which type of mining you want to set up (PC, mining pool, or cloud mining). Next, you have to obtain the necessary hardware and software to run your node, as well as setting up a Bitcoin-compatible crypto wallet to pay mining fees and (perhaps) rewards.

Photo credit: iStock/Stanislav Gvozd

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