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Today, it’s not uncommon for adult children to return home or never leave the nest to start with. About one in three 18- to 34-year-olds live with their parents, according to the most recent U.S. Census Bureau data.

Moving back home can be a wise move for grown kids who may be dealing with job uncertainty, earning a low income, and/or be facing a mountain of student loan debt.

And it can wind up being a good deal for parents as well.

Some of the benefits include: opportunities for companionship, the possibility of sharing household expenses, and the ability for adult children to pay down student debt and save money for longer-term financial goals (for instance, buying a house).

But living in the same household again can also bring opportunities for tension and misunderstandings.

That’s why parents who welcome their kids back may want to set a few guidelines. Here are some rules both parents and grown children might want to wrangle before moving back in under one roof.

What Is the Timeframe?

When adult children move back home, it’s helpful for both parties to have a timeframe in place, rather than the ’’foreseeable future.”

This may mean talking about why the move is happening. Is it to save money? If so, what is the money being saved for, and at what point should the child move out?

Some parents might find it helpful to set up a trial period, after which they can have a frank conversation about what is and is not working in the arrangement.


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Going Over the Financials

Many misunderstandings from adult children living at home stem from confusion over how much money, if any, they are expected to contribute.

It can be helpful for both parties to consider their expectations before coming together and talking through them. Some issues you may want to think about and then discuss:

•   Will adult children be expected to pay rent? And if so, how much will rent cost? When will it be due? Some parents might want to set a flat rate, while others might consider a percentage of the child’s income, if that income is currently low but expected to rise.

•   Will the child be responsible for a portion of bills, groceries, or other household costs?

•   How will resources be allocated? Is the fridge open for anyone? Can the child use the family car if they need it?

•   How much will bills go up with additional usage? Parents might decide they want their child to pay for any overages, or they might be okay with handling the increase themselves.

Recommended: How to Manage Money Better

Going Over House Rules and Behavior Expectations

Some parents have a “my house, my rules” expectation. But it can sometimes be mutually beneficial if both parties talk about behavior expectations with an attitude of give and take.

Often “unspoken expectations” don’t come up until a problem occurs. Talking through them proactively can make sure that everyone is on the same page.

Some issues parents and adult kids may want to go over:

•   What are expectations for guests? Is it okay for romantic partners to sleep over? Do parents need a heads up before guests come by?

•   What are communication expectations? Should a child inform their parents if they won’t be home by a certain time?

•   What chores are expected? It’s wise to go over whether or not you expect that your child to do some of the supermarket shopping and/or clean any areas of the house beyond their living spaces. It’s perfectly acceptable to have your adult child pitch in on dinner duty, take on cleaning, or otherwise contribute to the house as an adult. Perhaps they pay for their own monthly supermarket costs.

•   What do daily schedules look like? Maybe one family member needs quiet for work meetings. Maybe another needs access to family exercise equipment or the shower in the morning? Talking through routines — from breakfast to bedtime — will set expectations and avoid misunderstandings.

•   What does privacy mean when you’re under the same roof?

Both parties may be concerned about how the new arrangement will affect their lives, and talking through those concerns can help families find solutions that work for everyone.

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Helping Adult Children Achieve Financial Independence

There’s nothing like living together to get financial habits out in the open. This applies to adult children and their parents. But that’s not necessarily a bad thing. By keeping an open dialogue about money, you can help your adult children get on the right financial track (and perhaps move out sooner, rather than later).

Here are some ways you may be able to help adult children work towards financial security.

Talking Through Financial and Savings Goals

Instead of asking your adult child how much they have saved, or how much credit card debt they have, consider asking them to talk through their short-term financial goals and long-term ones too.

Putting Rent to Work

Some parents who are in a position to do so may want to charge their children rent and then use that money to gift their child a down payment on a home or car, help with tuition, or assist their child in reaching another financial goal.

Or, in lieu of rent, you might request that your child set up an automatic deposit into a savings account that could eventually become a security deposit on a rental or an emergency fund.

Teaching by Example

One way to encourage disclosure about your adult child’s financial picture is to talk through your own.

Talk broadly through your retirement plan, any long-term care plans, or how you hit your own financial goals (such as buying a house). This can help your child start good financial habits and build a positive money mindset.

After all, personal finance is not typically taught formally, and giving your adult child — no matter how old — some insight into the tools and strategies you use can give them ideas for how they can effectively manage their money.

Trying Not to Nitpick

While it can be helpful to talk through your own strategies, it may not be helpful if your child feels like you’re critical of the way they are spending money.

Let’s say your adult child buys a latte every day. Sure, you can point out how much they would potentially save if they put that money into a high-yield savings account instead. But for the sake of the relationship, it may be easier to let certain habits go and focus on what your child is doing to work toward financial goals, such as investing in their company’s 401(k) plan or doing their taxes well in advance of tax day.

The Takeaway

Living under one roof may not always be easy for adult children or parents, but it comes with an opportunity for growth for everyone, as well as a closer relationship as equals.

Part of forging that relationship may involve setting some parameters early on about what is expected from grown children while they are living at home, from how much they may be expected to contribute financially to how often they can use the car.

Letting kids move back home (where they can live more affordably), and having open discussions about money, can help them not only save, but also develop good financial habits.

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FAQ

What are reasonable expectations for an adult child living at home?

Reasonable expectations for an adult child living at home include contributing to household chores, paying a fair share of expenses, and maintaining a respectful and considerate attitude. They should also generally have a clear plan for their future, whether it’s pursuing education, employment, or other goals. Regular communication and setting clear boundaries can help ensure a harmonious living arrangement.

What if my adult child refuses to move out?

If your adult child refuses to move out, it’s a good idea to have an open and honest conversation about their reasons and your concerns. Ideally, you’ll want to set clear expectations and a timeline for moving out, and offer support in finding a place and securing employment. Consider creating a written agreement outlining responsibilities and consequences. If necessary, seek the help of a mediator or counselor to facilitate the discussion.

How to deal with disrespectful adult children living at home?

Dealing with disrespectful adult children generally involves setting firm boundaries and clear consequences. Consider having a calm and direct conversation about the specific behaviors that are unacceptable and the impact they have. Establish rules and consequences, and be consistent in enforcing them. At the same time, you’ll want to offer support and resources to help them become more independent. If the behavior continues, consider seeking family counseling or setting a deadline for them to move out.

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SOBNK-Q225-044

Having roommates can be a great way to reduce your monthly living expenses. It can also mean living in a bigger apartment or a nicer area than you could otherwise afford.

But negotiating finances with friends (or strangers) also comes with potential pitfalls, especially if you have roommates who don’t always pay what they owe, when they owe it.

Luckily, whether you already won the roommate lottery or are just trying to make the best of living with someone you barely know, figuring out how to share roommate expenses doesn’t have to be hard.

What follows are tips for splitting expenses with roommates so that everyone feels like things are fair in your household.

Managing Money With Roommates

These 25 strategies can help ensure that monthly expenses get divvied up fairly — and everyone is on the same page from the moment you first move in together.

1. Making Decisions Together

Whether you and a friend are moving in together for the first time or you already live together and you’re bringing in someone new, it can be helpful if you decide as a group how you’re going to handle finances. You might consider having a meeting right away to establish how you’ll be splitting costs.

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2. Making a List of What You Both Own

Before moving in together, you and your roommates may want to make a list of what you both already own and can bring to the apartment for communal use. For example, if your roommate has a stand mixer and you have a nice collection of baking pans, that can be a useful combination. If you can contribute a couch, your roommate might be able to find a kitchen table.

3. Figuring Out How You’ll Split Monthly Expenses

Many roommates find that sharing a household might mean sharing more than just rent and utility bills. You may want to consider sitting down with your roomies to figure out what monthly expenses beyond rent and utilities will be shared and how you will split up these costs. This may include cable, wifi, and any subscription services like video streaming.

4. Splitting Costs Evenly…

Since it can be difficult to determine who used a certain amount of electricity or watched the most Netflix, it could make sense to simply split costs down the middle (or evenly among roommates). That can save a lot of time and energy and could be the most fair arrangement.

5. …Or Splitting By Percentage of Use

If you or your roommate uses certain utilities or services significantly more than other members of the household, you might want to consider splitting by percentage of use. For instance, perhaps your roommate is a photographer and is always plugging in lights to take photos, and maybe you’re only home four days a week. A percentage is more complicated, but could be more fair.

Recommended: Strategies to Lower Your Energy Bill When Working From Home

6. Deciding Who Will Pay the Bills

To streamline bill paying (and make sure no bills end up falling through the cracks), it can be wise to put one person in charge of actually paying the bills. You may want to designate that person from the get-go, and then everyone else can send this person the money before the bills are due every month.

7. Keeping a Written Document of Expenses

Whether you split each cost evenly or by a percentage of use, it can make sense to write down each person’s share of expenses and what they can roughly expect to pay each month — so no one is blindsided when it comes time to pay the bills.

8. Figuring Out How to Divide Household Supplies

Once you have the details of the non-negotiable bills nailed down, you might next look at how you want to manage the cost of household supplies.

For example, while some roommates don’t mind toting their own roll of toilet paper into the bathroom, many find that it is easier and more economical to split the cost of a bulk package.

9. Deciding Whether to Share Groceries

Even if you have different tastes in food and purchase the most of your groceries separately, you may find that sharing basics, like gallons of milk, coffee, and juice, even bags of rice or quinoa, may be more economical. If you cook meals together, you may want to go in on even more weekly groceries to help save money on food.

10. Keeping Some Purchases Separate

Just because you plan to share a couch doesn’t mean you need to share the bill. While it may seem sensible to split the cost of furnishings and electronics for your rental, you may also want to consider what will happen when your lease is up.

Unless you and your roommates plan on selling everything when the time comes to move out (and splitting the proceeds), paying for things separately can make things simpler in the end.

Recommended: 25 Tips for Buying Furniture on a Budget

11. Establishing a Budget

If you and your roommate have agreed to buy groceries or other items together, you may also want to discuss a monthly budget before you start making household purchases.

You might be fine with generic OJ and laundry detergent, while your roommate wants to spring for the expensive name-brand stuff. Getting on the same page about how much you’ll spend each month on communal items can help avoid money squabbles later.

12. Finding an Easy Way to Track Expenses

You might give one roommate the responsibility for keeping track of monthly expenses and how much each roommate owes, as well as logging who paid what and when. They could do this on a spreadsheet or through an app. That way, each person will know exactly how much they owe, as well as what they’ve already paid.

13. Deciding How You Will Pay Each Other

Gone are the days of writing checks or going to the ATM to reimburse roommates for rent and other expenses. With all the peer-to-peer money transfer options now available, you can quickly and easily pay each other without cash.

You may want to sit down with your roommates and decide which app you’re going to utilize, make sure everyone has it downloaded to their phones, and then use it to reimburse each other.

14. Drafting a Roommate Agreement

When you first move in with a roommate, or when another roommate is moving in, you might want to create a roommate agreement that is separate from the rental contract you have with your landlord.

The agreement could spell out all the financials, such as how you will split costs, as well as some basic ground rules, such as parking and having guests over.

15. Setting Consequences for Failure to Pay Your Share

Nobody wants to be the bad guy, but if a roommate isn’t paying their share of expenses, you may want to make sure that there are some consequences.

For instance, you could agree (and even include this in your “roommate agreement”) that if a roommate doesn’t pay the bills on time once, they would take on all the household chores until they can pay, and if they fail to pay a second time, they would need to to leave the rental.

Recommended: How to Manage Money

16. Making Late Payers Cover Late Fees

You may want to make it clear that If one roommate is late with their payment and, as a result, triggers a late fee or penalty, then that person would be responsible for paying those additional charges. (You may also want to make this rule clear in your “roommate agreement.”)

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17. Discussing Responsibility for Damage

It can be a good idea to also discuss who will be responsible for covering the cost of any unexpected expenses, such as damage to your rental.

You might agree (and put in your agreement), for example, that whoever is responsible for any damages must pay for them. That way, if your roommate’s dog chews up the door frame, it would be up to them to pay for the repairs.

18. Splitting the Security Deposit

It often makes sense to have all the roommates contribute to the security deposit. That way, they will all be equally invested in keeping the place nice so that they get their portion of it back upon moving out.

19. Sharing Expenses for Get-Togethers

Hosting get-togethers like BBQs and Super Bowl parties can be a great bonding experience for roommates and their friends. When having one of these events, all the roommates can chip in so that the celebration is fun, as well as affordable.


💡 Quick Tip: When you feel the urge to buy something that isn’t in your budget, try the 30-day rule. Make a note of the item in your calendar for 30 days into the future. When the date rolls around, there’s a good chance the “gotta have it” feeling will have subsided.

20. Having Monthly Meetings

Roommates that don’t communicate effectively can become resentful and end up disliking each other. By having monthly meetings to discuss finances and other issues, everyone has a chance to air their grievances and figure out solutions for problems going forward.

21. Avoiding Passive-Aggressive Notes

It can be tough to live with roommates and deal with all their quirks, especially when it comes to money. But even if someone is late paying a bill or otherwise not doing their fair share, posting notes can end up creating hostility.

You may be able to resolve the situation more effectively by being direct and honest with each other either in a one-on-one or monthly roommate meeting.

22. Not Laying Out Money for Bills Until Everyone Has Given Their Portion

If you are responsible for paying the bills, you may find that it’s easier to pay them with your money and then collect from your roommates later. However, this can put you in a bad position if your roommates take their time in paying you back.

Instead, you might want to set a rule that you will only pay the bills once your roommates have given you their share.

23. Discussing Ways to Save Money

If utility bills or other shared expenses are on the high side, you may want to sit down with your roommates and talk about some ways to cut expenses and save money. You might decide, for example, to invest in energy-saving light bulbs you can turn off using an app or get rid of one or two streaming services.

24. Finding Coupons Together

You can make saving money a group activity with your roommates. Every week, before you go shopping, you can all look for coupons to use at the store on sites like Coupons.com and Ibotta.

25. Choosing Responsible Roommates

When vetting potential roommates, it can be helpful to discuss some of the expense-sharing ideas listed here. If they are open and amenable to sharing expenses equitably, you should have very few issues when it comes to splitting costs.

You may also want to make sure any potential roomies have a steady income, good referrals, and a solid credit score, as this can indicate they tend to be responsible with money.

The Takeaway

While roommates come with many benefits, sharing a space — and expenses — with other people isn’t always easy.

Being open about finances and setting some ground rules from the get-go, however, can help ensure that everyone contributes their fair share and all your bills get paid on time.

Using technology and smart money management resources can also make it easier to track and share expenses with your roommates.

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FAQ

How should roommates split expenses?

Roommates should split expenses fairly and transparently. Start by creating a budget that includes rent, utilities, groceries, and other shared costs. Next, you’ll want to discuss and agree on a method for splitting these expenses, such as equally or proportionally based on income or room size. You might use a shared spreadsheet or app to track payments and ensure everyone is contributing their fair share.

What should you not share with roommates?

While living with roommates, it’s important to set boundaries. You may want to avoid sharing personal items like clothing, toiletries, and electronics to prevent hygiene issues and misunderstandings. It’s also a good idea to keep financial information, such as bank details and passwords, private, especially if you’re living with someone you don’t know well. Establishing some boundaries and being clear on what is — and is not— communal can help maintain a respectful and comfortable living environment.

How do you divide expenses when living together?

To divide expenses when living together, you’ll want to first list all shared costs, including rent, utilities, groceries, and internet. The next step is to talk about and agree on a way to split these expenses. You might divide them up 50/50 or proportionally based on income. Or, you might designate specific expenses for each person. Whatever you decide, it’s a good idea to set a regular time (say monthly or quarterly) to review your monthly budget and make any needed adjustments.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

SOBNK-Q225-051

With more than 200 million users in at least 220 countries worldwide, Airbnb has the power to draw guests from all over and boost income for owners. The average Airbnb host earns more than $14,000 per year via the application, with guests paying an average of $84 per night for a single room and $136 per night for two rooms, or $149 per night for an entire home. If the rental is in a high-demand area, rates may be significantly higher.

Renting to travelers on Airbnb is an interesting way to make money, but how does it work for owners? Let’s take a look at Airbnbs, how they work, and what’s involved in running one. Stick around and you’ll be able to decide if being an Airbnb host suits your style.

What Is Airbnb?

Airbnb is a company that connects guests with hosts. Bookings, payments, and customer service issues can be handled through its platform.

Airbnb does not own any properties — it is simply a booking service. The real value of Airbnb is how ubiquitous it is. Guests looking for units with cooking facilities or unique stays will check Airbnb first. Potential hosts know Airbnb as an opportunity to make extra cash. Bringing these two groups of people together is the magic of Airbnb.

How Does Airbnb Work?

The concept behind Airbnb is pretty simple:

1.    A host lists a property on the platform.

2.    A guest finds the property and books through Airbnb.

3.    The host approves (or denies) the reservation.

4.    Payment is processed.

5.    The guest completes the stay.

6.    Hosts are paid about 24 hours after guests check-in.

How Airbnb works for owners is much like a hotel, where visitors change frequently. The average guest books a unit for four nights, though it is also common for hosts to see guests book longer stays. The short-term rental market is much different from the market a traditional landlord sees.

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Who Books on Airbnb?

The guests who book on Airbnb come from the company’s 200 million users. The site is widely known and easy to use.

One of the things to know when renting out an Airbnb is that hosts have a lot of control over who is able to book their Airbnb. Hosts can specify guest requirements in the booking settings. These requirements can include positive reviews from previous stays on the guest’s profile, agreement to house rules, and ID upon check-in.

How Does Airbnb Work for Hosts?

So, exactly how does Airbnb work for homeowners?

Hosts own and manage the properties on Airbnb. The hosts determine the conditions of the rental, such as:

•   Check-in and check-out times

•   The rental rate

•   Cleaning fees

•   How guests access the unit

•   What areas and amenities are available for guest use

•   House rules

•   Cancellation policy

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Hosts sign up for Airbnb so that their property is listed on the website. Guests can browse these listings and choose what property they think will work best for them.

When hosts sign up to receive guests, they provide details on the type of property, whether it’s shared or private, how many guests can stay, how many bedrooms there are, how many beds there are, if the bathrooms are shared or private, and so on.

Hosts set the prices of their Airbnb stays, as well as discounts if they wish. The application may suggest offering a 20% new listing discount off your first three bookings. Some hosts offer a 10% weekly discount, a 20% monthly discount, or whatever feels right to them, but many choose competitive pricing over special discounts. Airbnb does not require hosts to offer discounts.

Good photos of the property are essential. Hosts will also add a title and description of the property. They can open the reservation up to anyone or narrow it to an experienced Airbnb user who has good reviews.

They can also select what amenities are available. Basics include TV and Wi-Fi, a kitchen, air conditioning, and free or paid parking. But some properties advertise an indoor fireplace or outdoor grill, a fire pit, pool table, or lake or beach access. A piano or outdoor shower or the ability to ski in/out of the property might draw guests looking for these specific features.

As you finish, you’ll set up your calendar, select a cancellation policy, set house rules, choose how guests can book, and prepare for your first guest. You’ll also select the safety features in the home, such as a smoke alarm, carbon monoxide detector, fire extinguisher, and first-aid kit.

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How Much Can You Earn With Airbnb?

While the average host earns more than $14,000 per year, a lot of hosts make much more, and some homeowners find income from Airbnb to be a viable way to make payments on their home mortgage loan. Several variables come into play when it comes to how you can earn with an Airbnb.

•   Location. Location matters when you’re hosting an Airbnb. If you’re near national parks or city centers, you may be able to charge more for your rental. If you’re in a suburban area that doesn’t receive many visitors, it may be a bit harder (but not impossible) to regularly rent out your unit.

•   Dates. If you’re renting out an Airbnb unit during peak season or a date near a concert or popular festival, you may be able to charge more than during a down season.

•   Number of beds and guests you can accommodate. Generally, the bigger your place, the more you can charge. Guests can justify spending more on a rental unit if they are able to split the cost with other guests.

•   Luxe digs. If your property is unique or incredibly luxurious, you may be able to rake in more money per night.

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How Much Does It Cost to List on Airbnb?

It doesn’t cost you anything to list your property on Airbnb. The company only charges homeowners its fee once a property is booked by a guest.

How Much Does Airbnb Take From a Host?

Airbnb charges hosts 3% of the booking subtotal (the nightly charge plus the cleaning fee, which the host sets). But that’s not the only fee the company collects. When guests book, they generally pay a 14.2% service fee that goes directly to Airbnb. Fees could be as high as 16.5% if, for example, the guest pays in a different currency from the local one.

Airbnb says these fees help the process run smoothly by covering customer support, marketing to guests, protection for hosts, and educational resources for hosts.

What Kind of Property Can You Advertise on Airbnb?

There are all kinds of Airbnbs that can make homeowners some extra money, from renting out extra rooms to hosting guests in a private villa. Guests can stay in a house, apartment, or in an individual bedroom within a home, which may or may not have a private entrance. If you’ve invested in a duplex, renting out one-half of the property on Airbnb could be an option.

Some hosts rent an RV parked on their property, or a houseboat, treehouse, tent, or yurt. (And if you happen to own a castle, cave, Moroccan riad, or windmill, you’re welcome to rent that out as well.)

The only requirement Airbnb has is that the space is used specifically for lodging, and that if it is a boat or mobile home, it will be semi-permanently attached to a set location and parked in a privately owned space. Bear in mind that your municipality, homeowners association, or condominium rules may also govern what you can do with your property.

Recommended: What Is a Duplex?

How to Become an Airbnb Host

If you already have a property that can be converted to a short-term rental and a municipality that allows it, becoming an Airbnb host boils down to signing up for the service and adding pictures of your listing. You’ll start to earn money once bookings are complete.

If you don’t already have a property, you can work with a real estate agent to acquire one. You’ll want to look for a property in an area that is legal for short-term rental. You may want one that is in a high-demand area, commands a strong rental rate, has abundant support services (cleaning services, handyman services, etc.), and has the potential to rent out multiple rooms or beds.

The Takeaway

How does Airbnb work for homeowners? Property owners host guests who find their listing on the Airbnb platform. After check-in, hosts get paid, less a percentage of the nightly rental rate and cleaning fee. It’s a solid way to make extra cash if you’re willing to supervise bookings and cleaning. Some owners even purchase properties with Airbnb rentals in mind.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

How much does it cost to list on Airbnb?

There is no charge to list your property on Airbnb. Airbnb takes its fee — typically 3% — from the total booking fee a guest pays (usually a nightly charge plus a cleaning fee). Guests also pay a fee, usually 14.2% of the booking subtotal.

How much do homeowners make on Airbnb?

The average Airbnb host makes $14,000 per year, though the amount you make will vary based on your location, number of guests you can accommodate, and condition of the property.

How do I Airbnb my own house?

Any owner can create a listing on Airbnb for free. You’ll want to make sure your local government or homeowners association allows short-term rentals and you’ll need to set up your house with amenities and arrange for cleaning before and after each stay. Don’t forget to explore Airbnb’s insurance policy to make sure you’re comfortable with the coverage.

Do homeowners stay with you in Airbnb?

Some homeowners rent rooms within their own living space and might be present during a guest’s stay. Other homeowners rent their personal space but clear out during the guest’s visit. And some host guests in properties they own specifically for use as short-term rentals.

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SOHL-Q225-019

Federal student loans could be either Direct Loans or “indirect loans” until 2010, when Congress voted to eliminate the latter. Yet many borrowers of indirect loans, also known as Federal Family Education Loans (FFELs), continue to struggle with repayment today.

Here’s what student borrowers should know about the two different loan types.

Indirect vs Direct Student Loans

Indirect Student Loans

The Federal Family Education Loan Program was funded by private lenders (banks, credit unions, etc.), but guaranteed by the federal government. The program ended in 2010, and loans are now made through the Federal Direct Loan Program.

The government didn’t directly insure FFEL Program loans. Instead, it acted through a guarantor, which paid the lender if the borrower defaulted. Then, the government reimbursed the guarantor.

When it came to questions about payment, borrowers dealt with the lender, the guarantor, the servicer, or a collection agency — not the government.

Direct Student Loans

With a Direct Loan, made through the William D. Ford Federal Direct Loan Program, the funds come directly from the U.S. Department of Education, which gets the money from the U.S. Treasury. The loans are made by the Department of Education and backed by the federal government.

Direct Loans consist of Direct Subsidized and Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Before 2010, every school made its own decision about whether to participate in a direct or indirect loan program, or possibly both. But there were some differences in interest rates, fees, and repayment options of these types of student loans.

What Kind of Loans Do You Have?

If you’re thinking about how to best address your student loan debt, it’s important to know what kind of loan or loans you have, including whether they are Direct Loans or FFELs.

To figure out your loan types, log into your account on StudentAid.gov and click on “My Aid” in the dropdown section. In the “Loan Breakdown” section, you’ll see each loan you have and your loan balances. You can also find information there on who your loan servicers are, including their contact information, and your loan amounts. On each loan servicer’s website, you’ll find information about your monthly payments and payment history, and your loan interest rates and terms.

Repaying FFEL Program Loans

Even though indirect student loans ended on June 30, 2010, there are still 7.29 million borrowers who hold $165.4 billion in FFEL loans as of 2024.

Borrowers must consolidate their FFEL loans before they can apply for one of the income-driven repayment plans, which base monthly loan payments on your discretionary income and family size over a period of 20 or 25 years, typically resulting in lower payments.

FFEL loan holders also must consolidate loans to apply for Public Service Loan Forgiveness (PSLF), which allows those who work in qualifying public service jobs for the government or nonprofit organizations to have certain loan balances forgiven after 120 on-time payments.

Here are more on repayment options.

Income-Sensitive Repayment Plan

Only low-income FFEL borrowers may qualify for this FFEL repayment plan. The lender determines the monthly payment based on a fixed percentage of the borrower’s gross monthly income. Payments are made for a maximum period of 10 years.

Consolidating Your Loans

Consolidating loans with a federal Direct Consolidation Loan combines your loans into one loan with one payment. The interest rate on a Direct Consolidation Loan is the weighted average of the borrower’s current federal loans, rounded up to the nearest one-eighth of a percentage point.

This loan does not lower your interest rate, and may even increase the amount of interest that is paid over the life of the loan. If you decide to lengthen your payment period (for example, from 10 to 20 or even 30 years), your monthly payment may be lower, but the total interest you’ll pay over the life of the loan will most likely be higher.

A Direct Consolidation Loan may be an option for borrowers who want to streamline their payments rather than those who are looking to save money.

If you don’t have any indirect loans, you still can consider consolidating your Direct Student Loans. (Note that only federal student loans, not private student loans, are eligible for consolidation into a Direct Consolidation Loan.)

Refinancing Your Loans

Another option is to apply to refinance your student loans — federal, private, or both — into one new loan through a private lender. Ideally, the new loan will have a lower interest rate or better loan terms.

Before deciding to refinance federal loans, it’s important to note that when you refinance, you lose access to federal benefits. This includes income-driven repayment plans and Public Service Loan Forgiveness.

If you have a lower debt-to-income ratio after graduation and have built your credit over time since you first took out your student loans — and you don’t foresee a need for federal benefits — refinancing may be an option to consider, especially if you can qualify for a lower interest rate.

You can see how much you could save with our student loan refinancing calculator.

The Takeaway

Approximately 7.29 million borrowers are repaying FFEL Program loans as of 2024. The last of these “indirect loans” were issued in 2010, when federal Direct Loans largely took over.

Whether you’re repaying a FFEL loan, Direct Loan, or private loan, it’s a good idea to learn your options and figure out which makes the most sense for your situation.

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

FAQ

What is an indirect student loan?

Indirect student loans are also known as Federal Family Education Loans (FFEL). These loans were discontinued in 2010. Before that time, the Department of Education worked with private lenders through the Federal Family Education Program to provide these student loans, which were backed by the federal government. Student loans are now made through the Federal Direct Loan Program. However, about 7.29 million borrowers in the U.S. are still repaying FFEL loans.

How do I know if my loan is direct or indirect?

To determine if your loan is direct or indirect, log into your account on StudentAid.gov and click on “My Aid” in the dropdown section. In the “Loan Breakdown” section, you’ll see each loan you have. Direct loans start with the word “direct,” while indirect loans start with “FFEL.”

What is better, a subsidized or unsubsidized loan?

A subsidized Direct loan is generally preferable to an unsubsidized loan. The main difference between them is the way the interest is handled. With a Direct Subsidized Loan, you won’t be charged interest on the loan while you’re in school or during the six-month grace period after graduation. With a Direct Unsubsidized Loan, interest starts accumulating from the time the loan is disbursed and you are responsible for paying that interest.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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