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A home inspection is an examination of the home’s structure and mechanical systems. It’s typically performed during the escrow period of a real estate transaction so that buyers can gather information about the condition of the property. This information can help them decide if they want to complete the transaction or cancel the contract.

Many real estate professionals advise homebuyers to purchase a home inspection to protect their money and investment. While a home inspection can reveal many pitfalls associated with buying a particular piece of property, it also has limitations buyers should be aware of.

Note: SoFi does not offer home inspections at this time. However, SoFi does offer conventional mortgage loan options.

What Is a Home Inspection?

A home inspection is a visual assessment of a property’s condition, including the major mechanical, structural, and visual elements of a home. This includes things like the electrical, plumbing, foundation, walls, ceiling, heating and cooling systems, leaks, mold, and structural elements.

Getting a home inspection is one way that borrowers can protect their money when taking on a home mortgage loan. Because home inspection reports can reveal potentially expensive problems with a home, homebuyers may be able to renegotiate the contract, ask home sellers to fix problems, or withdraw from the contract entirely.

What Does a Home Inspection Include?

If you’ve been looking at properties, you probably already know some basics of what to look for when buying a house. But a home inspection delves more deeply than you could in your initial examination. It includes information about the home’s condition, including mechanical systems such as the HVAC, roof, electrical, plumbing, walls, ceiling, floor, windows, doors, foundation, and other structural components.

It’s important to note that inspectors have some limitations. If the electricity isn’t on, they can’t do an inspection of it. There are other systems that are not usually included in a standard home inspection, such as an inspection of a well or septic system.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

When Should You Get a Home Inspection?

Whether you’re a first-time homebuyer or have bought multiple properties, if you’re in a real estate transaction, you should get a home inspection when you want to feel more comfortable with your purchase. You’ll want to make an appointment with the home inspector as soon as your contract is signed. (A seller might also want to get an inspection before putting a home on the market, so that any big issues can be fixed before they hurt the home appraisal value.)

Home Inspection Checklist

Not quite sure what is checked on a home inspection? It’s helpful to know what the home inspection may include in a home inspection checklist.

Grounds

•   Is there proper grading and drainage away from the home or is standing water visible?

•   Are the walkways, yard, trees, and landscaping in good condition? Do branches or trees hang over the house?

•   Is there evidence of termite or water damage on exterior structures?

•   Are the railings secure and stable?

Structure

•   Are the sides of the house straight, without sagging or bowing?

•   Do windows and door frames appear square?

•   Do the roof ridge and fascia (the lower beam supporting the gutters) appear straight?

•   Is the foundation straight with no major cracks?

Exterior surfaces

•   Is the siding or stucco in good condition?

•   Do masonry veneers have cracks or flakes?

•   Is there any wood in contact with the ground?

•   Is the paint peeling or chipping?

•   Are there any vines covering the exterior surfaces of the home?

•   Are there stains on exterior surfaces?

Windows, door, and trim

•   Are door frames cracked or rotting?

•   Are windows in working order with no breaks?

•   Are the joints of windows and doors caulked?

Roof

•   Are shingles cracked, rotting, missing, or curling? Are there more than two layers?

•   Are there obvious patches, cracks, splits, or wrinkling on a flat roof?

•   Are the flashing and soffit in good shape?

•   Is there exterior venting for eave areas?

•   Are the gutters in good shape?

•   Are the chimneys straight, properly flashed, with no evidence of cracked joints?

Attic

•   Are there stains on the underside of the roof?

•   Is there damage or rot to the structure?

•   Is there sufficient insulation and ventilation?

•   Is there plumbing, exhaust or plumbing terminating in the attic?

•   Are there open electrical splices?

Interior rooms

•   Do floors, walls, and ceilings seem plumb and level?

•   Are there stains or cracks in the walls or ceiling?

•   Are the paint or wall covering, flooring, and trim in good condition?

•   Do the lights and switches operate correctly?

•   Are there enough electrical outlets? Do they work properly?

•   Is there heating and cooling in each room?

•   Is there cracked or broken masonry around the fireplace? Is there evidence of backdrafting? Does the damper operate properly?

Kitchen

•   Is there a working exhaust fan venting to the outside?

•   Are there GFCI outlets within 6 feet of the sink?

•   Does the dishwasher operate and drain properly?

•   Are there leaks in the pipes under the sink?

•   Does the floor under the sink have evidence of water?

•   Is the water flow adequate?

•   Are the cabinets in good condition?

•   Do built-in appliances operate properly?

Bathrooms

•   Is there a working exhaust fan that doesn’t terminate in the attic?

•   Is there adequate pressure and flow at all fixtures?

•   Is the toilet stable and working properly?

•   Are metal elements free of rust?

•   Is the caulking on the tub, toilet, and shower in good condition?

•   Are there stains or evidence of past leaking?

Basement or mechanical room

•   Is there evidence of moisture?

•   Are there stains or cracks on exposed foundation?

•   Is there visible sagging, stains, or damage from insects in exposed wood elements?

•   Is there insulation at rim/band joists?

Crawl space

•   Is the crawl space adequately vented to the exterior?

•   Is there insulation on exposed water supply, waste, and vent lines?

•   Is there insulation between the crawl space and the heated areas of the home?

•   Is there evidence of moisture or pest damage?

Plumbing

•   Is there evidence of leaking or cracked pipes?

•   Are there signs of rust on the water heater? Is it vented properly? Is it the correct size to produce enough water for the home?

•   Does the water pump short cycle?

•   Do the galvanized pipes restrict water flow?

•   Is the well water test acceptable?

•   Is the hot water temperature between 118 and 125 degrees Fahrenheit?

Electrical

•   Are there exposed splices? Knob and tube wiring?

•   Does the service panel have adequate capacity?

•   Is there aluminum cable for branch circuits?

Heating and cooling systems

•   Is there good air flow from all vents?

•   Are there open seams in the flues?

•   Is there rust around the cooling unit?

•   Is there a combustion gas odor?

•   Is the air filter clean?

•   Is the ductwork in good condition?

•   Is there asbestos on the components?

•   Are there separate flues for oil/gas/propane and wood/coal?

Miscellaneous

•   Are smoke and carbon monoxide detectors in place?

•   Are stair risers and treads in good shape?

•   Are stair handrails in good condition?

•   Does the garage door opener work properly?

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What Are Problems That May Fail a Home Inspection?

The most common problem areas that cause a home inspection to fail (meaning, the buyer pulls out of the transaction because of the severity of the issues) include:

•   Faulty roof or foundation

•   Pests

•   Low water pressure

•   Failing windows

•   Electrical issues

•   Drainage issues

•   Failing heating system

•   Wood rot

•   Leaks

•   Mold

•   Building code violations

•   Toxic building materials (like asbestos or lead-based paint)

What Happens if a House Fails Inspection?

If there’s an issue that’s too big to ignore, you have options.

1.    Ask the seller to make repairs. Sellers may be able to make the necessary repairs to get the property up to par.

2.    Ask for a credit from the seller at closing. If you’d rather have money to fix the problem yourself, you can negotiate for a credit from the seller.

3.    Resubmit a counteroffer with a lower price. You can submit an addendum to the contract that lowers the purchase price to reflect the condition of the property and remediation cost.

4.    Abandon ship. If the problems are too big and it doesn’t make financial sense to buy the property, you may just want to walk away.

5.    Buy it anyway. In a competitive real estate market, you may need to decide if the problems found during the inspection are worth bringing up. Sellers often have multiple offers or can sell the property “as is,” meaning, the property may be able to sell even with the problems found. This is dependent on the lender, of course, because lenders may not fund your mortgage if the problems found are severe. (Lenders find out this information in the home appraisal, not the home inspection. The home inspection is for you.)

What Are Home Inspectors Not Allowed to Do?

Home inspectors have some limits. The inspection may not include a close look at:

•   Outbuildings or fences

•   Pests

•   Mold

•   Sprinkler systems

•   Wells

•   Septic systems

•   Ducting

•   Vegetation and drainage

•   Swimming pools

Additionally, home inspectors may not climb on the roof, advise on the cost of repairs, or advise on the purchase of the property.

How Much Does a Home Inspection Cost?

According to the U.S. Department of Housing and Urban Development, the typical home inspection costs between $300 and $500. This will vary, of course, depending on the size of the home, region, age of the home, and other optional services you may want to opt for.

How to Find a Reputable Home Inspector

A good home inspector is invaluable and they’re not all created equal. If you want someone that will take a good look at your home, take these steps:

•   Ask for recommendations from family and friends. If someone you know had a great experience with a home inspector, get their number.

•   Ask your real estate agent for ideas. They’re in the business and likely have a good idea of which home inspectors are thorough and knowledgeable when it comes to a home inspection.

•   Read reviews. There are many sites that offer to connect service professionals with homeowners, and they usually have reviews of past work that you can see.

Pros and Cons of a Home Inspection

When it comes to a home inspection, there are a few pros and cons you’ll want to consider.

Pros

•   A trained professional can find issues you cannot. Even if you’re experienced in home construction, a professional has the advantage when it comes to thousands of potential issues the home could have.

•   It helps protect your money. A home inspection can help you determine if purchasing a certain property is right for you or not and can help you ensure that the home is fairly priced.

•   The report can be used as a negotiation tool. A home inspection that reveals an issue can be used to negotiate repairs, price reduction, or money to repair the issue.

Cons

•   It’s possible to miss major issues. Getting a home inspection doesn’t guarantee that there’s nothing wrong with the home you’re buying. The inspector can’t open up walls. And if the home doesn’t have all of its systems operational, the home inspector cannot inspect them.

•   You may need additional inspectors for specialized systems. If the property you’re buying has a well or a septic system, for example, you’ll likely need an additional inspection from someone qualified to inspect those systems.

💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.

Do the Homebuyers Have to Be There?

Home inspectors generally do not require potential purchasers to be present when they complete the home inspection. However, it can be very helpful if the buyers make time to be there. The inspector can point out issues, address the severity of them, or make recommendations that are hard to express in a report.

How Long Does a Home Inspection Take?

On the day of the home inspection, how long a home inspection takes depends on the size of the home. Generally, the home inspection takes between two and four hours. After the inspection is complete, the report is usually sent within 24 to 48 hours.

Home Inspection Tips

After you receive your home inspection, you may see some unexpected things. These tips can help.

•   Don’t panic. Every house has something wrong with it. Most things are fixable and you just need to find out what it costs to fix.

•   Get estimates. The home inspection is usually just a starting point. You’ll need to find professionals to determine how much it will cost to fix.

•   Negotiate for fixes. Your real estate agent can ask the seller to fix items found in the home inspection. The estimates you get can come in handy.

•   Make a decision by the deadline. In your contract, you’ll likely have a date that you need to cancel to ensure you don’t lose your deposit. If something in the home inspection is upsetting enough for you to cancel the contract, you need to do it by the deadline.

The Takeaway

Home inspections are recommended because they can help buyers make an informed decision when it comes to purchasing property. When there’s a sizable amount of money at stake, it’s usually worth it to pay a few hundred dollars to uncover potential problems.

However, sometimes even a home inspection doesn’t catch everything wrong with a property. Keep in mind that once your home inspection is finished, you may need to hire a specialist to get to the root of the problem identified by the home inspector. With better information in your hands, you can be prepared to commit your money to a mortgage.

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.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What things are big red flags in a home inspection?

Some big red flags to look for in a home inspection are potential issues related to the safety and strength of its construction and systems, such as foundation issues, electrical hazards, drainage issues, and leaks.

What is the importance of an inspection?

A home inspection can reveal potential problems or defects in a property. It can help buyers make better decisions and help protect their money.

What does an inspection agreement typically include?

If you see a home inspection agreement, it may include the scope of work, exclusions, date and fee for the inspection, extras that can be performed for a fee, dispute resolution process, limitations of liability, and statement of no guarantee or warranty of the inspection.

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Photo credit: iStock/LSOphoto

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.

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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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Refinancing student loans involves taking out a new student loan (ideally with better rates and terms) and using it to pay off your existing loans. Generally, the reason why people refinance student loans is to save money, although there are some additional benefits that come along with refinancing.

Refinancing private student loans can be an easy decision if your income and credit score can qualify for a lower rate than you got originally. You can also refinance federal student loans with a private lender, potentially at a lower rate. But doing so means giving up federal benefits and protections, so it’s important to weigh the benefits against the risks.

Here’s what you need to know about refinancing student loans so you can decide if this option is right for you.

Benefits of Refinancing Private Student Loans

Refinancing private student loans comes with a number of potential perks. Here are some reasons why you might consider a student loan refinance.

A Lower Interest Rate

One of the main reasons people refinance their existing student loans is because they can find a lower interest rate through a new lender. This can help you save money, potentially thousands over the life of your loan. It can also help you pay off your loan faster, or lower the amount you pay each month.

While student loan interest rates have been on the rise in the last couple of years, you may still be able to do better if your financial situation has considerably improved since you originally took out your student loans.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Reduced Monthly Payments

Another reason why people refinance their private student loans is to lower their monthly payments. You can do this by qualifying for a lower interest rate. Or, you can do this by extending your repayment term. Generally, the longer the loan term, the less you pay each month. Just keep in mind that extending your loan term could cause you to pay more in interest over the life of your loan.

Consolidation of Multiple Loans

If your student loan debt is a messy mix of loans, it can be difficult to stay on top of your payments and track your repayment progress. In this scenario, refinancing can double as a form of debt consolidation and allow you to combine those different loans. Once you refinance, you’ll only have to deal with one loan (and one payment and one due date) each month.

Releasing a Cosigner

When students take out private student loans, they generally need a cosigner. These are usually family members or friends of the student, and they share legal liability for the loan.

If you originally needed a cosigner but are now in a financial position to handle your debt on your own, you might consider refinancing your private student loans. This will give you a new loan and, in the process, release your cosigner from liability for your debt. If you currently have a higher income or credit score than your cosigner, you might even qualify for a better rate.

Factors to Consider Before Refinancing

To determine if refinancing is the right move for you, here are some factors to consider.

Credit Score Requirements

Not every borrower is eligible for refinancing. To get approved, you typically need a credit score of at least 650. A score in the 700s, however, gives you a much better chance of qualifying.

Your credit score also helps determine your new interest rate. Generally, the better your credit score is, the more competitive your interest rate will be. If you can’t qualify for an attractive refinance on your own, you might want to recruit a cosigner who has excellent credit.

Financial Stability

A good credit score is one qualifier for a favorable refinance rate, but that’s not the full story. Lenders will generally look at a wide range of financial factors when determining your interest rate, including your annual income and your debt-to-income ratio (how much of your monthly income you currently spend on debts).

If all three of those financial factors have improved since you’ve taken out your private student loans, it can be worth shopping around for better terms. If, on the other hand, you don’t have consistent earnings and/or have a lot of credit card debt, you’ll likely want to wait until your situation stabilizes before looking into a refinance.

Recommended: Can You Refinance Student Loans More Than Once?

Length of Repayment Term

Refinancing allows you to alter your payment plan. Once you qualify, you can typically choose the new term of your loan, whether it’s five, 10, or 20 years. By setting a new repayment term, you can decide how quickly you want to pay off your loans.

You might choose a shorter repayment term to pay off your loan faster and potentially save on interest. Or, you might opt to go with a longer repayment term to lower your monthly payments. Keep in mind, though, that extending your term may mean paying more in interest over the life of the loan. It will also take you longer to fully pay off your loans.

When Refinancing Might Not Be the Best Option

Refinancing isn’t the right move for every borrower. Here are some scenarios where it may not make sense to refinance your student loans.

You Can’t Get a Lower Interest Rate

Before choosing to refinance, you may want to shop around and see what rates you can potentially qualify for.

Many lenders offer online prequalification where you can enter some information to receive a rate quote without having to submit an actual loan application (which results in a hard credit inquiry). Prequalifying lets you shop around for the personalized rates and terms so you have a better idea of what to expect if you were to refinance, without hurting your credit.

If you can’t get a better rate than you currently have, refinancing might not make sense, at least right now.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

You Have Federal Loans and Could See a Decline in Income

If you have federal student loans and think your income could drop, or you might lose your job, it’s generally not a good idea to refinance those loans. Doing so means giving up federal student loan relief options, such as deferment and forbearance, as well as government programs like income-driven repayment. These protections could come in handy should you run into any financial hiccups.

Some private lenders offer relief programs but they may not be as generous as what you can get with the federal government.

You Are on an Income-Driven Repayment Plan

Income-driven repayment (IDR) plans are one of the many benefits available to federal student loan borrowers. When you choose one of these plans, the amount you pay each month is tied to the amount of money you make, so you never need to pay more than you can reasonably afford. Generally, your payment amount under an IDR plan is a percentage of your discretionary income (typically 10% to 20%).

Under all IDR plans, any remaining loan balance is forgiven if your federal student loans aren’t fully repaid at the end of the repayment period (either 20 or 25 years).

If you are currently on one of these federal repayment plans and you refinance, your loan becomes a private loan and you lose access to IDR plans.

You’re Working Toward Student Loan Forgiveness

In addition to the loan forgiveness associated with IDR plans, the federal government offers other types of loan forgiveness programs, including Public Service Loan Forgiveness, which is for public-sector workers, as well as a separate program just for teachers. If you think you may benefit from any of these federal relief programs, it’s probably not a good ideal to refinance your federal student loans. Doing so will bar you from getting your federal loans forgiven.

The Takeaway

So should you refinance your student loans? The answer depends on your financial situation and repayment goals. Generally, refinancing your student loans makes sense only if you can qualify for a lower rate than you have now.

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.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Why do people refinance their student loans?

Often, people will refinance their student loans to get a lower interest rate, a lower monthly payment, or both. Refinancing can also simplify student loan repayment by replacing multiple loans with a single loan and just one monthly payment.

Why should you avoid refinancing student loans?

Refinancing generally doesn’t make sense if you can’t qualify for a lower rate. You’ll also want to avoid refinancing if you have federal loans and are using (or plan to use) federal benefits like income-driven repayment or student loan forgiveness. Once you refinance a federal student loan, you’ll no longer have access to these federal programs.

Why should private student loan borrowers refinance right now?

You might consider refinancing your student loans now if you are able qualify for a lower rate than you originally got. Refinancing also gives you the opportunity to change the terms of your existing loan, remove a cosigner, and simplify your repayment process by replacing multiple loans with a single loan.

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

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.

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

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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Has your soon-to-be college student chosen the school they’d like to attend in the fall? Or, are they just starting to think about the application process? Either way, it’s never too early to research ways to pay for college.

Student loans, federal and private, are one common method that students and their families use to cover the cost of higher education. Typically, students are the ones who take out these loans (and are responsible for repaying them). However, there are also student loans, both federal and private, available for parents.

Also keep in mind that if your child takes out a private student loan, you will likely need to act as a cosigner, which means you will be responsible for repayment if your child is unable to make payments.

No matter who acts as borrower, it’s important for parents to be in the loop when it comes to student loans. Here’s what you need to know.

Not All Loans Are Created Equally

When it comes to student loans, there are two main options:

•   Federal loans (funded by the federal government)

•   Private student loans (funded by private lenders)

Federal Student Loans

Federal student loans are provided by the U.S. Department of Education and come in several forms:

•   Direct Subsidized Loans These are for undergraduate students and are awarded based on financial need. The government pays the interest on these loans while the student is in school and for six months after they graduate (known as the grace period).

•   Direct Unsubsidized Loans These are available to undergraduates, graduate students, and professional students and are not awarded based on need. The borrower is responsible for paying all interest that accrues on the loan.

•   Direct PLUS Loans These are for graduate and professional students and parents of dependent undergraduates. They are not based on financial need and a credit check is required.

•   Direct Consolidation Loans This option allows you to combine all your federal loans into one loan payment under a single loan servicer.

All federal loans come with fixed interest rates, which means the rate won’t change over the life of the loan. Interest rates are set by Congress each year on July 1st. For most students, federal loan repayment starts after the post-graduation grace period.

To apply for federal student loans, you need to submit the Free Application for Federal Student Aid (FAFSA).


💡 Quick Tip: Make no payments on SoFi private student loans for six months after graduation.

Private Student Loans

Private student loans are available through banks, credit unions, and online lenders. Many private student loans mirror the terms and repayment periods of federal student loans, but not always. Differences between federal versus private loans include:

•   Credit checks Most federal student loans don’t require a credit check (except PLUS loans) but it’s required for private student loans. To qualify for a private student loan, you’ll need to meet the lender’s credit and other eligibility requirements.

•   Repayment start date Some lenders might allow you to defer making payments until six months after you graduate, while others may require you to begin repayment while you’re still in school.

•   Interest rates Federal student loans have fixed interest rates that don’t change over the life of the loan; private student loans offer fixed or variable interest rates.

•   Repayment terms Federal loans have long repayment terms — from 10 to 30 years, depending on your plan. Private student loans also vary in term length, but might not be as long.

•   Loan forgiveness Some federal student loans offer forgiveness options for certain career paths, or after you’ve made a certain number of payments on an income-driven repayment plan. Private student loans aren’t required to offer this option to borrowers.

How Parents Can Help

If your student has tapped all available financial aid, including federal student loans, you might look into student loans for parents.

The federal government offers Direct PLUS Loans for parents. They have higher interest rates and fees and qualify for fewer repayment plans than federal direct subsidized and unsubsidized loans for students. The interest rate for federal direct PLUS loans is 8.05% for the 2023-24 academic year. There is also an origination fee of 4.228%, which is deducted from each loan disbursement.

To get a PLUS loan, you can’t have an adverse credit history (there may be exceptions to this rule if you meet other eligibility requirements) and you must complete the FAFSA with your child.

It’s important to note that a parent PLUS Loan will ultimately be your responsibility to repay. The only way to transfer parent loans is to have your child refinance the loan with a private lender in their name.

You also have the option of getting a parent student loan through a private lender, such as a bank or credit union.

If you have solid finances and expect to be able to work the entirety of your loan term, a private student loan may be a better deal. Private student loans often offer lower interest rates and typically don’t have origination fees. However, they generally don’t offer as many protections should you lose your income and have trouble repaying the loan.

You Can Use Loan Money Only for Certain Things

Typically, student loans are paid out directly to the school. The school will then apply your loan money to tuition, fees, and room and board (if your student lives on campus), and give any remainder to your student. They can then use the surplus funds but only for education-related expenses. This includes textbooks, computers/software, transportation to and from school, housing, meal plans or groceries, and housing supplies (e.g., sheets, towels, etc.).

Students can’t, however, use the proceeds of a student loan to pay for entertainment, going out to dinner, takeout meals, clothing, or vacations.

Federal Loans Offer More Forgiveness Options

Some student loan repayment plans, like income-driven plans, give graduates the opportunity to have their loans forgiven if they aren’t fully repaid at the end of the repayment period, which may be 20 or 25 years.

Depending on the field of work your student may enter, there may be other forgiveness options. For example, under Public Service Loan Forgiveness (PSLF), borrowers can have their loans forgiven after 120 monthly loan payments. To qualify, you must work for an eligible non-profit organization or government agency full-time while making those qualifying payments.

With the Teacher Loan Forgiveness Program, borrowers can qualify for up to $17,500 in loan forgiveness if they teach full-time for five full and consecutive academic years in a low-income elementary or secondary school or educational agency.

There are far fewer student loan forgiveness programs available for private student loans than federal loans. However, some private lenders offer loan modification or repayment assistance programs.


💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

The Takeaway

You and your student will generally only want to look into student loans after you’ve tapped more cost-effective forms of funding, such as scholarships, fellowships, and grants — since that’s money you don’t have to pay back.

After that, you might consider federal student loans. You don’t need a credit history to qualify, and they come with low interest rates and programs, like income-driven repayment plans and loan forgiveness, that private loans don’t offer. If you still have gaps in funding, you might next look at private student loans.

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

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

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SoFi 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.

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

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

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

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

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It’s no secret that identity theft has been an issue for consumers. In 2022, the Federal Trade Commission (FTC) received 1.1 million identity theft reports, and a similar number of complaints are expected in 2023. The financial toll of online fraud, which includes identity theft, can be substantial. The FTC estimates that it cost Americans $8.8 billion in 2022, with median losses around $650.

One tool that can help detect issues early on is credit monitoring. This service tracks your accounts and alerts you to any changes or suspicious activity, giving you time to start the process of undoing any damage that’s been done.

If you were involved in a data breach, you may receive credit monitoring at no cost. Otherwise, you can pay a nominal fee for the coverage — usually around $10 to $30 a month — or do most of the legwork yourself for free.

Why Is It Important to Monitor Your Credit?

Your credit history can have an impact on your ability to make big financial decisions, like purchasing a home or buying a new (or new-to-you) car.

If you have a spotless report, you could get better interest rates on new loans. On the other hand, if your score is what’s considered poor, you could be denied access to certain financial products altogether.

Even if you’re diligent about abiding by best credit practices, if someone has unauthorized use of your information, they can quickly sink your hard-earned credit score. That’s when credit monitoring comes in handy. If you see an alert corresponding to a change you didn’t make, you’ll know something’s up — and you can move quickly to repair any issues that might impact your creditworthiness.

Generally speaking, it’s a good idea to check your credit reports at least once a year. If you’re making a major purchase, consider monitor your credit for at least three months beforehand to ensure everything is in order.


💡 Quick Tip: Your credit score updates every 30-45 days. Free credit monitoring can help you learn about your score’s normal ups and downs — and when a dip is cause for concern.

Pros vs Cons of Credit Monitoring Services

Credit monitoring can be a useful tool, but there are some drawbacks you’ll want to consider. Here are pros and cons of credit monitoring services.

Pros of Credit Monitoring Services

Many credit monitoring services come with extra features that might help justify their cost. Common examples include:

•   Alerts when there are changes to your personal information, significant balance changes, account closures, or hard inquiries

•   Access to credit reports and scores from one or more of the three major credit bureaus

•   Dark web scans, which checks if your personal information has been compromised

•   Identity theft insurance, which can cover any costs you may incur as you’re dealing with identity theft

•   Identity recovery services, which can be useful as you repair any damage from identity theft

Cons of Credit Monitoring Service

Even the best credit monitoring service has its limits. Here are some potential drawbacks to consider:

•   Cost of a subscription

•   Can’t provide 100% protection from all fraud or identity theft

•   Can’t fix inaccuracies on your credit report (you’ll need to handle that)

•   Coverage may not include monitoring from all three major credit bureaus: Experian, TransUnion, and Equifax

•   You may not be alerted if someone uses your name to collect a tax refund or claim benefits from Medicare, Medicaid, Social Security, or unemployment insurance

How to Monitor Credit for Free

There are times when paying for a credit monitoring service makes sense. For example, you want more robust identity monitoring, prefer a program that monitors reports from the credit bureaus, or need help resolving disputes. It may also be a good move if you suspect your information has been exposed.

But it’s possible to do the job yourself (and avoid paying a subscription fee). Here’s how:

Request a Free Credit Report

By law, you’re entitled to a free credit report every 12 months from each of the three credit bureaus. Visit annualcreditreport.com to get started. While you can ask for the reports at any time, spacing out your requests every few months allows you to keep an eye on your accounts throughout the year.

Find Out If You’re Already Getting Coverage

Some accounts include some level of complimentary credit monitoring, so it’s worth a call to your bank or credit card company to find out if you qualify.

Put a Freeze on Your Credit Reports

There are instances when freezing your credit report might be a good move, such as when you believe your data has been breached or if your Social Security number or other sensitive information was stolen or made public.

A credit freeze allows only a limited number of entities to view your credit reports. This means the credit bureaus can’t provide your personal amount to new lenders, credit card companies, landlords, or hiring managers. While this freezes the renting, hiring, and lending process, it also prevents thieves from stealing your identity and opening a new account in your name.

There’s no charge to freeze or unfreeze your credit, and your credit score won’t be affected.

Request a Fraud Alert

If you think you may be the victim of fraud or identity theft, you may want to consider placing a fraud alert on your credit report. Once a fraud alert is placed, you’ll be asked to provide your phone number, which creditors will use to verify your identity whenever an application for credit is made.

There’s no charge to make the request with the credit bureaus, and the alert is active for one year. It has no impact on your credit score.


💡 Quick Tip: What is credit monitoring good for? For one, maintaining a high credit score can translate to lower interest rates on loans and credit card offers with more perks.

The Takeaway

Credit monitoring services can act like a watchdog over your accounts, flagging suspicious activity or changes so you can move quickly to correct inaccuracies or do damage control. You can take a DIY approach to keeping track of your accounts, which can include requesting a free credit report every year from the three credit bureaus. But if you’ve been the victim of identity theft or fraud — or need more robust monitoring — you may want to consider paying for a credit monitoring service.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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

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

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

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Student loans give many college students the opportunity to finance their education. Being well-informed on the nuts and bolts of student loans can make it easier to fund your education, while still keeping your eye on long-term goals like starting a career and saving for the future.

10 Student Loan Questions, Answered

There are many different types of student loans, with different loan amounts, costs, benefits, and repayment terms. In short, student loans are complicated. But don’t stress. We have answers to questions on everything from the difference between federal and private student loans to interest rates to when and how you’ll need to start repaying your loans. Let’s dive in.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

1. How Do I Apply for Federal Student Loans?

To apply for federal student loans, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA®). This opens the door to many forms of financial aid, including grants, work-study, and federal student loans.

After you submit the FAFSA, you’ll receive a Student Aid Report (SAR) via email or regular mail. The report includes your responses to the FAFSA questions as well as your Student Aid Index (SAI), formerly called Expected Family Contribution (EFC). Your SAI is a number that is used to determine your eligibility for federal financial aid.

Schools that receive information from your FAFSA will be able to tell you if you qualify for federal student loans. Almost every American family qualifies for federal student loans. Direct Subsidized Loans (in which the government covers your interest while you are in school and for six months after you graduate) are awarded based on financial need. Direct Unsubsidized Loans (in which you are responsible for all interest that accrues on the loan) are not need-based.

2. How Do I Fill Out a FAFSA Form?

You can fill out the FAFSA online at StudentAid.gov . While the FAFSA is known for being a confusing and complex application to complete, the form was streamlined for the 2024-2025 award year. Applicants can now skip as many as 26 questions, and some applicants may be able to complete it in as little as ten minutes.

While the FAFSA is typically available starting on October 1 for the following academic year, the new 2024-2025 FAFSA will not be available until December 31, 2023.

The first step to filling out the FAFSA is to create an FSA ID through StudentAid.gov, which serves as an electronic signature. Both you and your parents will need to create your own unique FSA ID. You’ll then want to check what information you’ll need to fill out the FAFSA and gather it before you begin.

The online FAFSA is typically processed by the Department of Education within three to five days, and then the information is sent to the list of schools you provided (keep in mind that you can list schools that you have not yet applied to.) The colleges use your FAFSA information to determine financial aid eligibility.

3. What is the Difference Between Private Student Loans and Federal Ones?

Federal student loans are funded through the government and are strictly regulated. To qualify for them, students must fill out the FAFSA. Private student loans, by contrast, are funded by banks, credit unions, and other private lenders.

Federal student loans for undergraduates don’t require a credit check and rates are set by Congress each year. Federal student loans also come with guaranteed benefits and protections, including income-driven repayment plans, deferment and forbearance options, and forgiveness programs.

Private student loans do require a credit check and rates are set by individual lenders. Generally, borrowers (or their parent cosigners) who have strong credit qualify for the lowest rates. Loan limits vary by lender, but you can often get up to the total cost of attendance, which is more than you can borrow from the federal government.

Since private student loans generally have higher interest rates than federal student loans and lack the same protections, it’s generally recommended that you tap all forms of federal aid, including federal student loans, before applying for private student loans.

Recommended: Private vs Federal Student Loans

4. How Much Does College Cost?

The average cost of tuition and fees for the 2023-2024 school year is $42,162 at private colleges, $23,630 for out-of-state students at public universities, and $10,662 for in-state residents at public schools, according to U.S. News.

The actual amount you will pay for college will depend on where you choose to go and how much financial aid, including need-based and merit-based aid, the school awards you.

If you submitted the FAFSA, each school that accepts you will also send you a financial aid award letter, also known as the student aid package or school offer. This letter will include the annual total cost of attendance and a list of financial aid options. Typically, your financial aid package will be a mix of gift aid, meaning financial aid that doesn’t have to be repaid, and federal student loans, which you have to repay with interest. The award letter is specific to that university or college, so you’ll receive a different letter from every school that accepts you as an incoming student.

5. Is College Worth the Cost? What Are the Benefits?

College represents an investment in yourself and your future, and only you can decide how much that’s worth. So, we’ll focus instead on the potential benefits of going to college. The most obvious benefit is that, if you want to pursue certain careers, you’ll likely need the appropriate college education and training.

Studies show that college graduates earn significantly more money, accumulated over a lifetime, than those who did not attend. Earning your degree of choice requires a solid plan and commitment, and these are excellent strategies and skills to develop before entering the working world. Plus, people often make lifelong friendships at college, and many universities have a strong alumni network, which can be helpful on many levels as you begin your career.

6. What Can Student Loans Be Used For?

Funds from federal and private student loans can be used for a variety of education-related expenses, including tuition, fees, textbooks, computers/software, transportation to and from school, housing (on or off campus), meal plans or groceries, and housing supplies (e.g., sheets, towels, etc.).

Basically, if the expense is essential to your educational success — meaning it supports your living arrangements, basic daily needs, or attendance at school — it’s likely a permissible use of student loan funds.

Recommended: Using Student Loans for Housing and Living Expenses

7. What is a Grace Period for Student Loans?

For most federal student loans, after you graduate, leave school, or drop below half-time enrollment, you have a six-month grace period before you must begin making payments. Grade periods for private student loans can vary by individual lender.

The student loan grace period is designed to give students a chance to find employment before their monthly loan payments kick in.

You are not required to make interest or principal payments during the grace period. However, if your loan isn’t subsidized by the government, interest will still accumulate during the grace period and be added to your balance, or capitalized, if you don’t pay it before your first loan payment is due. Making at least interest-only payments even when it’s not required can save you a significant amount of money over the life of your student loans.

8. How Do I Repay Student Loans?

Repayment on federal student loans generally begins after the six-month grace period. The standard repayment plan for federal student loans is 10 years, but borrowers are able to select one of the other repayment plans at any time without incurring any costs.

Federal student loans also offer income-driven repayment plans, which tie the borrower’s monthly payment to their income. While this may make the loan more expensive in the long-term, it can make the monthly payments more affordable. When deciding on a repayment plan, you want to consider factors like your income, estimated monthly payments on the student loan, and your overall budget. Over time, you may find it helpful to reevaluate the payment plan you’ve selected as your financial situation may change.

To determine the repayment options available with a private student loan, check directly with the individual lender.

If you have higher-interest Direct Unsubsidized Loans, graduate PLUS loans, and/or private loans, you may be able to refinance your student loans after you graduate at a lower interest rate. This could lower the total cost of your loans and make repayment easier.

9. Can I Repay Student Loans Early?

Yes, you can generally pay off student loans, including federal student loans and private student loans, early without incurring prepayment penalties. You may want to reach out to your lender first to make sure they will apply your extra payments to your principal, rather than towards your next payment.

There are many benefits to paying off your student debt early. You will save on student loan interest and get out of debt faster. However, you’ll want to make sure you have enough income to cover a higher monthly payment. Paying too much toward your student loan could cause you to fall short on essential bills like rent or a car loan. It might also delay saving for other goals.

Recommended: 6 Strategies to Pay off Student Loans Quickly

10. How Can I Apply for a Private Student Loan?

If you decide to apply for a private student loan to help pay for college, it’s a good idea to shop around and compare lenders. Your school’s financial aid office may be able to provide you with a list of lenders that they work with. However, you’re not restricted to this list.

Before you choose a lender, it’s a good idea to review factors including interest rate, loan terms, any additional fees associated with the loan, and the repayment plans available at each lender. Many lenders will allow potential borrowers to get prequalified to find out how much they may qualify to borrow and at what rates.

Another thing that may be worth considering is if the lender has any sort of programs for borrowers who run into financial difficulties down the road and may have trouble making payments on their student loans. Some lenders offer unemployment protection that allows eligible borrowers to temporarily pause payments on their student loans should they lose their job through no fault of their own.


💡 Quick Tip: Need a private student loan to cover your school bills? Because approval for a private student loan is based on creditworthiness, a cosigner may help a student get loan approval and a lower rate.

The Takeaway

Student loans can be instrumental in helping you pay for college, but it’s important to understand how they work before borrowing. Broadly, there are both federal and private student loans. Federal student loans are backed by the federal government and come with unique benefits like income-driven repayment plans and forgiveness programs.

Private student loans are offered by private lenders and generally require potential borrowers to undergo a credit check during the application process. Since private student loans tend to have higher interest rates and lack federal protections, you generally want to consider federal loans first.

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

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

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SoFi 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.

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

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

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

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

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