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An apprenticeship program pairs paid on-the-job training with classroom instruction to produce skilled workers, who get a foot in the door of their preferred field without going to college for four years or more.

More than 646,000 apprentices were taking part in nearly 27,000 registered apprenticeship programs in 2024, according to the U.S. Department of Labor’s Office of Apprenticeship.

Here are details about finding an apprenticeship, how much you might earn, the commitment required, and more.

Apprenticeship 101

An apprenticeship is a way to acquire hands-on training, work experience, classroom instruction, and mentorship in a particular trade. Not only is an apprenticeship paid, but it’s also a doorway to a stable and in-demand job.

Most apprentices are promoted or receive a raise during their apprenticeship. The average starting salary is $80,000 after an apprentice completes an apprenticeship program.

Apprentices receive a nationally recognized credential in their industry upon completion of the program, and may even earn academic credit toward a college degree. Ninety-three percent who cross the finish line retain employment, according to the Labor Department.

There are several places to look for an apprenticeship. You can use the federal agency’s Apprenticeship Finder to search by keyword and location, contact your state’s apprenticeship agency, check out trade or labor unions in your area, or use traditional job search engines. If you need more guidance, find an American Job Center near you.

Recommended: Why College Isn’t for Everyone

How Does an Apprenticeship Work?

The majority of apprenticeships are registered either with the Department of Labor or a state apprenticeship agency. Upon entering a program, apprentices receive training under the guidance of an experienced mentor. Many are also required to take academic courses related to that career.

The eligible starting age is 16, but some occupations require apprentices to be at least 18 years of age. Some apprentices may also have the option to enter a pre-apprenticeship program, which aims to better prepare workers for the apprenticeship program.

Upon completion of the program, a nationally recognized credential, certificate, or degree is awarded.

How Long Does an Apprenticeship Last?

An apprenticeship program usually lasts four years. Some take as little as one year, and some take as many as six. Whatever the length, most apprentices must complete at least 2,000 hours of on-the-job learning plus 144 hours of classroom work.

How Much Do Apprentices Make?

The average apprentice salary is $22 per hour, with starting earnings around $15–$20 per hour. Typically, wages increase each year as they gain skills and experience. By the end of their apprenticeship, many earn between $25–$35 per hour or more. Earnings vary based on the industry, location, and whether the apprenticeship is unionized.

Do You Have to Pay for an Apprenticeship?

Apprenticeship training is typically offered by the employer at no cost to the apprentice, but apprentices may need to cover certain expenses, such as tools or educational materials.

Employers may pay for the instruction but specify that if an apprentice leaves the program before completion, related costs must be paid back to the employer.

What Types of Careers Offer Apprenticeships?

If construction jobs come to mind when you think of apprenticeships, that’s logical. Many apprenticeships are in the construction trades, but not all are.

Here’s a sample of jobs and the number of active, registered apprentices:

Occupation	Active apprentices in 2022	Median annual wage*
Electrical power line installers and repairers	15,249	$85,420
Heavy truck and tractor-trailer truck drivers	9,944	$54,320
Heating, AC, and refrigeration mechanics and installers	8,535	$57,300
Nursing assistants	4,033	$38,130
Firefighters	2,306	$57,120
Registered nurses	2,281	$86,070
Food service managers	1,820	$63,060
Barbers and hairstylists	1,751	$35,080
Software developers	1,219	$132,270
*2023 Bureau of Labor Statistics wage data for the occupation as a whole

What About College or Trade School?

Alternatives to apprenticeships include attending a four-year college or a trade school. There, you’ll be provided with a broader set of knowledge along with the key skills required for your area of study.

Trade school costs less than college but still can cost thousands of dollars a semester. As an apprentice, you can learn to do something you enjoy while getting paid. What’s the catch? Trade school degrees often take about two years to complete. Many apprenticeships last longer, and even getting one can be tough.

Then there’s the traditional college route. But is college worth it?

More than half of college students take out student loans, usually federal student loans but in some cases private student loans. The average borrower leaves school owing just over $35,000.

However, the return on investment can be huge. The ROI for a bachelor’s degree is 134% after 20 years on average, according to the Education Data Initiative.

Major U.S. companies have vowed to change their hiring habits by offering career paths to people without four-year college degrees. Almost two-thirds of U.S. workers do not have a bachelor’s degree, and job screening by college degree hits minorities especially hard. But change has been slow in coming. A bachelor’s degree remains the standard in many cases.

Beyond the cost of college tuition, whether you choose an apprenticeship or a degree, you’ll need to evaluate salary and career potential using either path to find the one that’s right for you.

Student Loans, Grants, and Scholarships

Whether you choose trade school, college, or an apprenticeship with a community college component, you might need financial aid in the form of grants, scholarships, federal student loans, federal work-study, or private student loans.

Private student loans can be helpful, but because they lack the benefits and borrower protections available with federal student loans, they are intended to fill in gaps after other funding sources have been spoken for.

Apprentices in a credit-bearing college program who qualify can receive federal Pell Grants.

And yes, it’s possible to take out student loans for community college.

Do hunt for scholarships. Every year sees $2 billion in unclaimed scholarships, meaning merit- and need-based aid was left on the table.

Recommended: Grants and Scholarships by State

Pros and Cons of an Apprenticeship

Here’s a snapshot of the upsides and potential downsides of apprenticeships.

Pros	Cons
Apprentices can earn a salary while avoiding student loan debt.	An apprentice will typically start with a relatively low salary.
Apprentices build new skills through hands-on experience and classroom instruction, and may even earn credit toward a college degree.	The competition to get an apprenticeship can be fierce, especially in high-paying fields.
It can open the door to a well-paid career.	Many occupations still require at least a bachelor’s degree, particularly in the medical and science fields.

Apprenticeship vs Internship

Both apprenticeships and internships aim to help you gain expertise with hands-on training in a certain industry, but several differences should be noted. Here are some of the most common ones.

•   Duration: Internships typically last only one to three months, while an apprenticeship can last up to six years.

•   Pay: Apprentices receive at least the minimum wage specified by the Fair Labor Standards Act for hours on the job. Wage increases are earned as the apprentice gains and uses skills while working for the employer. Internships are usually unpaid, temporary positions.

•   Structure: Apprenticeships have a structured training plan and prepare an apprentice to fill an occupation within the organization. Internships aren’t always structured and only prepare interns through entry-level work.

•   Mentorship: Apprentices work with an experienced mentor. Internships don’t always include mentorship.

•   Credential: After completing an apprenticeship program, nationally accredited certification is awarded. Interns generally don’t receive any type of credential.

•   Job opportunities: Interns are usually in college and get an opportunity for career exploration and skill development. An apprenticeship provides in-depth training, and apprentices can potentially transition into the same role after completing the program and earn a higher salary.

The Takeaway

An apprenticeship can be an excellent way to gain access to a company or a field you wish to work in without going the traditional college route. They aren’t for everyone, though; nor are they available in every field.

While apprenticeships are typically covered by your employer, you may still find you need funding to cover additional costs or living expenses. In that case, you can rely on cash savings, grants, scholarships, and federal and 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.

FAQ

What is an apprenticeship?

An apprenticeship is a structured program that combines paid on-the-job training with classroom instruction, allowing individuals to gain practical skills and experience in a specific trade or profession. Apprenticeships are often offered in fields like construction, healthcare, and IT, providing a pathway to industry-recognized credentials or licensure.

How long do apprenticeships typically last?

The length of an apprenticeship varies by field and program but generally ranges from one to six years. Most programs include a set number of hours for on-the-job training and classroom instruction, ensuring participants gain comprehensive knowledge and practical experience in their chosen industry.

What are the benefits of an apprenticeship?

Apprenticeships provide hands-on training, mentorship, and a salary while learning. They often lead to industry-recognized certifications, higher earning potential, and strong job prospects. Unlike traditional education programs, apprenticeships allow participants to “earn while they learn,” reducing or eliminating student debt.

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Photo credit: iStock/JohnnyGreig

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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

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

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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The average cost of college tuition varies widely based on location and whether the school is public or private. The average cost of college for in-state students at a four-year institution in 2024-25 is $11,610. Students at private nonprofit four-year institutions paid over $43,000, on average.

Read on for more information about average tuition costs and other expenses facing college students.

The Average Cost of College

According to the College Board’s annual “Trends in College Pricing” report, the average cost of attending a four-year college as an in-state student at a public university during the 2024-25 school year is $11,610. For an out-of-state student attending a public four-year college, the average rose to $30,780.

The average cost of attending a private four-year institution is $43,350. These averages are based on the published price at a college or university. This includes tuition, fees, and room and board.

Cost is a major factor for students deciding which school to attend. According to the annual Sallie Mae survey “How America Pays for College 2024,” 81% of parents and students eliminated a college based on cost.

Historical Average Cost of Tuition

The cost of tuition has increased dramatically over time. For the 2004-05 school year, the average cost of college tuition at a public four-year institution was $5,132 for a student receiving in-state tuition. In 20 years, tuition rose to $11,610 for the 2024-25 school year.

U.S. News reviewed tuition costs at 436 ranked National Universities, those universities included as part of the annual college rankings. According to their data, the average tuition and fees at private National Universities increased by 126% in 20 years from 2004 to 2024. During the same period, at four-year public National Universities, tuition for out-of-state students increased by 112%, and for in-state students it rose by 133%.

Average Total Cost of College

A traditional undergraduate college degree takes four years to complete, which means four years of tuition costs. According to EducationData.org, the cost of college has risen, on average, about 7.0% annually since 2000.

Year-over-year changes can fluctuate greatly, however, so it can be challenging to predict exactly how much a student will pay in tuition costs over the course of their degree. For example, the “Trends in College Pricing” report found that in-state tuition costs at public four-year institutions increased just 2.7% from the 2023-24 to the 2024-25 school year. For that same time period, tuition increased 3.9% at private nonprofit four-year institutions.

To get a rough estimate of how much college will cost in its entirety, you can take the current tuition rate and multiply it by four. Keep in mind this won’t account for any increase in the cost of tuition.

Average Additional College Expenses

Tuition generally makes up the majority of a student’s college expenses. But there are other fees and costs to factor in, including room and board, books, and other supplies. As you plan how to pay your tuition, students might also consider general living expenses.

What Is the Cost of Room and Board?

Some colleges charge “comprehensive fees,” which reflect the total for tuition, fees, and room and board. Other schools charge room and board separately from tuition and fees. The cost of room and board typically accounts for the cost of housing (i.e., a dorm room or on-campus apartment) and the meal plan.

The average cost of on-campus room and board for the 2024-25 school year is $12,917 for four-year public institutions for both in-state and out-of-state students, and $13,842 for four-year private nonprofit institutions.

The actual cost will vary depending on the type of housing you live in and the meal plan you choose. Housing can be another determining factor for students. About 73% of students attend college in their home state, and 36% live at home or with relatives to save on housing costs.

The Cost of Extra Classes

Tuition at some schools covers the cost of a certain number of credit hours. Your credit hours can vary each term depending on the classes you enroll in. If you exceed the number of credit hours covered by tuition, you may pay an additional fee.

Books and Supplies

On top of those expenses, don’t forget to budget for books and supplies. The average college student attending a public, four-year college spends $1,220 on textbooks per year.

Transportation

Transportation is another major category of expenses for college students. Will you have a car on campus? If so, plan to pay for gas, insurance, and a parking permit. How often do you plan to go home? Will a trip to visit your family require airfare?

Other Living Expenses

Then there are additional personal expenses like eating out, laundry, and your monthly cell phone bill. To get an idea of how much you’ll actually spend every month, it helps to review your current spending.

College may be the first time you’ve had to learn how to budget. Consider sitting down with your parents, an older sibling, or a trusted friend who has already navigated their first year of college to get an idea of the expenses you may encounter.

Paying for College

There are, of course, options available to help you finance your education. Whether you’re going to college for the first time or returning for further education, consider looking into the following options:

First Thing’s First: The FAFSA

A common first step for students interested in securing federal financial aid is to fill out the Free Application for Federal Student Aid (FAFSA®). As you get ready to apply, pay attention to deadlines, as they vary by school and state. After you fill out the FAFSA, you’ll receive an offer letter detailing the type of aid you qualify for. This may include scholarships and grants, work-study, and federal student loans.

Planning ahead is one way to set yourself up to successfully pay for college. If you’re not quite ready to fill out the FAFSA yet, you can use the Federal Student Aid Estimator at StudentAid.gov/Aid-Estimator/ to get an idea of how much aid you might qualify for.

Recommended: Important FAFSA Deadlines to Know

Scholarships and Grants

Scholarships and grants can be immensely helpful when it comes to paying for college, since that money doesn’t need to be repaid. In addition to filing the FAFSA, you can check to see if there are any other scholarships for which you may qualify. There are also online resources and databases that compile different scholarship opportunities.

The federal work-study program is another form of aid that can help students pay for college. If you are eligible for work-study and receive it in your financial aid award, you may still have to find your own employment at your university. Check with your school’s financial aid office to find out if your school participates and whether they will place you or if they have a work-study job board.

Of course, other jobs for college students are available, but students will have to pursue those on their own.

Recommended: Grants for College

Student Loans

Student loans offer another avenue for students to finance their college education. Unlike scholarships and grants, however, student loans must be repaid. There are two kinds of student loans — federal and private.

Federal Student Loans

Applying for student loans requires filling out the FAFSA. Federal loans for undergraduates can be either subsidized or unsubsidized. With a subsidized loan, borrowers won’t be responsible for paying the interest that accrues on the loan while they are actively enrolled in school at least half-time. With an unsubsidized loan, borrowers are responsible for paying the accrued interest during all periods.

Whether subsidized or unsubsidized, loan repayment generally doesn’t begin until after graduation (or a student drops below half-time) and a grace period.

Most grace periods for federal loans are six months. Interest rates on federal student loans are set by the government and are fixed for the life of the loan.

Federal loans aren’t guaranteed to cover your undergraduate or graduate school tuition costs. There are borrowing limits that restrict the amount of federal loans a student can take out each year. For example, a first year undergrad, dependent student is currently allowed to borrow $5,500 in federal loans. In some cases, private student loans may be used to fill in the gaps.

Private Student Loans

Private student loans are offered by banks, credit unions, and online lenders. Terms and conditions of a private student loan are set by the individual lender.

Private lenders will likely review a borrower’s credit history and other financial factors in order to determine what type of loan they may qualify for. If an applicant is applying with a cosigner, private student loan lenders will look at their financial background as well, which might include things like their credit score and current income.

While federal student loans come with fixed interest rates, private student loans can have fixed or variable interest rates. Variable interest rates may start lower than fixed rates, but they rise and fall in accordance to current market rates.

Private student loans don’t carry the same benefits and protections offered by federal student loans — such as income-driven repayment and loan deferment options. Some lenders may offer their own benefits, though.

The Takeaway

The average cost of college tuition for the 2024-25 school year was $11,610 for students paying in-state tuition at a four-year public institution. For out-of-state students, the average was $30,780. At a private four year institution it was $43,350. Paying for college usually requires a combination of financing options, including savings, scholarships, grants, work-study, federal student loans, and even 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.

FAQ

How much does four years of college cost on average?

The average cost for four years of college varies based on the institution type. As of 2024, attending an in-state public college averages around $108,000, including tuition, fees, and living expenses. Private colleges are significantly higher, averaging over $230,000 for four years. Costs can vary further by location and program.

How much has college tuition increased in 2024?

In the 2024-2025 academic year, average tuition and fees increased by 2.7% for in-state students at public four-year institutions and by 3.9% at private nonprofit four-year institutions. These increases are below the general inflation rate of 3.1% for the same period.

What are ways to save money on college expenses?

There are many ways to save money on college expenses, including by attending in-state public colleges, starting at a community college, or enrolling in accelerated degree programs. You can apply for scholarships, grants, and work-study opportunities, use tax-advantaged 529 savings plans, minimize textbook costs through rentals or e-books, and reduce living expenses by commuting or sharing housing.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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

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

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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Prepaid college plans are an excellent option for families looking to lock in today’s tuition rates for future use, potentially saving thousands as college costs rise. These state-sponsored programs allow participants to prepay tuition at in-state public colleges, offering financial predictability and peace of mind.

However, the availability, terms, and benefits of prepaid plans vary widely by state. Understanding what each state offers is essential for making an informed decision and maximizing the benefits of these plans to support your child’s higher education goals.

Keep reading to learn more on prepaid college tuition plans, including what they are, pros and cons, and which states offer them.

What Are Prepaid College Tuition Plans?

If you have a child who plans on going to college, a prepaid college tuition plan can help set them up for success. A prepaid college tuition plan allows you to start paying for college now, long before the student actually attends. This locks in the current tuition rate, even as tuition costs go up.

You can think of it as a loan of sorts. You pay up front, and the state earns money off of those payments. When it comes time for your student to attend college, the state pays the tuition out of the funds you provided.

Of course, you need to be confident in your student’s plans for this to work. You will probably need to live in the same state as the college the student will attend since these plans tend to apply only to in-state tuition.

Pros and Cons of College Prepaid Plans

Locking in a lower tuition rate can be a tremendous financial benefit. With college costs constantly on the rise, a prepaid tuition plan offers the potential of a steep discount. And you might even enjoy some tax breaks if you choose this approach, such as a deduction based on your contribution to a prepaid plan, depending on where you live.

However, this sort of plan can be somewhat inflexible. You may be limited in the choices you have in terms of schools. While you can get a refund if your student chooses a different school than you all expected, you may end up feeling some pressure to stay the course when investing in a plan like this.

And you can’t use the money freely. There are restrictions to how you can use the funds in a prepaid college plan. For example, room and board probably aren’t covered. These plans generally focus specifically on tuition and fees.

Despite this, many choose prepaid college plans to lock in a rate. They also enjoy the high contribution limits and tax benefits. Here are the major pros and cons of these plans.

Prepaid College Plans vs 529 Program

Prepaid college plans and 529 savings plans are both designed to help families save for higher education, but they differ significantly.

Prepaid college plans allow families to lock in tuition rates at in-state public colleges by prepaying future costs, offering protection against rising tuition. However, they often have residency requirements and limited flexibility if the student attends an out-of-state or private institution.

529 savings plans, on the other hand, are investment accounts with tax-free growth when used for qualified education expenses. They provide greater flexibility, covering tuition, room, board, and more at any eligible institution, but are subject to market risk.

	Prepaid College Plan	529 Savings Plan
Time frame	You must start investing within a certain time period. Different states will have different rules about this.	You can generally invest whenever you like.
Flexibility	These plans are less flexible. You generally have to spend the money on tuition and fees specifically.	You have more flexibility in how you spend your money. You can use funds for tuition, books, room and board, and other expenses.
Risk	These plans are stable. However, they won’t earn much over time. If your student changes their mind and you withdraw the money, expect to break even. These plans aren’t risky, but they aren’t going to earn much, either.	This is an investment. It could earn far more than a prepaid plan, but it does involve risk.

Recommended: How to Start Saving for Your Child’s College Tuition

States With Prepaid College Plans

Only nine states still have prepaid college plan options, and each state will offer something a little bit different. You can compare all of the options below to see if any of these state plans work for you.

State	Plan	Features
Florida	Florida 529 Prepaid Plan	The child must be a Florida resident. This plan covers tuition and fees, and you can opt into a one-year dorm plan, as well. Florida lets you use this plan nationwide, and it’s guaranteed by the state.
Massachusetts	MEFA U.Plan	You can contribute the full cost of tuition and fees to this plan, which is invested in bonds. You can transfer the funds or cash out and receive your investment plus interest if your plans change.
Michigan	MPACT	Michigan offers a discounted, age-based pricing structure. Plus, you can transfer the funds to other family members. The funds work at in-state, out-of-state, and even trade schools.
Mississippi	Florida 529 Prepaid Plan	You pay a lower monthly rate for younger children when you enroll in this plan. You have to use the funds on tuition and fees, but anyone can contribute to the plan.
Nevada	Nevada Prepaid Tuition Program	There are some eligible out of state and private institutions that qualify under this plan. The student must use the funds within six years of graduating high school.
Pennsylvania	PA 529 Guaranteed Savings Plan	This plan only applies to state universities. However, you can also use it for up to $10,000 at elementary and secondary public, private, or religious schools. You can alter your contribution levels at any time by changing your tuition level.
Texas	Texas Tuition Promise Fund	Save for public colleges and universities in Texas with this plan, excluding medical and dental institutions. You must enroll between September and February.
Virginia	Tuition Track Portfolio	Allows Virginia residents to prepay future college tuition by purchasing units that correspond to the current average tuition rates of Virginia public colleges and universities, thereby protecting against tuition inflation.
Washington	Guaranteed Education Tuition	You can use your funds on schools nationwide. You can even use the funds for room and board, books, computers, and other expenses. As long as you use the funds for higher education, they won’t be subject to tax.

Are Prepaid College Plans Tax Deductible?

Prepaid college plans are not directly tax-deductible at the federal level. However, some states offer tax deductions or credits for contributions to their state-sponsored prepaid plans. These tax benefits vary by state, so it’s essential to check local regulations to understand the specific advantages available in your state of residence.

Are Prepaid College Plans Worth It?

That depends on where you live and what your student’s goals are. If the future is pretty certain, or you live in a state with a very flexible plan, a prepaid college plan can be a safe, stable way to save up money for college.

Because of the limitations and lack of flexibility, though, it may not be right for everyone. If, for example, you want to be more aggressive about your college planning, a 529 savings plan might suit your goals better. Plus, you can spend that money on things beyond just tuition and fees.

Recommended: Parent PLUS Loans vs Private Parent Student Loans for College

Alternative Methods for Prepaid College Plans

Beyond a prepaid tuition plan, you can also try a college savings plan to build up cash for college. This allows you to save up money and spend it on qualified education expenses. It doesn’t lock in a tuition rate, but because it’s a more aggressive type of savings plan, you could end up saving up more money in the long run.

Of course, if your child is headed to college in the next few years, you may not have time to save much money. Parent PLUS loans can help. When an undergraduate’s financial aid doesn’t meet the cost of attendance at a college or career school, parents may take out a Direct PLUS Loan in their name to bridge the gap.

The Takeaway

The thought of large student debt scares off many who would otherwise attend a college or university. But with some strategic and long-term planning, college can fit in the budget. You can mix and match approaches to find what works for you. For example, you could combine a prepaid tuition plan with federal and private student loans to pay for college. No matter what you ultimately choose, it will help to start planning well in advance.

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.

FAQ

What is a prepaid college tuition plan?

A prepaid college tuition plan allows families to pay for future college tuition at today’s rates, protecting them from future tuition increases. These plans are often state-sponsored and typically cover tuition and mandatory fees at in-state public colleges or universities. Families purchase credits or units that can be used when the student attends college.

What are the advantages of prepaid tuition plans?

The primary advantage is locking in current tuition rates, saving money as costs rise. Prepaid plans also offer financial predictability and may provide tax advantages. They reduce reliance on student loans, making higher education more affordable.

What are the limitations of prepaid tuition plans?

Prepaid plans often restrict usage to in-state public colleges, and transferring to private or out-of-state schools may result in lower payout values. Not all states offer these plans, and withdrawing funds for non-educational purposes may incur penalties or fees. Understanding plan terms is crucial before enrolling.

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Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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Despite decades of anti-discrimination legislation and other efforts to fight redlining, create fair lending, and ban racial and other bias, housing discrimination can still exist in many markets throughout the country, especially for first-time homebuyers.

It can be subtle or overt. Either way, housing discrimination holds people of color, immigrants, families with children, and LGBTQ people back by denying them access to safe neighborhoods, good schools, and the generational wealth that comes with homeownership.

This guide offers more information on housing discrimination and what to do if it happens to you.

What Is Housing Discrimination?

Federal law defines housing discrimination as discrimination concerned with renting or buying a property based on race, color, religion, national origin, sex (including gender identity and sexual orientation), familial status, or disability. In other words, if anyone in the house-hunting or mortgage loan process treats a person buying, renting, or selling housing differently because of any of these reasons, they are breaking the law.

Whether first-time homebuyers are buying a starter home or upsizing, they may want to fine-tune their anti-bias antennas and know the laws.


💡 Quick Tip: You deserve a more zen mortgage loan. When you buy a home, SoFi offers a guarantee that your loan will close on time. Backed by a $5,000 credit.‡

Housing Discrimination Examples

Housing discrimination comes in many forms. It could be a landlord who charges higher fees to renters with children, a real estate agent who refuses to show immigrants homes in certain neighborhoods, or a buyer offering less because of the seller’s race.

What’s more, housing discrimination can be subtle, according to the U.S. Department of Housing and Urban Development (HUD), making it difficult to prove and punish. Here are examples of subtle housing discrimination described on HUD’s website:

An African American man speaks on the phone to a landlord who seems eager to rent to him. But when the man meets with the landlord to fill out the application, the landlord’s attitude is different. A few days later, the potential renter receives a letter saying his application was denied because of a bad reference from his current landlord. But his current landlord says he was never contacted.

An Asian man meets with a real estate broker because he is interested in purchasing a house for his family in a specific neighborhood. When he mentions the neighborhood, the broker tells the Asian man that she has wonderful listings in a neighborhood where there are more people like him. When he looks at houses in the neighborhood she recommends, he notices that the majority of residents are Asian. The man files a complaint. Steering buyers to certain neighborhoods because of race is illegal.

Sexual harassment, failure to comply with accessibility requirements, and rules against renting or selling to families with children are also discriminatory.

Equal Opportunity Housing Laws to Know

Housing discrimination by sellers, lenders, and landlords based on race, color, religion, or nationality has been illegal since Congress passed the Fair Housing Act in 1968. The act was expanded in 1974 to include gender and in 1988 to include families with children and people with disabilities. Additional laws concerning discrimination in mortgage lending are included in the Equal Credit Opportunity Act, passed in 1974.

Some situations are exempt from the Fair Housing Act. These include some types of senior housing and housing operated by religious organizations and private clubs. Single-family rental homes are also exempt as long as the landlord does not own more than three homes and does not advertise or broker the rentals. Owner-occupied properties with four or fewer rental units are not governed by the Fair Housing Act.

States and local jurisdictions may have additional laws regarding housing discrimination. For instance, many states and cities ban discrimination based on age, criminal history, immigration status, marital status, or sexual orientation.

In 2020 the Trump administration made several changes to HUD regulations, making it more complicated for people to prove they are victims of housing discrimination. Specifically, victims had to go to great lengths to show that the discrimination was intentional. In early 2021, President Joe Biden signed executive orders aimed at reversing those changes. Housing discrimination continues, however, and in 2023, HUD announced that it was making $30 million in additional funding available to state and local fair housing enforcement agencies across the country to help fight discriminatory practices.

What to Do About Potential Discrimination

First, become familiar with the federal, state, and local laws that may apply. Knowing the laws and how they work is vital to filing an effective complaint and getting a successful outcome.

If you think you are a victim of housing or mortgage lending discrimination, you can file a federal complaint with the HUD Office of Fair Housing Equal Opportunity (FHEO). This office investigates claims concerning any of the protected classes specified in the Fair Housing Act. You can file a complaint online or mail the complaint form to your regional HUD office or call the Housing Discrimination Hotline at 800-669-9777. The complaint form is available in nine languages, including English and Spanish, and any retaliation for filing a complaint is illegal.

The FHEO is supposed to investigate complaints within 100 days. Sometimes complaints prompt the U.S. Department of Justice to file lawsuits against people or companies that may have violated the law.

You may also want to file a complaint with your state attorney general’s civil rights bureau or your city’s civil rights or fair housing commission. This may be more effective than filing solely with the FHEO, especially in areas with extensive housing discrimination regulations. To find out where to file a complaint in your area, start with the National Fair Housing Alliance website for a list of local agencies.

In addition to the FHEO, mortgage lending discrimination complaints can be filed with the Consumer Financial Protection Bureau.


💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

How to Make Your Case Proving Housing Discrimination

Extensive documentation can help prove housing discrimination. When you are talking to real estate agents, sellers, landlords, or lenders, it’s a good idea to listen carefully and take notes during each conversation. HUD officials suggest looking for what they call red-flag language. This may occur when a real estate agent is trying to steer you away from or into a particular neighborhood. Phrases such as “This wouldn’t be a good fit for you” or “You’d be happier in this other neighborhood” can be red flags.

If you feel you are being “steered,” you can do an online search to learn if a broker failed to show all of the houses in the local housing market in your price range.

If you suspect lending discrimination, such as being quoted a higher rate than you expected, you can check the posted rates online at that mortgage lender and others to see how they compare. You can take screenshots or print this information.

Keep an eye out for and document surprising obstacles that come up in the home buying or renting process. Perhaps a landlord, seller, or agent has said a property is not available but then you find that it is still on the market weeks later. Or maybe your application to purchase a co-op is denied, but you aren’t given a specific reason why. These may be signs of discrimination. You’ll want to document the situation with dated notes from your conversations and screenshots or copies of the ads showing the property still available after you were turned down.

Local housing advocacy and human rights groups also offer help. Organizations such as the Fair Housing Justice Center may help you conduct tests using volunteers of different races to test for disparate treatment in specific locations. These tests can also provide compelling evidence for your case.

Recommended: Home Affordability Calculator

The Takeaway

Longstanding laws and regulations are not enough to eradicate housing discrimination, but informed buyers and renters can fight back. Make sure you advocate for yourself at every stage of the process.

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.

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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.

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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.

^‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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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