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Income verification documents, which are typically requested when you’re applying to rent a home or apartment, are documents that prove you have a job and are earning an income.

A landlord requests these documents to ensure that you’re earning enough to cover your rent payments each month. The income verification paperwork requested may vary from landlord to landlord, and the documents may also differ, depending on your specific career situation. The landlord is simply doing their due diligence to make sure you can afford the rental.

How to Show Proof of Income to Rent an Apartment

There are a number of ways that prospective renters can show proof of income to a prospective landlord or property management company. The types of documents you need to produce will likely depend on the specific request from the landlord.

Generally, there are a few standard income verification documents that landlords and property managers are looking for:

•  Pay stubs

•  Tax returns or W2 forms

•  Bank statements

•  A letter from your employer

Typically, a landlord will request two forms of income verification. Often, your pay stubs and tax forms will suffice as proof of income. But in some cases, you may need to submit several months’ worth of bank statements. You might even need to ask your employer to write you a letter to assure the landlord that you have a job and do have income.

How to Show Proof of Income if You’re Self-Employed

If you’re self-employed, the process can be more complicated. You may need to submit 1099 tax forms or your personal tax returns showing regular and steady income going back a couple of years. Depending on the nature of your self-employment, you may have business tax returns, such as a Schedule C if you own and run a small business, that you can use to verify your income.

You can also use bank statements from your business bank account to show a landlord that you have income. The documents required will likely be similar to those you need when applying for self-employed personal loans. Ask the landlord what will work best for them so you will know exactly what documents you should present.

How to Show Proof of Income for Side Hustles

You may have a side hustle — perhaps you make and sell crafts online, for instance — and that’s similar to owning a small business. And you should be reporting the income you make from your side hustle to the IRS on your tax return. By presenting your tax return to a landlord, you can prove that you’re making side hustle income.

If you’re working for a ridesharing app or food delivery service, the company should be sending you a tax statement with your annual earnings so that you can report them on your tax return. You can always show a copy of that tax statement to a prospective landlord.

Why Proof of Income is Important

Proving your income is important when you rent an apartment — or apply for credit, for that matter — because it shows that you have money coming in every month, and are able to fulfill your financial obligations. In other words, it shows the property owner that you can make your rent payments.

Recommended: What Is The Difference Between Transunion and Equifax?

Understanding Rent-to-Income Ratio

Along with proving your income, you need to make sure that your rent is not eating up too much of your paycheck. That’s where the “rent-to-income ratio” comes into play. It calculates the percentage of your total income that you’re spending on rent.

The general rule of thumb is that you shouldn’t spend more than 30% of your gross monthly income on housing costs. Depending on where you live, those costs may be a higher or lower percentage of your income, but try to aim for around 30%. An online money tracker can help you keep tabs on your spending.

To figure out your rent-to-income ratio, divide your total annual earnings by 12, which gives you your monthly earnings, and multiply that number by 0.3 (or 30%). The result is how much you can afford to spend on rent per month.

Annual earnings ÷ 12 x 0.3 = How much you can afford to pay for rent

For example, let’s say you earn $50,000 a year. Divide that number by 12 and multiply it by 0.3 and you get $1,250. That’s what you should aim to spend on rent each month. Depending on where you live, you may need to spend more, but that figure gives you a ballpark of where you should be in order to have enough money to pay for your other expenses and hopefully, contribute to your savings as well.

How to Best Prepare to Pay Rent

When you are approved by a landlord to rent an apartment, you’ll need to plan and prepare to pay your rent on time and in full every month.

That means having your finances in order. First, you should have a checking account set up. Typically, you’ll pay your landlord by check or through an online portal and either way, you’ll need a bank account in order to do this. You may be surprised to learn that more than 6% of U.S. households (or more than 14 million people) don’t have a bank account. Fortunately, it’s easy to open a bank account if you don’t have one.

Next, make sure that you’re properly budgeting for your rental expenses. You want to make sure that you have enough money in your account to cover the rent when your landlord cashes your check. A budget planner app can help.

There are other expenses that can go along with renting an apartment or home that you may need to pay. Here are a few you should be aware of:

•  Utility bills

•  Renters insurance

•  Parking, maintenance, and fees for amenities such as a gym or pool

Finally, know the terms of your lease. It’s common for rent to go up once a lease expires, which you may discover when you go to re-sign or renegotiate the rent. Unfortunately, renting is not like a fixed-rate mortgage when you have a monthly rate locked in. So don’t be surprised if the costs of staying in your apartment go up after your lease expires.

The Takeaway

Income verification documents offer proof to a landlord or property management company that you have enough money coming in every month to pay the cost of an apartment or home rental. Typically, pay stubs, tax returns, and bank statements are the only forms of documentation you need. However, if you are a small business owner, you may be required to produce additional documents. The good news: Once you are approved to rent, you can start the process of moving in.

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.

FAQ

Can you rent an apartment with no income?

It is possible to rent an apartment with no income, though it likely will be quite difficult. In this instance, having a high credit score can help, because it shows you have a track record of paying your expenses. A healthy savings account can also be useful to prove you have money in the bank.

Can proof of income for an apartment be faked?

It is possible to fake proof of income for an apartment by using online tools to create fake pay stubs and other documents. This constitutes fraud and is illegal, but it does happen.

Is proof of income different for a student?

Yes, it can be, yes. If a student has no income because they are studying full-time, they may need to get a co-signer like a parent or guarantor in order to secure a lease.

Photo credit: iStock/Anna Kim

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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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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SORL-Q224-1921062-V1

The average cost of the CPA exam is about $2,000, but the exact cost varies for each candidate. The biggest reason for this is that each state has its own board of accountancy, each of which sets its own costs for several items that are needed to sit for the exam.

There are also necessary costs that aren’t tied to the exam itself, such as licensing fees and continuing education costs. If you have to retake or reschedule the exam, you may have to repay registration and examination fees. Plus, the single most expensive part of the process tends to be the review course, the price of which can vary widely.

Passing the CPA exam can be expensive. Fortunately, there are many ways to cover the costs, and the price can be well worth it if you pass the exam.

How Much Does It Cost to Take the CPA Exam?

As just noted, the cost to take the CPA exam is about $2,000, but the final estimate will vary depending upon where you live. Hence, you could end up paying several hundred dollars above or below this amount. However, while the total cost can vary significantly, there are certain items that are common expenses for all exam candidates.

This is a wide range, but that is expected given that the costs can be different from one state to the next. Examination fees shown above are approximate; your state’s fees may be higher or lower.

In addition, the CPA review courses sometimes have tiered pricing, so even two people taking the same course and living in the same state may have different costs. There can be several differences between different tiers of review courses, such as 24-month access versus lifetime access.

Do You Need a Finance Degree to Take the CPA Exam?

Each of the 55 licensing jurisdictions (all 50 states, plus Washington, DC, Guam, Puerto Rico, the Virgin Islands, and the Mariana Islands) maintains its own licensing requirements. Because of this, each state may have slightly different requirements to sit for the exam.

All 50 states require a bachelor’s degree plus 150 credit hours in order to become a licensed CPA. However, rather than requiring a finance (or accounting) degree, states may require 120 credit hours of college credits plus 30 additional, accounting-specific credit hours to sit for the exam.

Still, you should review your state’s requirements before you begin preparing for the exam. Some states require 30 hours of accounting courses, while others require upper-level accounting courses. Your state or territory’s board of accounting website will list the specific requirements needed to sit for the exam.

Recommended: What Can You Do With a Finance Degree and What Is the Cost?

Other CPA Exam Costs

There isn’t just one fee to sit for the CPA exam; candidates must cover several costs, all of which vary depending upon where you live. This is one of the reasons the cost can be quite different from one state to the next.

Ethics Exam

Your state may require you to take and pass an ethics exam in order to practice there. Some states have their own ethics exams, while others administer the AICPA exam. Currently, the AICPA exam costs $250 – $320 and can vary depending on the course option you select.

Registration Fees

Most states require a registration fee for each of the four exam sections. Fees vary but are generally $75 to $100 per section. Some states also have tiered pricing for registration, allowing you to save money if you register for multiple sections at once. If you choose to register for multiple sections at once, keep in mind that each section is estimated to take four hours, with a total of 16 hours for the entire exam.

Application Fees

Application fees are due when you apply to take the CPA exam. Because each state sets its own fees, these vary but are usually between $100 and $200. The fee is non-refundable, but you usually don’t have to pay the application fee again if you have to retake the exam. However, if your application is rejected, you may have to pay the fee more than once.

CPA Licensure

The CPA licensure fee is only necessary after you pass the exam. This is the fee you pay to your state accountancy board to be a licensed accountant. These fees also vary by state and can run anywhere from $50 to $500. This cost is an annual one, so you should expect to pay the fee every year to maintain your license.

Keep in mind that each state has its own licensing requirements and accountancy board. Hence, if you move out of state, you will have to be licensed in the new state to be recognized as a CPA there.

Background Check

Your state may require you to pass a background check as part of the licensing process. According to NASBA, the fee ranges anywhere from $1 to $49. In the case of California, there is an additional “rolling” fee of $15 for fingerprinting.

Travel and Accommodations

Currently, the CPA exam cannot be taken online; it can only be administered at Prometric Testing Centers. You can find a testing center with Prometric’s Pro Scheduler . Testing centers are only located in select cities, so you may end up spending hundreds of dollars on transportation and accommodations depending on how close you are to a testing center.

International Candidate Credential

If you want to take the exam outside the United States, you may be required to pay additional fees for international candidate credentialing. Most states allow international applicants to sit for the exam, but six states and two territories do not administer it. In addition to any domestic fees, you may also have to pay additional fees of $371.55 for each of the following: Auditing and Attestation (AUD), Business Environment and Concepts (BEC), Financial Accounting, and Reporting (FAR), and Regulation (REG).

Covering CPA Exam Costs

Although the exact cost of the CPA can vary significantly, one thing is for certain: the exam and licensing process is expensive. Fortunately, there are many ways to cover the costs.

Private Student Loan

A private student loan can help you cover some or all of the cost of the CPA exam. For example, SoFi student loans have no fees, come with multiple repayment options, and have low fixed and variable rates. Everything is handled online and the application process is simple.

Private student loans are different from federal student loans. Federal student loans may have more consumer protection, but private student loans may offer more competitive interest rates. Consider both private and federal student loans if you need to finance your CPA exam costs.

Credit Card

You may be able to pay for some or all of your costs with a credit card. In fact, if paying online, payment by credit card may be required for examination fees. The same may be true for application and registration fees.

Exam prep courses are offered by third parties, so you should be able to pay for them with a credit card in most cases.

Personal Savings

Avoid tapping into your emergency fund, but any excess savings can help cover exam costs. If you aren’t able to pay for the entire cost with personal savings, scholarships, grants, and student loans can help you pick up the tab. But personal savings can also be useful, particularly if you still owe money after considering other options.

Scholarships

There are several scholarships available that can help you cover much of the cost of the CPA exam. For instance, the American Institute of Certified Public Accountants offers a scholarship of up to $1,000 to exam candidates. Another example is the Newt D. Becker scholarship, worth up to $2,499.

Your state board may also offer scholarships; for example, Wisconsin offers several $2,500 college scholarships to go toward your 150 hours required to sit for the exam. Check with your state board to see if the state offers any additional scholarships.

Employer Reimbursement

Some employers will reimburse you for the cost of the exam itself, review materials, or both. If you work for an accounting firm and the exam is relevant to your job, it’s a good idea to ask whether your employer reimburses these costs.

The Takeaway

There are many costs associated with CPA licensure, from prerequisite coursework all the way to maintaining your license each year. Each of the 55 licensing jurisdictions has its own requirements and fees, so where you live can affect not only licensing requirements but also the cost of the whole process.

However, what is for sure is that becoming a licensed CPA isn’t cheap. The price tag is likely to be four figures, which is high, especially before you are certified.

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.

FAQ

How much does the CPA exam cost to take?

The cost is about $2,000 on average, but the exact cost depends upon where you live. Each state sets its own fees, so they may vary significantly from one state to the other. Also, exam prep courses can add to the overall cost.

Are there any hidden costs to take a CPA exam?

Hopefully, there will not be any hidden costs of the CPA exam if you have considered all of the costs mentioned here. However, there may be some fees you don’t anticipate. For example, if you have to retake or reschedule the exam, you may have to repay the registration fee in addition to repaying fees per exam section.

Photo credit: iStock/ridvan_celik

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SOIS-Q224-1917051-V1

Salary vs. hourly pay are two ways that businesses classify workers, based on how and when their compensation is doled out. Hourly employees, as you might guess, are paid for every hour of work that they do. Salaried employees, on the other hand, receive a fixed amount of compensation in exchange for their labor, regardless of how long it takes.

There are pros and cons to each, both for employers and employees, and there are numerous rules and laws that can come into play as well. But it boils down to this: Hourly employees’ compensation is tied to the time worked, plus applicable overtime. Salaried employees get a fixed amount.

What Is An Hourly Rate?

An hourly rate is the set per-hour compensation a worker or employee earns in accordance with their employment contract. That hourly rate can be any number above the federal wage floor, or minimum wage, of $7.25 per hour.

The lowest that an hourly worker in the U.S. can earn is $2.13 per hour, as set by federal law, for workers who receive at least $30 per month in tips. No matter the amount, an hourly rate is how much an employee earns for one hour of work.

What Is a Salary Rate?

As mentioned, salaried employees earn a fixed amount regardless of how many hours they work. As such, a salary rate is what an employee would earn over a fixed amount of time, such as a traditional 40-hour workweek. Since we typically discuss salaries on a yearly basis (for example, Job X pays a salary of $50,000 per year), a salary rate could be $961.54 per week ($50,000 annual salary divided by 52 weeks in a year).

The big difference, when it comes to salaried workers, is that there is no potential to earn overtime for working more than the predetermined number of hours (usually 40) as specified by their employer and applicable laws.

If you want to find out what is a good entry-level salary, you can do some research into averages in your industry and geographic area to get an idea.

Recommended: The Highest Paying Jobs by State

Why Are Some Jobs Hourly and Others Salary?

Federal laws and regulations determine whether some jobs can be exempt from overtime pay rules — in other words, salaried. This is to protect some workers from being classified as salaried when they may end up working many more hours in a given week than the standard 40.

Depending on the state you live in, there may be additional rules that stipulate why a position may pay hourly vs. salary.

The Big Difference Between Salary vs Hourly Pay

Whether or not a worker earns overtime pay is the single biggest difference between a salaried employee and one who is paid hourly. Overtime pay is paid out at a rate of 1.5 times the normal hourly rate, which is commonly phrased as “time and a half.”

Another way to describe salary vs. hourly pay is “exempt” vs. “non-exempt.” “Exempt,” in this sense, means exempt from overtime wages. Non-exempt employees are owed overtime wages for working more than 40 hours per week.

There are situations in which an employer may end up paying a salaried employee more for working more than 40 hours per week, but it depends on the specific agreement or contract between the two parties.

Additionally, salaried jobs tend to be more administrative, “professional,” or “white collar,” and may offer more or better benefits than hourly jobs. That’s not always the case, but if you’re climbing the corporate ladder and become a salaried employee, you may notice that the entire compensation package is a bit beefier than packages for hourly workers.

Recommended: Salary Calculator: Hourly to Salary Conversion

Salary Pay

As noted above, salaried employees earn a fixed amount regardless of how long they work. There are some obvious pros and cons to salaried positions, too:

Pros of Salary Pay

The clearest advantage of a salaried position is that an employee will earn the same amount of money during a given time period no matter how long they work. So, if they end up working 30 hours in one week, they still get paid the same as they would have if they worked 40.

Also, as discussed, salaried jobs often have better benefits, such as employer-sponsored health insurance and paid vacation days. Salaried jobs can also be a bit more secure than hourly positions and may offer workers more opportunities for advancement.

Cons of Salary Pay

Salary pay can be double-edged: While you’ll be paid for 40 hours even if you work only 30, you’ll earn the same if you work 50 hours, too. There is no chance for overtime pay if you work more than a standard week. That can be a big drawback for some workers.

Similarly, depending on the specifics of the position, it may be harder to keep your personal and professional life separate. Salaried positions may provide more benefits and job security, but that comes at a cost of more demanding work that may encroach on your personal time.

Hourly Pay

Hourly workers earn their paycheck by the hour. That, like salaried positions, can have pros and cons as well:

Pros of Hourly Pay

It’s worth stating again: The biggest plus to an hourly job is that you are eligible to earn overtime pay. That doesn’t mean hourly workers always will get overtime — many employers go to great lengths to make sure that they don’t — but it’s a possibility. And that can help ensure that you’re not working 50- or 60-hour weeks, which may be more common for salaried employees.

Also, hourly workers may earn double their standard wages on certain days, like holidays. And depending on the industry, working overtime may be standard or expected. That can help push an hourly worker’s earnings above salaried workers’, in some circumstances.

Cons of Hourly Pay

A big disadvantage to hourly-paying jobs is that they can be less secure than salaried positions. Turnover can be high, for example, and if the economy takes a turn for the worse, hourly workers may see their hours reduced, or their positions furloughed or eliminated. Further, hourly jobs aren’t usually very flexible, and may not offer paid time off or sick days to workers, either.

Recommended: Average US Salary by State

The Takeaway

Salaried workers receive a fixed paycheck regardless of the number of hours worked, whereas hourly workers are paid based on the number of hours they clocked. The big differentiator between the two is that salaried workers are not eligible for overtime pay, which is 50% more than their standard hourly rate. Each type of employment has its pros and cons, but usually salaried positions are more secure.

Regardless of how you’re paid, it can be helpful to keep your finances in order by using a budget planner app, complete with a debt payoff planner to help you get ahead.

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.

FAQ

Is it better to be paid a salary or an hourly rate?

Generally, salaried positions are often seen as more prestigious and can offer more job security and benefits. Many workers feel it’s better to be paid a salary because one receives a predictable paycheck, but it ultimately depends on the position and the employee’s personal preferences.

What is the advantage of salary pay?

The biggest and most obvious advantage of salary pay is that you have a fixed paycheck coming your way no matter how much (or little) you worked during a given time period. Of course, that can be a disadvantage, too, if you regularly work more than 40 hours per week. It also may be easier to budget with a fixed, salaried income.

What are the budget challenges of being a salaried employee?

Salaried employees are, in a sense, on a fixed income; they’re earning the same amount all through the year, and can’t go for a bigger paycheck by working overtime. If they don’t receive a raise annually, they may see their effective pay decline due to inflation, which can end up straining their budgets.

Photo credit: iStock/.shock

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.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

SORL-Q224-1921080-V1

When it comes to financing a college education, there are several very different options, and it’s important to understand the pros and cons of each.

Depending on your academic qualifications, you may have been awarded scholarships or grants, which is funding that won’t (typically) need to be repaid. Any expenses not covered by a scholarship will need to be financed, often through a combination of work-study, personal funds, and student loans.

It is fairly common for college students to take out student loans to finance their education. There are two main types of student loans — private student loans and federal student loans. We’ll compare and contrast some of the more popular features of both private and federal student loans and explore some features that can help you determine what makes the most sense for your financial situation.

Types of Federal Student Loans

Federal student loans are funded by the federal government. In order to qualify, you must fill out the Free Application for Federal Student Aid (FAFSA^®) every year that you want to receive federal student loans. We’ll delve more into the FAFSA soon — but first, here are some important distinctions to consider.

Subsidized vs Unsubsidized Loans

Federal loans can be subsidized or unsubsidized. If you’re an undergraduate student in financial need, you may qualify for a subsidized loan. The amount of money you qualify for will be determined by your school.

With subsidized loans, the U.S. government covers the interest that accrues while you are a full- or half-time student, during a six-month grace period after graduation, and for any periods of loan deferment.

If you receive an unsubsidized federal loan, you don’t need to demonstrate financial need when applying. Interest begins accruing from the day your loan is disbursed — though borrowers are not required to make payments until six months after graduation. As with subsidized loans, your school will determine the amount you can receive, based on your cost of attendance.

Direct PLUS Loans for Parents and Graduate Students

Direct PLUS Loans are another source of federal student loan funding. To qualify for graduate PLUS Loans, you need to be a graduate-level or professional student in a program that offers degrees or certifications, and attend college at least half-time.

Parents can also apply for a Parent PLUS loan if their dependent undergraduate student attends an eligible school at least half-time. “Parent” is defined as biological, adoptive, or sometimes a stepparent.

To obtain a Direct PLUS loan, you cannot have an adverse credit history. And you and your dependent child must meet the general eligibility requirements for federal student aid.

Recommended: How Do Student Loans Work? Guide to Student Loans

More About the FAFSA

If you plan to apply for any of these types of federal loans, you’ll need to fill out the FAFSA form. Be aware of your state’s FAFSA deadline — FAFSA funding is determined on a rolling basis, so the sooner you can apply, the sooner you may qualify.

The new FAFSA application typically is available on October 1 of the prior year. The 2025-26 FAFSA form is expected to be released on October 1, 2024.

Benefits of Federal Student Loans

First off, you won’t be responsible for making student loan payments while you are actively enrolled in school. Your repayment will typically begin after you graduate, leave school, or are enrolled less than half-time.

Another perk is that your credit history doesn’t factor into a federal loan application. One exception is Direct PLUS Loans for grad students and parents.

Interest rates on federal student loans are fixed and typically lower than interest rates on private student loans. Depending on the type of federal loans you have, the interest you pay could be tax-deductible.

When it comes to federal student loan repayment, there are several options to choose from, including several income-driven repayment plans.

If you run into difficulty repaying your federal student loans after graduation, or if you drop below half-time enrollment, deferment and forbearance options are available. These programs allow qualifying borrowers to temporarily pause payments on their loans should they run into financial issues — but interest may still accrue. The loan type will inform whether a borrower qualifies for deferment or forbearance. Borrowers can contact their student loan servicer for more information on these programs.

Qualifying borrowers can also enroll in certain forgiveness programs, such as Public Service Loan Forgiveness (PSLF). These programs have strict requirements, so borrowers who are pursuing forgiveness should review program details closely.

Federal Student Loan Pros and Cons

Here is a recap of some of the pros and cons of federal student loans.

The CARES Act and Federal Student Loans

The CARES Act, passed in March 2020 in response to COVID-19, temporarily paused payments on most federal student loans and set interest at 0%. With the signing of the debt ceiling bill in June 2023, the three-year pause came to an end. Interest on federal student loans resumed on September 1, 2023, and the first post-pause payments were due shortly after. To ease the transition, borrowers won’t be reported as delinquent if they are late with payments through September 2024.

The CARES Act and the payment pause did not apply to private student loans.

Private Student Loans

Private student loans are not funded by the government. To apply for them, you can check with individual lenders (banks, credit unions, and online lenders), with the college or university you’ll be attending, or with state loan agencies.

Because these loans are available from multiple sources, each will come with its own terms and conditions. So when applying for private student loans, it’s important to clearly understand annual percentage rates (APRs) and repayment terms before signing, as well as the differences between private vs. federal student loans.

Since private student loans are not associated with the federal government, their repayment terms and benefits vary from lender to lender. Some private loans require payments while you’re still attending college. Unlike federal loans, interest rates could be fixed or variable. If you are applying for a variable-rate loan, it’s a good idea to check how often the interest rate can change, plus how much it can change each time and what the maximum interest rate can be.

When applying for a private loan, the lender typically reviews your financial history and credit score, which means it may be beneficial to have a cosigner.

Be sure to ask your lender about repayment options in addition to any deferment or forbearance options. These will all vary by lender, so it’s important to understand the terms of the particular loan you are applying for.

Benefits of Private Student Loans

Private student loans offer several benefits that can make them an attractive option for some students. One significant advantage is their ability to cover the full cost of attendance, including tuition, fees, and living expenses, which can be particularly helpful if federal loan limits are insufficient.

Additionally, private lenders often provide a variety of loan options with different repayment terms and interest rates, allowing borrowers to choose a plan that best fits their financial situation and future income expectations. Some private loans offer competitive interest rates, especially for borrowers with excellent credit or those who have a creditworthy cosigner, potentially resulting in lower overall borrowing costs compared to federal PLUS loans.

Another benefit of private student loans is the potential for customization and flexibility in loan features. Many private lenders offer interest rate discounts for autopay enrollment, loyalty discounts for existing customers, and even the option to release a cosigner after a certain period of on-time payments.

Private loans can also be accessed more quickly than federal loans, which can be advantageous in time-sensitive situations.

Private Student Loans Pros and Cons

Here is a recap of some of the pros and cons of private student loans.

Private loans can help fill the monetary gap between what you’re able to cover with grants, scholarships, federal loans, and the like, and what you owe to attend college. It’s never a bad idea to take the time to do your research, shop around, and find the best loan options for your personal financial situation. For a full overview, take a look at SoFi’s private student loan guide.

Determining Whether a Student Loan Is Federal or Private

To find out if the student loan you have is a federal student loan, one option is to check the National Student Loan Data System (NSLDS). This database, run by the Department of Education, is a collection of information on student loans, aggregating data from universities, federal loan programs, and more.

Borrowers with federal student loans can also log into My Federal Student Aid to find information about their student loan including the federal loan servicer.

Private student loans are administered by private companies. To confirm the information on a private student loan, one option is to look at your loan statements and contact your loan servicer.

Options for After Graduation: Consolidation vs Refinancing

After graduation, depending on one’s student loan situation, borrowers may wish to consider consolidation or refinancing options to combine their various loans into a single loan.

The federal government offers the Direct Consolidation Loan program that allows borrowers to combine all of their federal loans into one consolidated loan.

Loans consolidated in this program receive a new interest rate that is the weighted average of the interest rates of all loans being consolidated — rounded up to the nearest one-eighth of a percent. This means that the actual interest rate isn’t necessarily reduced when consolidated. If monthly payments are reduced, it is most likely because the repayment term has been lengthened. Additionally, only federal student loans are eligible for consolidation in the Direct Consolidation Loan program.

Student loan refinancing, on the other hand, means taking out a new loan and using it to pay off all the other student loans. Depending upon individual financial situations, applicants could qualify for a lower interest rate through refinancing.

When an individual applies to refinance with a private lender, there is typically a credit check of some kind. Each lender reviews specific borrower criteria that influences the rate and terms an applicant may qualify for.

Recommended: The SoFi Guide to Student Loan Refinancing

Combining Federal and Private Student Loans

Refinancing federal loans with a private lender is the only option that allows borrowers to combine both federal and private student loans into a single loan. While refinancing may allow borrowers to secure a competitive interest rate or preferable terms, it’s very important to understand that when you refinance federal student loans, they no longer qualify for federal benefits or borrower protections.

Refinancing may make sense for federal student loan holders who do not plan to take advantage of any federal programs or payment plans, but it won’t make sense for everyone. When you are evaluating whether you should refinance student loan debt, reflect realistically on your professional and financial situation. For example, borrowers who are enrolled in income-driven repayment plans or are pursuing Public Service Loan Forgiveness, may find that refinancing their federal student loans doesn’t make sense for their personal goals.

The Takeaway

Federal student loans differ from private student loans in key ways. You must fill out the FAFSA every year to qualify for federal loans. With subsidized federal loans, interest doesn’t accrue until after graduation and a six month grace period. Federal loans also offer special protections to borrowers, such as deferment and Public Service Loan Forgiveness. The same protections are not available on private student loans. You may or may not qualify for a lower interest rate on a private student loan, depending on your credit history, whereas your credit score doesn’t affect your ability to qualify for federal 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.

FAQ

What is the difference between a federal and private student loan?

Federal student loans are issued by the U.S. government with fixed interest rates, more flexible repayment options, and benefits like income-driven repayment plans and loan forgiveness programs. Private student loans are offered by private financial institutions with rates and terms based on creditworthiness, often requiring a cosigner, and generally lacking the same level of repayment flexibility and borrower protections. However, private student loans are a good option once federal student loans have been exhausted.

What is the downside to using private student loans instead of federal student loans?

The downside to using private student loans instead of federal student loans includes higher and potentially variable interest rates, less flexible repayment options, and fewer borrower protections. Private loans often require a good credit score or a cosigner, lack income-driven repayment plans and loan forgiveness programs, and generally offer limited deferment and forbearance options compared to federal loans.

How much student loan debt is federal vs private?

According to the Education Data Initiative, federal student loan debt significantly outweighs private student loan debt in the United States, with federal loans comprising approximately 92% of the total student loan debt, amounting to around $1.6 trillion, while private loans account for the remaining 8%, or roughly $140 billion.

Is it better to get a federal or private student loan?

It is generally better to get a federal student loan due to its lower interest rates, flexible repayment options, and robust borrower protections. However, private student loans can be a good option once federal student loans have been exhausted.

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.

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

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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SOIS-Q224-1920889-V1

There’s nothing quite as indulgent as sitting back on your couch, remote control in hand, knowing that your favorite restaurant meal is about to show up at your doorstep. But food delivery can also, unfortunately, lead to racking up credit card debt.

One solution is to use a checking account to pay for food delivery services. Although not every platform allows you to pay directly from your bank account, there are often payment options that still let you tap the funds in your checking account. Learn more about the details below.

What Is Food Delivery?

Third-party food delivery services have revolutionized at-home dining. Gone are the days where pizza was the only option for ordering in. These days, you can get just about any meal your heart desires, all with the tap of a finger.

Third-party delivery platforms connect hungry diners with nearly endless restaurant options. The meals are typically delivered by gig-economy workers who earn income via these apps.

Some of the most popular food delivery services include:

•   Grubhub

•   Uber Eats

•   Postmates

•   DoorDash

There may be other food delivery services available in your area, including restaurants that still deliver directly. However, those options may or may not allow you to use your checking account as payment.

Using Checking Accounts for Payment

Not every food delivery service allows you to link directly to your banking details. You may have to do a bit of research to find a single food delivery that accepts a checking account. That said, most offer the opportunity to pay through a third-party service like PayPal, which in turn makes bank account payment possible.

As of May 2024, neither Grubhub nor DoorDash had an option to input your checking account details. Both do allow you to use a debit card, however, which works almost exactly like a checking account payment. Grubhub also offers PayPal, Venmo, and Amazon Pay linking, among others, while DoorDash links with PayPal, Venmo, and Apple Pay.

Postmates and Uber Eats both give users the option to input their bank account information, which means you can pay directly with your checking account.

Linking Bank Account to Delivery App

For the apps that do allow you to use a bank account, linking the account is usually fairly straightforward. Both Uber Eats and Postmates use a third-party platform called Link to securely connect your bank account to your food delivery app account using your regular login credentials. The data transferred is encrypted, and you can disconnect linked accounts at any time.

Some delivery services may allow you to manually link your bank account using details like the routing number and account number. In that case, you should always be sure you’re only providing your details to certified and secure parties. If you’re using a lesser-known food delivery app, do some research ahead of time to ensure it’s legit before you enter your banking details.

Recommended: Checking Account vs. Debit Card: What’s the Difference?

Benefits of Checking Account Payments

Why pay for your next plate of Pad Thai or other food delivery with your checking account? Consider the following benefits.

No Credit Card Fees for Merchants

While this one may not benefit you directly, you may be saving a small business some money. That can feel like something of a good deed. Although food delivery services have helped connect more restaurants to more at-home diners, they do usually charge the restaurant a commission fee, which can eat into already-slim profit margins.

Credit cards, too, often charge merchants a fee that can be as high as 3.5% per transaction. In short, by using your checking account, you may be offering more direct support to your favorite restaurants.

Easier to Budget Food Spending

Sometimes, the money we put on a credit card feels less than real, which is one reason it can be so easy to spiral into credit card debt. But when money is coming directly out of your checking account, it’s often a bit more tangible. Over time, using your checking account can therefore make it easier to track how much you’re really spending on food delivery each month — and stick to a budget for how much you should be spending.

May Qualify for Cash Back/Rewards

In some cases, delivery apps or your bank may offer cash back or rewards for payments made with a checking account (or debit card). Check with your bank, and review offers from the delivery apps you use for further details.

Recommended: Checking vs. Savings Accounts

Potential Risks and Drawbacks

Although there are many upsides to using a checking account to pay for your food delivery, there are some drawbacks to consider, too.

Overdraft Fees from Erroneous Charges

When you’re drawing directly from your bank account — as opposed to putting money on a credit card — you’re at more risk of overdrafting (spending more than you have in your account). Doing so can rack up pricy overdraft fees, and it’s possible even if you’re careful. Occasionally, for instance, a transaction goes through more than once, which is an error that can be easier to rectify with a credit card.

Less Fraud Protection vs Credit Cards

One good thing about credit cards: They often come with robust fraud protection and easy ways to dispute charges. In fact, many credit card issuers will actually stop a charge they feel is suspicious and prevent it from going through until they get confirmation from you that it’s legitimate. Checking account payments don’t generally have this technology, so that’s something to consider when you’re linking your account to a food delivery service.

Difficulty Disputing or Reversing Charges

As mentioned, no matter the reason for an erroneous or fraudulent charge, it can be more difficult to reverse it when it’s basically cash (as opposed to credit). You can check directly with your bank account to learn about their process for such reversals.

Tips for Safe Checking Account Use

If you are going to use your checking account to pay for your food deliveries (or anything else), follow these tips to help ensure you do so safely.

Monitor Transactions Closely

Regardless of whether you’re using it for food delivery payments, regularly checking your bank account is always a good idea. That way, you’ll see any fraudulent transactions and start the process of rectifying them quickly. Plus, you’ll simply know how much money you have at your disposal.

Adjust Spending Limits/Alerts

Some bank accounts offer built-in spending limits, or they alert you when your account gets below a certain dollar threshold. It can be easy to overdo it with food deliveries, so if you’re going to link your checking account, consider adjusting those limits and alerts accordingly.

Consider Using a Prepaid Card

If you’re trying to keep yourself to a specific budget but don’t want to link your checking account to your food delivery app — or use a credit card that you could easily rack up sky high — consider using a prepaid card instead. That way, you know exactly how much you will spend on food delivery (since amounts in excess of the prepaid limit won’t go through). What’s more, you won’t take on any of the risks associated with linking your bank account.

Alternatives To Checking Payments

As mentioned above, if the delivery service you’re using doesn’t allow you to link your bank account directly, you will likely be able to link a digital payment platform like PayPal, Cash App, or Venmo, which can facilitate direct-from-bank transfers. And most apps will allow you to input a debit card in place of a credit card.

Of course, if you go the old-school way and order directly from a restaurant, you may still be able to pay with plain old cash.

The Takeaway

Ordering food delivery is a favorite convenience of the digital age, and you can enjoy it without using your credit card. It is often possible to link to a checking account or a debit card, which pulls money directly from your checking account, to pay for the food you’ve ordered. Or you might use a digital payment service, and link that to your checking account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Can I earn rewards with checking account payments?

It’s rare to find cash back rewards or other incentives linked to payments that come directly from a checking account. However, many debit cards do offer rewards. Using this kind of card is almost exactly like paying directly from your bank account. Check with the financial institution about any rewards available.

What if a delivery never arrives?

If your meal is marked “delivered” but you don’t find it, you should be able to get help from the food delivery service itself. Most apps offer a way to contact their customer support team right from the interface.

Do all food delivery apps accept checking?

Unfortunately, not all food delivery apps allow you to directly link your checking account. However, virtually all of them allow you to use a debit card instead of a credit card, which works almost exactly the same way. In addition, many of the apps allow you to link a third-party platform like Venmo or Cash App, which can facilitate bank account payments.

Photo credit: iStock/FG Trade

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.