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When you’re preparing to buy a home, understanding the early steps in the mortgage process can make your search smoother and more effective.

Two common terms you’ll hear are prequalification and preapproval — each gives lenders and home sellers insight into your borrowing potential, but they differ in how they evaluate your finances and how much confidence they provide in your ability to secure a loan. Knowing the distinction helps you plan better, shop smarter, and present stronger offers in a competitive housing market.

Here’s a look at how these two steps vary, how each can play a part in a home-buying strategy, and how one in particular can increase the chances of having a purchase offer accepted.

What Does Prequalified Mean?

Getting prequalified is a way of finding out how much you might be able to borrow to purchase a home and what your monthly payments might be.

To get prequalified for a home loan, you’ll provide a few financial details to mortgage lenders. The lenders use this unverified information, usually along with a soft credit inquiry, which does not affect your credit scores, to let you know how much you may be able to borrow and at what interest rate.

You might want to get prequalified with several lenders to compare monthly payments and interest rates, which vary by mortgage term. But because the information provided has not been verified, there’s no guarantee that the mortgage or the amount will be approved.

Recommended: How Much House Can I Afford?

What Does It Mean to Be Preapproved?

Preapproval for a mortgage loan requires a more thorough investigation of your income sources, debts, employment history, assets, and credit history. Verification of this information, along with a hard credit pull from all three credit bureaus (which may cause a small, temporary reduction in your credit scores), allows the lender to conditionally preapprove a mortgage before you shop for homes.

A preapproval letter from a lender stating that you qualify for a loan of a specific amount can be useful or essential in a competitive real estate market. When sellers are getting multiple offers, some will disregard a purchase offer if it isn’t accompanied by a preapproval letter.

When seeking preapproval, besides filling out an application, you will likely be asked to submit the following to a lender for verification:

•   Social Security number and card

•   Photo ID

•   Recent pay stubs

•   Tax returns, including W-2 statements, for the past two years

•   Two to three months’ worth of documentation for checking and savings accounts

•   Recent investment account statements

•   List of fixed debts

•   Residential addresses from the past two years

•   Down payment amount and a gift letter, if applicable

The lender may require backup documentation for certain types of income. Freelancers may be asked to provide 1099 forms, a profit and loss statement, a client list, or work contracts. Rental property owners may be asked to show lease agreements.

You should be ready to explain any negative information that might show up in a credit check. To avoid surprises, you might want to order free credit reports from www.annualcreditreport.com. A credit report shows all balances, payments, and derogatory information but does not give credit scores.

Calculate Your Potential Mortgage

Use the following mortgage calculator to get an idea of what your monthly mortgage payment would look like.

Do Preapproval and Prequalification Affect Credit Scores?

Getting prequalified shouldn’t affect your credit scores. Only preapproval requires a hard credit inquiry, which can affect scores. But the good news for mortgage shoppers is that multiple hard pulls are typically counted as a single inquiry as long as they’re made within the same 14 to 45 days.

Newer versions of FICO® allow a 45-day window for rate shoppers to enjoy the single-inquiry advantage; older versions of FICO and VantageScore 3.0 narrow the time to 14 days.

You might want to ask each lender you apply with which credit scoring model they use.

Do I Have to Spend How Much I’m Preapproved for?

No, you don’t have to spend the full amount you’re preapproved for on a mortgage. Preapproval shows the maximum a lender is willing to offer based on your finances, not what you should borrow. Choosing a lower-priced home can leave room in your budget for savings, emergencies, and other financial goals.

Recommended: Guide to First-Time Home Buying

Are Prequalification and Preapproval the Same Thing?

Prequalification and preapproval are not one and the same. Here’s a visual on what’s needed for each:

Do I Need a Prequalification Letter to Buy a House?

No, you do not need a prequalification letter to buy a house, nor do you have to have a preapproval letter when making an offer on a house.

But getting prequalified can allow you to quickly get a ballpark figure on a mortgage amount and an interest rate you qualify for, and preapproval has at least three selling points:

1.    Preapproval lets you know the specific amount you are qualified to borrow from a particular lender.

2.    Going through preapproval before house hunting could take some stress out of the loan process by easing the mortgage underwriting step. Underwriting, the final say on mortgage approval or disapproval, comes after you’ve been preapproved, found a house you love and agreed on a price, and applied for the mortgage.

3.    Being preapproved for a loan helps to show sellers that you’re a vetted buyer.

The Takeaway

In the homebuying process, understanding the difference between mortgage prequalification and preapproval can make your search smoother and more strategic. Prequalification gives you a general idea of what you may afford, while preapproval involves verified financials and can strengthen your offers in a competitive market. Knowing when to use each step helps you shop confidently and prepares you to move quickly when you find the right home.

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

FAQ

What is mortgage prequalification?

It’s an early step where a lender estimates how much you might be able to borrow based on basic financial information you provide.

What does mortgage preapproval mean?

Preapproval is a more formal process where the lender verifies your income, debts, and credit, and may issue a conditional approval for a specific loan amount.

How do prequalification and preapproval differ in documentation?

Prequalification uses self-reported details, while preapproval requires verified documentation like pay stubs and tax returns.

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SOHL-Q126-077

It may seem as if droves of college students collect diplomas every year, but of the students who start college, how many actually graduate?

The most recent data from the National Student Clearinghouse (NSC) Research Center reports that the six-year graduation rate for bachelor’s-degree-seeking full-time undergraduate students who enrolled in fall 2019 was 61.1%.

The graduation rate refers to the percentage of students who complete their program within 150% of the published time for that program. The NSC Research Center’s averages include students who transferred institutions, but individual schools’ figures don’t include those students. It’s important not to confuse graduation rates with retention rates, which refer to the percentage of students who continued at a particular school the next year.

Here, we’ll walk you through what the college graduation rate can tell you about a school and why it’s important, as well as outline a good graduation rate. We’ll also break down graduation rates by state and college, discuss some reasons why students might not graduate, and let you know how to overcome some of those obstacles.

What Do College Graduation Rates Tell Us?

If you’re a prospective student, understanding the difference between graduation rates and retention rates leaves you better prepared to work out how the schools on your list compare. Checking out the graduation rate of your first-choice college gives you a definite indication of whether that school is better or worse than average at getting students to the finish line. Average graduation rates also tell you which types of institutions are best at that key task. Based on the available statistics, private, nonprofit institutions graduate students at the highest rate.

Why Is Knowing the Graduation Rate Important for Selecting a College?

When it comes to researching colleges, different things matter to different students. Athletes may want to know more about athletic programs. English majors may want to know how many professors are published writers.

However, among all the different factors you can research, the graduation rate remains one of the most important for all prospective students to understand.

Why? The graduation rate not only lets you know how many students graduate in a timely manner but also serves as a gauge of other important points, such as student satisfaction. Still, it’s not the only metric you’ll want to consider when you’re choosing a college. Other priority considerations include teacher-to-student ratio, retention rate, loan default rates (which could indicate low incomes after graduation), and selectivity.

Two trusted websites compile information on graduation rates for individual schools: College Navigator and College Results Online.

•   College Navigator: College Navigator compiles information from about 7,000 colleges and universities across the United States. The site breaks down both retention rates and graduation rates, and you can also filter rates by race/ethnicity and gender.

•   College Results Online: College Results Online also lists both graduation and retention rates for institutions. You can cross-index certain peer institutions against each other to compare rates.

What Is a Good Graduation Rate for a College?

The best graduation rates in the U.S. are over 90%, with many of the Ivy League schools falling into this bracket. For example, let’s take a look at a few graduation rates based on College Navigator data for the cohort that enrolled in fall 2017:

•   Harvard University: 97%

•   Yale University: 96%

•   Cornell University: 95%

You can also find high graduation rates within highly selective liberal arts colleges:

•   Claremont McKenna College: 95%

•   Amherst College: 93%

•   Davidson College: 92%

It’s important to remember that since these highly selective schools only admit students with top-tier credentials, they naturally attract some of the most driven students on the planet, resulting in a high graduation rate.

So, what’s a good graduation rate for a college? Do these figures mean that a college with a graduation rate in the 80s or even the 70s isn’t a good school or that it isn’t the right school for you? Absolutely not. As we mentioned above, there are other factors in the mix as well, including your personal preferences and interests. The right fit for you may be a school with a 70% graduation rate. The better the fit, the more likely you are to graduate on time.

Lowest College Graduation Rates in the United States

Unfortunately, the colleges with the lowest graduation rates in the U.S. aren’t highly publicized. However, if, during your own research, you see a school that graduates students at or below 60%, you may want to probe the admissions counselor at that college for the reasons why rates are so low and find out more about how the college plans to improve.

Average College Graduation Rates in the United States

If we dig a bit further into the 2025 NSC Research Center report, it states that the average college graduation rate for the fall 2019 cohort was:

•   70.9% at public four-year institutions

•   74.6% at private nonprofit institutions

•   35.9% at private for-profit four-year institutions

Overall, 58.1% of male students and 64.3% of female students graduated within six years, with female students having a higher graduation rate at the following types of institutions:

•   Public institutions (74.3% female versus 67.7% male)

•   Private nonprofit institutions (77.6% female versus 71.3% male)

The National Student Clearinghouse (NSC) Research Center calculates graduation rates by tracking cohorts of first-time, degree-seeking college students to compile its report. Using data from over 3,750 colleges, it considers completion the earning of a certificate, associate, or bachelor’s degree, which could be at the starting school or any other institution.

College Graduation Rates by State

Here are the college graduation rates for the fall 2019 cohort by state, according to the NSC Research Center:

Numbers of College Graduates in the 21st Century

In the past 20 or so years, the number of college graduates has increased by a huge amount. According to information published by the Education Data Initiative, in 2000, approximately 1.24 million students graduated from college with a bachelor’s degree. In 2025, that number reached nearly 2.17 million.

Reasons Why College Students Don’t Graduate

Let’s turn the tables a bit and take a look at a few reasons why students might not graduate. Depending on the student, these may include issues such as the high cost of tuition, trying to balance work and school, or poor academic performance.

Cost

Increasing price tags aren’t a new reason for students to drop out of school. When it gets too expensive, they may feel there’s no solution but to leave. The 2025 affordability report of the National College Attainment Network found that for the average in-state student in the 2022-2023 academic year, a little over a third of public bachelor’s-granting institutions were affordable. Researchers based this on total tuition and living costs and an emergency expenses constant measured against grants, federal loans, federal work study income, an estimated family contribution, and estimated summer wages.

Recommended: What Is the Average Cost of College Tuition?

Balancing Work and School

Many undergraduates work part-time jobs to help pay their way through college. A lot of them get stuck in the quagmire of trying to keep up with both work and school, which can be a challenging balancing act. Many seasonal jobs for college students exist, which means you may be able to get a job during the summer instead of working during the school year.

Recommended: 3 Summer Jobs Ideas for College Students

Transferring

Transferring colleges sometimes means credits can get lost in translation. When colleges force transfer students to retake classes, it not only costs those students more financially, but they also have to spend extra time pursuing their degree. This sometimes means that students can face difficulty getting enough credits to graduate.

Poor Grades

Sometimes, students simply can’t make the grade. Even if it happens during just one semester, it can cause them to shy away from college altogether. In particular, first-generation college students, low-income students, and minority students are vulnerable and may question whether they really belong in college.

Being Denied a Student Loan

Being denied a student loan or other types of financial aid can be a huge deterrent to continuing in college. If you haven’t secured enough financial aid, remember that there are ways around it — including seeking a loan through a different lender.

Overcoming the Obstacles as a College Student

What can you do to overcome these obstacles and successfully graduate from college? Let’s find out. Here are a few things you can do to help you stay the course:

•   Get organized with everything — schoolwork, athletics, homework, and anything else that takes your time and attention.

•   Get support from family and friends.

•   Create healthy habits. Eat nutrient-dense meals, get enough sleep, and stay healthy.

•   Carefully consider the best ways to pay for college, and focus on managing your money.

•   Get to know professors and academic support professionals at your college or university.

•   Work on your time management skills so you have the time you need for important assignments.

•   Take care of your mental health. If you’re struggling to balance the many priorities of being a college student, reach out to family or friends for help. If you need additional support, contact your campus’s health and wellness center to see what counseling resources are available to students.

•   If you’re attending community college to begin with, investigate transfer options early on so you know how to make the transition as smooth as possible.

Ways to Fund College

Making sure you have a concrete plan to pay for college is one of the best ways to make sure you successfully graduate. Let’s walk through a few tips to make sure you have all your ducks in a row.

•   Fill out the Free Application for Federal Student Aid (FAFSA®). This is the first step in applying for federal financial aid, including grants, scholarships, and low-interest-rate federal student loan options.

•   Search for scholarships. Ask the college or university you plan to attend about the scholarships they offer. Don’t forget to search around in your community as well.

•   Get a work-study job. If you qualify for work-study, this can be an opportunity to earn some money for college expenses. In this federal program, you work to earn money, and your school pays you for that work, which it must do at least monthly.

•   Look into private loans. If you need to fill the gap between scholarships, grants, and federal student loans, look into private loans to help you make it across the graduation stage. These may lack the borrower protections afforded to federal student loans (such as deferment options or income-driven repayment plans) and are therefore generally considered only after you’ve exhausted other financing sources.

The Takeaway

A school’s graduation rate reflects the percentage of students who graduate within 150% of the published time frame. This is different from a school’s retention rate, which measures the percentage of students who remain at that school from year to year. A school’s graduation rate can be an informative benchmark as you evaluate and compare schools during the application process.

If you are a current college student, you can do a lot to make sure you stay the course, including taking care of yourself, using scholarships and grants to your advantage, getting academic help, and making sure (if necessary) that you have the right private loans to make it all happen.

Ready to find private student loans to make sure you get to throw your cap at graduation? Visit SoFi and learn more about private student loans and the low rates we have to offer. Our friendly experts can also help you decide on your best course of action.

FAQ

What is the average college graduation rate in the U.S.?

According to the NSC Research Center Yearly Progress and Completion report published in December 2025, the average graduation rate for the 2019 U.S. cohort was 61.1%. This rate can help you evaluate prospective institutions, comparing individual college graduation rates to the national average.

Which schools have the best graduation rates?

Private nonprofit schools tend to have the highest graduation rates, followed closely by public schools. Private for-profit schools have lower rates, while Ivy League universities, such as Harvard and Yale, have particularly high rates.

How can students increase their chances of graduating?

Key reasons why students leave college without graduating include cost, academic difficulties, and administrative problems with transferred credits or loans. The best way to avoid these problems is to plan carefully and stay organized. Consider different colleges and their benefits, look at various options for funding, and build a network for practical and emotional support.

Photo credit: iStock/digitalskillet

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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., Puerto Rico, U.S. Virgin Islands, or American Samoa, 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 4/22/2025 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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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.

SOISL-Q126-016

The average cost of the CPA exam, including required fees, is about $1,330, but the exact cost varies for each candidate. The biggest reason for this is that every state has its own board of accountancy, each of which sets its own costs for additional fees 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.

Taking 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 noted, the cost to take the CPA exam, including all required fees, is about $1,330, but your final cost will depend on where you live and the review course you choose. As a result, you could end up paying much more or less than 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 vary from one state to another. The fees shown above are approximate, and your state’s fees may be higher or lower.

In addition, the CPA review courses sometimes have tiered pricing, so two people taking the same course and living in the same state may have different costs. There can be several differences between various 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, which include all 50 states, plus Washington DC, Guam, Puerto Rico, the Virgin Islands, and the Mariana Islands, maintains its own licensing requirements. Consequently, each state may have slightly different requirements to sit for the exam.

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

It is important to review your state’s requirements before you begin preparing for the exam. While some states require 30 hours of accounting courses, others may 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 on 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 American Institute of Certified Public Accountants (AICPA) exam. Currently, the AICPA exam costs $250-$320 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 $10-$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. These vary since each state sets its own fees, but they are usually between $50 and $400. The fee is nonrefundable, 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-$400. This is an annual cost, 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. 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. These fees can range anywhere from $30 to $100. 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 and can only be administered at Prometric Testing Centers. You can find a testing center with Prometric’s Pro Scheduler. These centers are located only in select cities, so you may end up with additional expenses for transportation and accommodations, depending on how close you are to a testing site.

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. Also, most states allow international applicants to sit for the exam, but several states and territories do not. In addition to any domestic fees, you may also have to pay fees of $356 for each of the following: Auditing and Attestation (AUD), Financial Accounting and Reporting (FAR), Taxation and Regulation (REG), and one discipline, such as Business Analysis and Reporting (BAR).

Covering CPA Exam Costs

Although the exact cost of the CPA exam can vary significantly, one thing is 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 costs of the CPA exam. For example, SoFi private 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 are available only to currently enrolled undergrad or grad students whose school includes the exam expenses in the official cost of attendance. 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.

Since exam prep courses are offered by third parties, using a credit card is a standard payment method for your review.

Personal Savings

If possible, you should avoid using emergency funds, but personal savings can help cover exam costs. If you aren’t able to pay for the entire expense using your savings, scholarships, grants, and both federal and private student loans can help you cover what is left. Personal savings can be useful, though, 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 AICPA offers a scholarship of up to $1,000 to exam candidates. Another example is the Newt D. Becker scholarship, which is worth up to $2,499.

Your state board may also offer scholarships. For example, Wisconsin offers several $3,000 college scholarships as you work toward your 150 hours required to sit for the exam. Check with your state board to see if your 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.

Recommended: Scholarship Search Tool

The Takeaway

There are many costs associated with the CPA exam, from prerequisite coursework to maintaining your license every 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.

Without a doubt, becoming a licensed CPA isn’t cheap. The price tag is likely to be four figures, which is high, especially before you are certified. However, you have options, including private student loans, to help cover the cost of the exam and related requirements.

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 for the exam and required fees is about $1,330, but the exact amount depends on where you live. Each state sets its own fees, so they may vary significantly from one to the other. Exam prep courses can also add to the overall cost.

Are there any hidden costs to take the CPA exam?

If you have considered all of the costs mentioned here, there should not be additional hidden fees for the CPA exam. 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.

Is the CPA ethics exam required in all states?

Most states require candidates to take an ethics exam. Many require only the AICPA ethics exam, while some require a state-specific course and exam. A few states, including Pennsylvania and Michigan, do not require an ethics exam as part of the CPA licensing process. Check the specific requirements for your state.

What happens if you don’t pass the CPA exam?

If you fail a section of the CPA exam, you must wait 24 hours after receiving your score to reschedule the test. It is important to check your state’s requirements for retaking the exam. You will also need to pay retake fees, which include a reapplication fee.

Photo credit: iStock/ridvan_celik

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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., Puerto Rico, U.S. Virgin Islands, or American Samoa, 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 4/22/2025 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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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.

SOISL-Q126-015

Student loans are often the go-to choice for families who need help paying for a child’s college education. But as you put together your financing plan, you may find there are other options worth considering — including using a home equity line of credit, or HELOC — to cover some college costs.

Both types of borrowing have advantages and disadvantages that may influence your decision to use one or both to pay for school. Read on for a look at student loans vs. HELOCs and how each can be used to help with your family’s educational and financial goals.

What Is a HELOC?

A home equity line of credit, or HELOC, is a revolving line of credit provided by a private lender and secured with the equity you have in your home.

HELOCs are sometimes confused with home equity loans, but they are not the same thing. Because a HELOC is a line of credit, you pay interest only on the amount of money you’ve actually borrowed. Payments can vary from month to month. As you replenish the account by making payments, you can borrow from it again. With a lump-sum home equity loan, a borrower receives all the money upfront and pays interest on the entire loan amount from day one.

A HELOC can be used to pay for just about anything — including tuition, books and supplies, housing, transportation, and other college expenses. But because the line of credit is secured with your home, if you fall behind on your payments, you risk foreclosure. And should you decide to sell your home, you may be required to repay what you currently owe.

Recommended: Different Types of Home Equity Lending

What Are Student Loans?

Student loans allow students and, in some cases, their parents, to borrow money to pay for a college education. Here’s how the two main types of student loans work:

Federal Student Loans

There are a few different types of federal student loans, and each has its own rules when it comes to how much you can borrow and how the money is repaid. But generally, they offer lower interest rates than many other types of loans and include more protections for borrowers, including temporary relief programs in case of financial hardship and even the potential for loan forgiveness.

To apply for federal student aid, you must submit the Free Application for Federal Student Aid (FAFSA®) form. If you qualify for assistance and accept what’s offered, the school will apply your federal loan funds to your outstanding account charges (tuition, fees, etc.). Whatever is left after that will then be turned over to you to use for other educational costs.

Private Student Loans

Private student loans are issued by nongovernment lenders, such as banks, credit unions, and other financial service companies. Because the federal government does not back these loans, they do not offer the same repayment options or safety-net protections as federal loans. So if your family (student and/or parents) qualifies for federal student loans, you’ll probably want to tap those first. However, if you’ve exhausted your federal financial aid and require additional funds, you may find you can get the help you need by borrowing through a private lender.

Key Differences Between a HELOC and Student Loans

While you may decide to use federal or private student loans, a HELOC, or all three types of financing to help pay for a college education, it’s important to be aware of some key differences in how they work.

Interest Rates

•   Federal student loans are usually the way to go for borrowers who are looking for the lowest interest rates available. The government sets a fixed interest rate for these loans, so once you sign on the dotted line, you can expect to pay the same rate for the life of the loan. But different types of federal student loans have different interest rates, and the way interest starts accruing on these loans also varies. If you have a subsidized loan, for example, you won’t accrue any interest while you’re in school, for six months after you leave school, or during any deferment. The U.S. Education Department pays the interest during these periods. The interest on an unsubsidized loan starts accruing immediately, however, and it is the borrower’s responsibility.

•   Private student loans are generally available with a choice of a fixed or variable interest rate, but the individual lenders set these rates, and they can vary quite a bit. It’s important to shop for the most competitive offer based on your creditworthiness and other qualifications.

•   HELOCs have a variable interest rate, which means the rate fluctuates over time. This can be good or bad, depending on which way interest rates are going. If rates drop, the borrower can benefit; but if they rise, it may make it harder to keep up with the payments. Still, because a HELOC is secured with your home, the interest rate may be lower than with unsecured borrowing, such as a personal loan or credit card. And because it’s a line of credit and not a lump-sum loan, you’ll be charged interest only on the amount you’ve actually borrowed.

Recommended: Student Loan Interest Rates Guide

Fees

•   Federal student loan borrowers are often surprised to learn they’ll be expected to pay an origination fee on each loan they receive. Origination fees are currently 1.057% for federal subsidized and unsubsidized loans for undergraduate and graduate students, and 4.228% for federal PLUS loans for parents and graduate students. The lender who is servicing the loan also may charge a fee if a payment is more than 30 days late.

•   Private student loan fees can also vary based on the lender you choose. Some may charge an origination fee or fees for late payments, while others, including SoFi, have zero account fees on student loans.

•   HELOC fees vary depending on the lender, but they often include application/origination, notary, title search, appraisal, credit report, document prep, and recording fees. There also may be an annual maintenance fee and charges for early termination or account inactivity.

Repayment Terms

•   Federal student loans offer the most repayment options for borrowers, including a fixed payment plan that ensures loans are paid off within 10 years and income-driven plans that base your monthly payment on your earnings and your family size. Some borrowers may also be able to have a portion of their loans forgiven. And those who have multiple federal student loans may choose to consolidate them into a single Direct Consolidation Loan. Another plus: Student and parent borrowers may be eligible for a deferment period if they become unemployed, experience an economic hardship, or serve in the military. (Be aware that repayment terms and deferments are set to change for new borrowers beginning July 1, 2026.)

•   Private student loans have different repayment terms depending on the lender and can often be repaid over a period of 10 to 15 years or longer, usually starting six months after graduation. There is no loan forgiveness with a private student loan, but some lenders, including SoFi, may offer borrowers a student loan deferment period that’s similar to what some federal loans offer. However, you can expect your loan to continue accruing interest during this time.

•   HELOC borrowers are usually required to make at least a minimum monthly payment during their account’s “draw” period. When the draw period ends — typically after 10 years — access to the line of credit ends and the lender sets up a repayment schedule based on the balance owed.

Credit Requirements

•   Federal student loan borrowers who are undergraduates don’t have to worry about passing a credit check as part of their application process — and they don’t need a cosigner to get a loan. Though parents and graduate students do have to pass a credit check to get a federal loan, there’s no required minimum credit score.

•   Private student loan lenders may have different credit requirements, but all borrowers (including undergraduates) should expect to go through a credit check. Lenders generally will be looking for a solid credit history, a good to excellent credit score, and other factors that show the borrower — alone or with the help of an eligible student loan cosigner — has the ability to repay the loan.

•   HELOC credit requirements can vary, but lenders typically require that you have at least 15% to 20% equity in your home, a healthy debt-to-income ratio that shows you can afford to take on the added debt load, and a credit score that indicates you can reliably repay the money you owe.

Tax Deductibility

•   Federal student loan interest payments can qualify for a tax deduction of up to $2,500, as long as you use the loan to pay eligible higher education expenses for yourself, your spouse, or a dependent. And you don’t have to itemize deductions on your return to get the tax break: The interest you pay is considered an income adjustment, so there’s no separate form to fill out.

•   Private student loan interest payments qualify for the same tax deduction as federal student loans, with the same requirements.

•   HELOC borrowers can now claim their interest payments as a deduction, regardless of how the funds are used. Prior to 2026, interest paid on money used for college didn’t qualify for a tax break.

Borrowing Limits

•   Federal student loans have different borrowing limits based on the loan type and your student status (undergraduate or graduate) or if you’re a parent.

•   Private student loan limits can vary by lender; there is no set borrowing limit as with most federal loans. However, the maximum amount you can borrow may be based on your school’s estimated cost of attendance minus any other forms of financial aid you receive, your creditworthiness, and other factors.

•   HELOC lenders may allow you to tap up to 90% of your home equity. For example, if your home is valued at $350,000 and you owe $250,000, you might qualify for a $90,000 HELOC: 350,000 – 250,000 = 100,000 x .90 = 90,000.

Alternative Options

Although you can use a HELOC to pay for college — especially if you find you need more money than you can get in student loans — there are other options that could help your family manage education costs.

Scholarships and Grants

A wide range of scholarships and grants are available to students who are willing to take the time to do some research and apply. And this type of financial aid, which can come from private organizations, colleges, and other sources, doesn’t have to be repaid.

Work Study or a Part-Time Job

A work-study program or part-time job can also help pay some college costs. A student can check with the financial aid office at their school to learn more about participating in federal or state work-study programs. And local businesses like coffee shops, restaurants, retail stores, and markets often hire college workers to help out at night and on the weekends.

529 Plans

If your student is still a few years away from attending college, you may want to look into a state-sponsored 529 college savings plan, also known as a qualified tuition program. These tax-advantaged plans offer parents and others an opportunity to save ahead for a family member’s college expenses.

The Takeaway

Using a HELOC vs. student loans to pay for college has advantages and disadvantages. Because you have to pay interest only on the amount you actually borrow, a HELOC can be an affordable alternative, or addition, to lump-sum student loans. And since your home is used as collateral with a HELOC, the interest rate may be lower than with some other borrowing options. Of course, this also means you could lose your home if you can’t make your HELOC payments.

You may want to exhaust any federal financial aid for which your family is eligible — and check out potential private student loan offers — before turning to a HELOC for help. Federal student loans offer borrower protections you can’t expect with a HELOC, and you won’t be putting your home at risk.

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

Can I use both a HELOC and student loans?

Yes, if the federal financial aid for which you are eligible doesn’t cover all your college costs, you may choose to combine a HELOC with both federal and private student loans. You may want to compare all your options before moving forward, however, and it may be helpful to make a plan for how you expect to use and repay the money you borrow.

Does the interest rate on a HELOC vary?

Yes, a HELOC comes with a variable interest rate, which means the rate you pay fluctuates based on the benchmark interest rate.

Are student loan interest rates fixed?

Federal student loans have fixed interest rates, so you’ll pay the same rate for the life of the loan. Private student loans may be offered with a choice of a fixed or variable interest rate.

Can you use a HELOC to pay off student loans?

If you can qualify for a lower interest rate, you might consider using a HELOC to pay off your student loans. But it’s important to keep in mind the upfront and ongoing costs that come with a HELOC. You’ll also lose the protections that student loans offer borrowers and could put your home at risk if you can’t make your HELOC payments.

Photo credit: iStock/andresr

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., Puerto Rico, U.S. Virgin Islands, or American Samoa, 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 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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.

SOISL-Q126-013

Attending college in the U.S. can be expensive. In addition to tuition and fees, students may need to cover the cost of room and board, along with other expenses, such as books and lab fees.

To help students going to college manage their budget, it’s important that they carefully weigh their options when it comes to public and private schools. In-state tuition at a public college can be far cheaper than out-of-state tuition or a private nonprofit school.

College Tuition in the United States

The United States has some of the world’s highest tuition costs, and prices have risen steeply over time, driven in part by increasing demand and the availability of loans. More recently, however, factors such as the increased availability of financial aid have kept average net tuition prices relatively stable.

Colleges have also added amenities to their campuses to help attract higher-paying students. While appealing to many students, this has a knock-on effect on the cost of attendance. Schools are also spending more on administration.

Average College Tuition Costs

The cost of college varies depending on whether students choose to attend public or private institutions. Public schools generally have different costs for in-state and out-of-state tuition.

The average tuition cost for 2025-2026 for an in-state student at a public four-year school is $9,750 per year. A student attending a public four-year program from out of state can expect to pay an average of $28,386 per year, according to the Education Data Initiative.

Students who wish to attend a private nonprofit four-year college will pay an average of $38,421 per year.

In addition to tuition and fees, students also have to cover other costs, such as room and board and transportation. These additional expenses will vary depending on whether you’re living on or off-campus, but they can add more than $10,000 to the annual cost of attending college. The average annual cost of attendance for students attending a public four-year in-state program is $27,146. Out-of-state students face an average of $45,708 per year. And for students attending a private nonprofit four-year program, the average annual cost of attendance is $58,628.

Recommended: What Is the Average Cost of College Tuition?

States With the Cheapest College Tuition

College tuition prices for public four-year institutions vary widely by state. Generally speaking, public colleges in the South and the West are the cheapest to attend. Colleges in the Northeast are the most expensive. Vermont has the most expensive in-state tuition and fees, topping out at an annual average of $19,223. New Hampshire is a close second at $18,839. To learn more, take a look at the annual study published by the College Board that tracks trends in college pricing and financial aid.

Here’s a look at the states with the cheapest in-state tuition and fees at four-year flagship university programs over the 2025-2026 school year.

Florida

University of Florida
In-state tuition and fees: $6,380
Out-of-state tuition and fees: $30,900

North Carolina

University of North Carolina at Chapel Hill
In-state tuition and fees: $7,020
Out-of-state tuition and fees: $43,152

Wyoming

University of Wyoming
In-state tuition and fees: $8,245
Out-of-state tuition and fees: $24,865

Montana

University of Montana
In-state tuition and fees: $9,188
Out-of-state tuition and fees: $34,312

Idaho

University of Idaho
In-state tuition and fees: $9,400
Out-of-state tuition and fees: $28,636

South Dakota

University of South Dakota
In-state tuition and fees: $9,687
Out-of-state tuition and fees: $13,299

Mississippi

University of Mississippi
In-state tuition and fees: $9,990
Out-of-state tuition and fees: $30,150

Utah

University of Utah
In-state tuition and fees: $10,004
Out-of-state tuition and fees: $31,748

Georgia

University of Georgia
In-state tuition and fees: $10,034
Out-of-state tuition and fees: $30,878

Nevada

University of Nevada, Reno
In-state tuition and fees: $10,309
Out-of-state tuition and fees: $28,941

Arkansas

University of Arkansas
In-state tuition and fees: $10,496
Out-of-state tuition and fees: $29,146

West Virginia

West Virginia University
In-state tuition and fees: $10,752
Out-of-state tuition and fees: $30,432

Paying for College

Because the price of college tuition, fees, and room and board can be so high, many students have to take out student loans and apply for grants and scholarships to make college affordable. Students may take out federal loans or private loans to help them pay for school. They’ll have to repay these loans through a series of monthly payments with interest.

The U.S. Education Department offers federal loans under the William D. Ford Federal Direct Loan Program. This program includes four types of federal loans:

•   Direct Subsidized Loans are available to undergrads who demonstrate financial need. The Education Department covers the interest on these loans while the students are enrolled in school at least half-time.

•   Direct Unsubsidized Loans are available to undergrads, graduate students, and professional students and are not based on need.

•   Direct PLUS Loans are for graduate and professional students and parents of dependent undergrads. Eligibility is not based on financial need. Effective July 1, 2026, new PLUS loans will no longer be available for grad and professional students. However, borrowers who already received a grad PLUS loan can continue borrowing under current terms through the 2028-2029 school year.

•   Direct Consolidation Loans allow students to combine federal loans into a single loan.

To apply for federal student loans and other forms of federal aid, students must fill out the FAFSA®, or Free Application for Federal Student Aid, each year.

Recommended: FAFSA Guide

Private student loans may be available through private lenders, such as banks and online lenders. These institutions set their own terms, interest rates, and loan amounts. When determining individual rates and terms, lenders will generally evaluate the applicant’s credit history, among other factors. Private student loans are typically considered a last resort when it comes to financing college because they aren’t required to include the same borrower benefits or protections (such as income-driven repayment options) as federal student loans.

There are also various sources of financial aid that can help students pay for school. This aid can come from federal, state, school, and private sources.

•   Grants, such as federal Pell Grants, are a form of financial aid that doesn’t need to be paid back, unlike student loans.

•   Scholarships are funds offered to students, often based on academic performance, an area of study, or special talents. Scholarships also do not generally need to be repaid.

•   Work-study programs allow students to earn money while they’re in school. Students may qualify for the federal work-study program based on financial need.

•   Many schools offer financial aid or scholarships.

The Takeaway

College can be a huge expense, but there are also a lot of benefits of a college education. As you’re considering schools, it’s important to evaluate all of your options and think seriously about choosing one that’s in your budget, as well as finding manageable ways to pay for it. That may mean attending a public school in the state you live in. And if you live in one of the states with the cheapest in-state tuition, you may pay less than $10,000 a year to go to school.

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 college cost on average in the US?

The estimated average cost of attendance for one year of college (living on campus) is $27,146 for in-state students at public four-year schools, $45,782 per year for out-of-state students at public four-year schools, and $58,628 for students at private nonprofit schools.

What state has the cheapest tuition?

States with the cheapest in-state tuition include Florida, Wyoming, and Montana. For out-of-state students, Florida, South Dakota, and North Dakota have some of the cheapest tuition.

What funding options are available?

By filling in the FAFSA, students can apply for federal loans. Direct Subsidized Loans are based on need, while Direct Unsubsidized Loans and Direct PLUS Loans are not need-based, and Direct Consolidation Loans allow students to combine federal loans. Further options may include grants, scholarships, work-study programs, and school-based financial aid.

Photo credit: iStock/Bet_Noire

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., Puerto Rico, U.S. Virgin Islands, or American Samoa, 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 4/22/2025 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.

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