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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, and 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 could 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 Loans

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 they aren’t backed by the federal government, these loans 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. These loans come with a fixed interest rate that is set by the government, 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. Department of Education 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 these rates, which are set by the individual lenders, can vary quite a bit — so it can be a good idea to shop for the most competitive offer based on your creditworthiness and other qualifications.

•   HELOCs have a variable interest rate, which means the rate can fluctuate over time. This could be good or bad, depending on which way interest rates are going. If rates drop, the borrower could 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 other types of unsecured borrowing, such as personal loan or credit card. And because it’s a line of credit and not a lump-sum loan, you’ll only be charged interest 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 also can vary based on the lender you choose. Some may charge an origination fee or fees for late payments, while others, including SoFi, have zero fees on student loans.

•   HELOC fees can vary depending on the lender, but they often include an application/origination fee, notary fee, title search, appraisal fee, credit report fee, document prep fee, and recording fee. 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 also may 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.

•   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 usually are 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 typically lenders 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 used 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 only claim their interest payments as a deduction if they used the borrowed funds to “buy, build, or substantially improve your home.” Interest paid on money used for college doesn’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 typically will allow you to tap into your home equity for 85% or more of your home’s current appraised value minus the amount you currently owe, So, for example, if your home is valued at $350,000 and you owe $250,000, you might qualify for a HELOC that’s $47,500 ($350,000 x 85% = $297,500 – $250,000 = $47,500).

Alternative Options

Although a HELOC can be used 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 his or her 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 only have to pay interest 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 interest rate you pay could fluctuate based on movements in the underlying benchmark interest rate or index.

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 — and you’ll lose the tax deduction you receive for the interest paid on your student loans. You’ll also lose the protections that student loans offer borrowers, and you could put your home at risk if it turns out 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).

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.

The Fresh Start Program offers federal student loan borrowers who are in default a second chance at regaining federal aid benefits. This program allows defaulted borrowers to pull themselves out of the consequences of default, but borrowers must take action to enroll in the program by the impending deadline.

According to StudentAid.gov, more than six million borrowers are eligible for the Fresh Start student loan program. If you’re among the millions of borrowers who could benefit from what this temporary relief program can offer, here’s what to know and how to act on this limited-time opportunity.

Who Qualifies for the Fresh Start Program?

Federal student loan borrowers with qualifying loans are eligible to participate in the one-time Fresh Start program. Students loans that qualify include:

•   All defaulted William D. Ford Federal Direct Loans and Family Federal Education Loans (FFEL) that went into default before March 13, 2020.

•   Defaulted Perkins loans that are held by the Department of Education.

Defaulted loans that aren’t eligible for Fresh Start include Perkins loans that are held by schools, Health Education Assistance Loan (HEAL) Program loans, and Direct Loans and FFEL Loans that went into default after the COVID-19 payment pause ended. Loans that are pending litigation under the Department of Justice are also not eligible for the Fresh Start Program.

💡 Quick Tip: The Fresh fresh start program student loans can help borrowers avoid delinquency and get back on track with payments.

Do Private Student Loans Qualify?

Since the Fresh Start student loan program is a federal initiative, it’s only accessible to borrowers who’ve defaulted on the qualifying federal student loans mentioned above. If you have a private student loan that’s in default, it is ineligible for this government program.

It’s important to speak to your lender as soon as possible if you can’t make your loan payment. Lenders might send a defaulted private student loan to collections to get payment, and report the default to credit bureaus which harms your credit history and score.

Benefits Available Through the Fresh Start Program

If your defaulted federal student loans qualify for the Fresh Start initiative, enrolling in the program can unlock crucial benefits that are typically inaccessible with a defaulted loan status. Here’s how the Fresh Start program for student loans can help you:

•   Re-access federal student loans and grants. By lifting your loan out of default through the Fresh Start program, you’ll regain eligibility for federal student loans and grants.

•   Enroll in an income-driven repayment (IDR) plan. Fresh Starts lets you enroll in an IDR which you weren’t eligible for with a defaulted loan. This includes the newest Saving on a Valuable Education (SAVE) Plan which, according to the Department of Education, lowered monthly payments for 50% of SAVE Plan participants to $0.

•   Requalifies you for loan forgiveness. Loans in default don’t qualify for loan forgiveness, so Fresh Start can help you regain student loan forgiveness eligibility for that debt.

•   Erases the default from your credit history. Fresh Start changes the loan’s status from “default” to “current” on your credit report. This essential change not only has a positive impact on your finances, like qualifying for lower rates on new credit accounts, but also in your everyday life, like for a rental application.

•   Dodges wage garnishment actions. Some borrowers with defaulted federal loans might have up to 15% of their wages garnished as a way for the government to collect the unpaid debt. Under Fresh Start, the wage garnishment practice for qualifying defaulted loans is avoided.

•   Avoids withholding other federal benefit payments. Benefit payments from federal sources, like Social Security and tax refunds, can be automatically withheld and applied to the defaulted loan balance. By getting your loan out of default through Fresh Start, you can avoid this outcome.

Applying for the Fresh Start Program

The student loan Fresh Start application is straightforward, and enrollment only takes a few minutes. For defaulted federal student loans that are held by a guaranty agency, you must contact the agency that holds your loans to enroll in Fresh Start. If you’re unsure which agency oversees your defaulted loan, call the Debt Resolution Group at 1 (800) 621-3115.

For defaulted loans that are held by the Department of Education, there are three ways to enroll:

•   Online. Create a myeddebt.ed.gov account if you don’t already have one; otherwise, log into your myeddebt.ed.gov account. Under the Account Information page, find the Fresh Start Transfer Information section and click on the link to “enroll.”

•   Phone. Call 1 (800) 621-3115 to speak to a representative with the Debt Resolution Group. When you’re asked for the reason for your call, say that you’d like to “get out of default through Fresh Start” or similar wording. You can also express your interest in enrolling in an IDR plan while making this phone call.

•   Mail. Mail a request letter with your name, Social Security number, date of birth, mailing address, and the following language: “I would like to use Fresh Start to bring my loans back into good standing.” All letters must be postmarked before October 1, 2025 and mailed to: PO Box 5609, Greenville, TX 75403.

Does the Fresh Start Program Have a Deadline?

Generally, the main Fresh Start eligibility criteria is ensuring the federal loan that’s in default qualifies for the program. A vital part of participating in the program is requesting enrollment into Fresh Start by the September 30, 2025 deadline.

After this date, the program is closed to enrollment, and currently, there are no announced plans to extend the deadline. Don’t miss out on this one-time opportunity to get your federal student loans back into good standing.

Next Steps After the Fresh Start Program

When your loan is successfully out of the default standing, it’s assigned to a new loan servicer. The loan’s status will show on your account as “in repayment,” and the Department of Education will request the removal of the loan’s default record from your credit report.

Your new loan servicer will contact you once your loan is successfully transferred. Shortly afterward — typically within a week — you can then apply for an income-driven repayment plan to help make your payments more manageable.

The Takeaway

Fresh Start offers easy and fast relief from federal student loan default. If you have qualifying Direct or FFEL Program loans, this temporary program not only helps you get a defaulted federal loan back into good standing and re-access certain federal programs, it can improve other areas of your life and finances by removing the adverse default status from your credit record.

But with the upcoming September 30, 2024 deadline to enroll, you must act quickly to recover the benefits you lost as a result of default.

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 deadline for the Fresh Start program?

Enrollment into the Fresh Start Program ends on September 30, 2024. Currently, the program will be inaccessible to student loan borrowers with defaulted loans after this date. Keep in mind that defaulted loans aren’t automatically enrolled in Fresh Start. If you have a qualifying student loan that’s in default, you must take action to request enrollment into the program.

Where can I find more information about the Fresh Start program?

Visit StudentAid.gov for more information and resources about the Fresh Start program. You can also contact your loan servicer to speak to a representative about your eligibility and enrollment into the initiative.

Can I still participate if I have multiple student loans?

Yes, if you have other federal student loans that are not in default, you can still participate in the Fresh Start student loan program for your qualifying defaulted student loans.

Photo credit: iStock/GaudiLab

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.

One of the most popular benefits the U.S. military offers is the GI Bill, which helps current and former service members pay for college or vocational school.

This federal benefit can help veterans transition to civilian life and achieve their educational and career goals. But because a veteran’s eligibility for education assistance can vary based on when and how long they served, their branch of service, and other factors, understanding and maximizing these generous benefits can be a challenge.

If you’ve been wondering how — and how much — the military pays for college, here’s a look at some GI Bill basics.

What Is the GI Bill?

The GI Bill, formally known as the Servicemen’s Readjustment Act of 1944, was signed into law by President Franklin D. Roosevelt at the end of World War II. The program was originally designed to offer various financial and social benefits to World War II veterans after they returned home. Those benefits included small business loans, mortgages, and education grants.

Today, the GI Bill specifically refers to any U.S. Department of Veterans Affairs (VA) education benefit offered to active-duty service members, veterans, and their families. The Post-9/11 GI Bill is the most frequently used VA education benefit program. Depending on how long you were in the military, it provides up to 100% of your tuition, money for housing, and a stipend for books and supplies.

Besides the GI Bill, serving in the military can give you access to other education-related benefits. As a service member on active duty, for example, you may qualify for certain perks or special repayment options for any federal or private student loans you’ve already taken out.

Types of GI Bills

Since it was enacted in 1944, the GI Bill has been extended — and expanded — several times. As a result, there are multiple parts and programs that can be used to pay for college. Here’s a closer look.

Post-9/11 GI Bill

This current version of the GI Bill is designed to support the latest generation of service members and veterans. If you have served on active duty for at least 90 days since Sept. 10, 2001, you are likely eligible for Post-9/11 GI Bill benefits. This is the case if you’re still in the military, or if you have already separated with an honorable discharge.

The Post-9/11 GI Bill can help cover the cost of college or an advanced degree, technical training, on-the-job training, or licensing/certification. Eligible service members can also transfer unused education benefits to their spouse and children.

Recommended: What Are Student Loans for Military Dependents?

Montgomery GI Bill

The Montgomery GI Bill (MGIB) is an older GI Bill program that provides up to 36 months of education benefits to those who have served on active duty and meet the requirements.

The Active Duty Montgomery GI Bill (MGIB-AD) is for veterans and current members of the military who have served at least two years on active duty. It provides a monthly benefit payment to use for education and training costs.

The Selected Reserve and Guard Montgomery GI Bill (MGIB-SR) provides educational assistance to eligible members of the Selected Reserve, including National Guard members. Similar to the MGIB-AD, the MGIB-SR provides a monthly payment based on the type of education or training a recipient is getting.

Recommended: What Is a Trade School and Is It Right for You?

Other GI Bill Programs

The GI Bill also includes other education programs available to service members both during and after service, as well as their families. These include:

Veterans Readiness and Employment (VR&E)

If you have a disability connected to your military service that limits your ability to work or prevents you from working, the VR&E program can help. This GI Bill program can help you explore employment options and get the education or job training you might need to work. In some cases, your family members may also qualify for certain benefits.

Survivors’ and Dependents’ Educational Assistance (DEA)

The DEA program is for eligible spouses and children of veterans who were disabled, died, went missing in action (MIA), or were held as a prisoner of war (POW) during their service. It provides monthly payment to help cover the cost of education or job training for these family members.

Recommended: Guide to Military Student Loan Forgiveness

GI Bill Eligibility for Veterans

GI Bill veterans’ benefits are generally based on when you served, how long you served on active duty, and other factors. You also have to have been honorably discharged.

Though you may qualify for more than one type of GI Bill educational benefit, you can generally use only one benefit for a period of service; so you may have to decide which one is the best fit for your needs. (You can call the VA at 888-442-4551 if you need help making a choice.) Here are the eligibility requirements for different GI Bill programs.

Post-9/11 GI Bill Eligibility

If you served in the military after Sept. 10, 2001, you may be eligible for Post-9/11 GI Bill benefits. The amount you receive (which could range from 50% to 100% of the full benefit) will be based on how long you served on active duty and other criteria.

To be eligible for Post-9/11 GI Bill Benefits, you must meet one of these qualifications:

•   You have served at least 30 days of continuous active-duty service after Sept. 10, 2001, and have been discharged due to a service-connected disability. Or:

•   You have served an aggregate of 90 days of active-duty or federal service after Sept. 10, 2001, and received an honorable discharge.

Recommended: Finding Free Money for College

Montgomery GI Bill Eligibility

You may be eligible for the MGIB-AD if you:

•   Served between two and four years after June 30, 1985.

•   Have a high school diploma, GED, or 12 hours of college credit.

•   Had your military pay reduced by $100 a month for the first 12 months of service.

You can find a full list of eligibility criteria here.

You may be eligible for MGIB-SR benefits if you:

•   Agreed to serve for a period after June 30, 1985 (or for some types of training, after Sept. 30, 1990)

And either:

•   Agreed to serve six years in the Selected Reserve, or:

•   You’re an officer in the Selected Reserve and you agreed to serve six years in addition to your initial service obligation.

You can find a full list of eligibility requirements here.

Benefits Provided

Here’s a breakdown of the benefits offered by the Post-9/11 GI Bill.

Tuition/Fee Coverage

If you’re a veteran who qualifies for full benefits and you attend a public school as a state resident, the Post-9/11 GI Bill will pay all of your tuition and any mandatory fees directly to your school. You also may be eligible to receive the in-state tuition rate for an out-of-state school.

If you choose to attend a private or foreign institution of higher learning, or a qualifying non-college degree program, a predetermined maximum amount (currently up to $27,120.05) will be paid to your school annually. Benefits for flight training and virtual/online schools, which have their own maximums, also may be available.

Monthly Housing Allowance

The Post-9/11 GI Bill also pays a monthly college housing allowance. The program will pay you a percentage of the full monthly housing allowance based on the percentage of Post-9/11 GI Bill benefits you’re eligible for, as well as how many credits you’re taking.

If you are taking 100% of your classes online, you may be eligible for a monthly stipend equal to half of the national average stipend, which is currently $967.40.

Book and Supplies

Under the Post-9/11 GI Bill, you may be able to receive an annual stipend of up to $1,000 per year to pay for books and supplies. This stipend is paid out at the beginning of each term and is based on the percentage of benefits you’re eligible for and the number of courses you’re enrolled in for the year.

Recommended: How to Pay for College Textbooks

Applying for GI Bill Benefits

If you’re a veteran and interested in getting the military to pay for college, you’ll need to apply for GI Bill benefits. Here’s a look at what’s involved.

Required Documents

Some of the information you’ll be asked for when you apply may include:

•   Your Social Security number

•   Direct deposit bank account information

•   Education history

•   Military history

•   Basic information about the educational institution or training facility you want to attend

Application Process

You can apply for benefits online at the VA’s website. Alternatively, you can apply by mail. Simply call 888-442-4551 to request an application. Once you receive the application and fill it out, you can send it to the VA regional processing office that’s right for you (you can use this online VA locator). You can also apply by visiting your nearest VA regional office.

It takes the VA an average of 30 days to process an application. If the VA determines you are eligible for educational benefits, you’ll receive a Certificate of Eligibility (COE) that you can provide to the school you’ve chosen.

Military Tuition Assistance

The U.S. Department of Defense (DOD) also offers education benefits to current active-duty, National Guard, and Reserve Component service members who wish to pursue post-secondary education in their off-duty time. This is one of the many ways you can save money while serving in the military.

Called the Military Tuition Assistance program, it will pay up to 100% of tuition and course-specific fees, with a limit of $250 per semester credit hour and an annual limit up to $4,500. Degrees and programs of study covered include undergraduate and graduate programs, vocational/technical, distance learning, and independent studies. (Housing, books, and other expenses aren’t covered.) Details are available through each service branch’s website.

State Benefits for Veterans

Many states offer education benefits that veterans can use along with, or as an alternative to, their federal GI Bill benefits. To find out about these benefits — which may include tuition waivers, scholarships, grants, and other programs — you can visit the Department of Veterans Affairs or Department of Education website for your state. Your military branch also may have information about the various benefits available in your state.

Local and regional veterans service organizations also offer scholarship opportunities to qualified candidates. And your employer may provide help with tuition or student loan repayment as part of their veteran financial well-being programs.

The Takeaway

If you’re hoping to further your education when your military service is complete, the GI Bill can help you pay for college, graduate school, and a variety of training and certification programs. Depending on when you served, how long you served, and some other factors, you may receive help paying for a large portion of your education expenses, including tuition and fees, education-related supplies, and housing costs.

Beyond the GI Bill, you also may qualify to receive assistance through state resources, local and regional organizations, your employer, and 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

Can the GI Bill be transferred to dependents?

If you meet certain service requirements, you may be able to transfer your Post-9/11 GI Bill benefits to an eligible dependent. You can apply for a Transfer of Education Benefits (TEB) through the Department of Defense.

Do GI Bill education benefits expire for veterans?

It depends. If you were discharged from active duty on or after Jan. 1, 2013, your benefits won’t ever expire. But if you were discharged before Jan. 1, 2013, your Post-9/11 GI Bill benefits will expire 15 years after you separate from the military.

Montgomery GI Bill benefits must be used within 10 years after your separation date. After that, you could lose any benefits you haven’t used, although the Department of Veteran Affairs (VA) may grant an extension under certain circumstances.

What education benefits can I get if I’m still in the military?

If you’re still serving in the military, you may be eligible for education benefits through the GI Bill, the Department of Defense’s Military Tuition Assistance, and other programs. You can get information at the Department of Veteran Affairs (VA) website or through your military branch.

Photo credit: iStock/Drazen Zigic

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.

SOIS-Q224-1922071-V1

The income needed for a $450,000 mortgage varies based on a few factors, but generally speaking, an income of $130,000 would put you in the position to afford a $450,000 mortgage. You can estimate how much you need to make by focusing on principal and interest. Together, these two factors account for a majority of a home’s monthly mortgage payment and reveal an approximate income you’ll want to bring in.

For a more accurate monthly payment estimate, you’ll need to know the home’s property taxes, home insurance costs, as well as which type of home loan you plan on using. Certain loans come with monthly fees that will increase your monthly housing costs.

If you’re thinking about borrowing $450,000 to buy a home, here’s what you need to know.

Income Needed for a $450,000 Mortgage

The income needed to qualify for a $450,000 mortgage varies on a few factors. However, the principal and interest (P&I) payment for a $450,000 mortgage would be $2,996 for a 30-year term with a 7.00% interest rate. For a 15-year term, the payment is $4,047. Keep in mind that these calculations do not include other fees that will increase how much you actually pay.

Many lenders want borrowers to stick to a 28% housing cost, meaning that they will not approve loans that take up more than 28% of the borrower’s gross monthly income. A mortgage calculator can do the math for you, but for a payment of $2,996 each month to equal 28% of your monthly income, you would need to earn about $10,800 per month, or about $130,000 per year. However, these calculations do not factor in other fees that contribute to your monthly mortgage payment.

To get a more accurate monthly payment, use a mortgage calculator with taxes and insurance included.

Recommended: First-Time Homebuyer Guide

How Much Do You Need to Make to Get a $450K Mortgage?

The income needed for a $450,000 mortgage varies based on:

•   Loan term

•   Interest rate

•   Property taxes

•   Home insurance

•   Loan-specific fees

However, the loan term and interest rate determine a majority of the costs for any monthly mortgage payment.

What Is a Good Debt-to-Income Ratio?

The maximum debt-to-income (DTI) ratio lenders often accept is 36%, with a maximum of 28% going toward housing costs. Some lenders have higher margins, and some are willing to work with borrowers who have unusually high incomes and amounts of debts.

What Determines How Much House You Can Afford?

The two biggest factors that determine how much house you can afford are your income and DTI ratio. Regardless of your debts, the mortgage payment cap is often 28% of the borrower’s gross income.

What Mortgage Lenders Look For

Mortgage lenders typically look for a low DTI ratio, a strong credit score, a history of stable employment, and a high income. All of these factors suggest you are not only responsible enough to take on a mortgage but are financially capable of repaying your debts.

$450,000 Mortgage Breakdown Examples

When determining a home’s affordability, compare loan terms. A 30-year loan may enable you to buy a more expensive home, but increases the amount you pay in interest. For example, if you borrow $450,000 with a 30-year mortgage at 7.00%, over the life of the loan you will pay about $628,208 in interest in addition to the $450,000 principal. Borrow the same amount at the same rate but pay it back over 15 years and your interest charges shrink to around $278,236.

Remember, the above calculations do not include property taxes, home insurance, and loan-specific fees.

Pros and Cons of a $450,000 Mortgage

A $450,000 mortgage loan comes with its share of pros and cons. Here are a few things to consider:

Pros:

•   You build equity with each monthly payment

•   Equity can be used to secure a low rate loan

•   Fixed housing costs

•   Freedom to make changes to the property

Cons:

•   Yearly home maintenance costs

•   Large down payment

•   Large closing costs

How Much Will You Need for a Down Payment?

The minimum down payment a buyer can make for a conventional loan is 3%, and this low rate is often only available to first-time buyers. Assuming your mortgage is for $450,000, this means the purchase price must be $463,918. A 3% down payment would be $13,918.

Can You Buy a $450K Home With No Money Down?

It’s possible to buy a $450,000 home with no money down using a loan from the U.S. Department of Agriculture or the U.S. Veterans Administration (a VA loan). All other traditional mortgages require a down payment. However, other options do exist.

Can You Buy a $450K Home With a Small Down Payment?

USDA and VA loans do not have down payment requirements. The lowest amount needed for a conventional loan for some buyers is 3% of the purchase price. FHA loans require a 3.5% down payment.

Is a $450K Mortgage with No Down Payment a Good Idea?

It certainly can be. For example, if you use a loan that doesn’t require a down payment, such as a USDA loan, you could use the money for something else. If you were to fix up the home and sell it after a few years, those renovations might bring in a good return on your investment.

Ultimately, however, it depends on the monthly payment. As long as you can comfortably afford the monthly payment, whether the mortgage requires a down payment or not doesn’t matter too much.

Can’t Afford a $450,000 Mortgage With No Down Payment?

You may want to consider lowering your maximum purchase price if you can’t afford the P&I payment.

If housing prices are high where you live, another thing you may want to consider is looking in another area. Consider looking at the cost of living by state with data that rates the most affordable states. You may find moving to a new location deserves some consideration.

You may also consider the following tips.

Pay Off Debt

Debts like student loans, credit cards, and car loans eat up your monthly income. As they are paid off, three things happen:

•   You free up cash

•   You lower your DTI ratio

•   You cultivate a better credit score

Once you do this, you may be approved for a higher loan amount or the monthly payment on a $450K mortgage will become more manageable.

Look into First-Time Homebuyer Programs

First-time homebuyer programs help homebuyers with down payments and closing costs. They often come in the form of grants, forgivable loans, or low interest loans. Many programs can be found through HUD and are first-come-first-served. Apply early if you’re interested.

Build Up Credit

The stronger your credit score, the more confidence lenders have in you. This will likely result in a lower rate, and may also result in a higher loan limit. However, your lender will still likely want you to stick to a 28% DTI for housing costs.

Start Budgeting

Create a monthly budget to intentionally track how much you spend and save. See if there are places where you can cut back to help save up for a larger down payment.

Alternatives to Conventional Mortgage Loans

There are alternatives to conventional mortgage loans, but they involve working with a seller who is open to nontraditional financing methods. Some nontraditional methods include seller financing and lease-to-own options.

Another option is a portfolio loan, which some banking institutions offer. A portfolio loan is a loan lenders don’t sell to another institution. Instead, they keep it in their own books, which enables them to allow for looser eligibility requirements.

Recommended: Home Loan Help Center

Mortgage Tips

Here are a few quick tips to qualify for a mortgage:

1.    Get preapproved as early as possible: The mortgage preapproval process helps with a lot of things, and it will tell you how much house you can afford.

2.    Use a mortgage calculator when shopping online: This will help you quickly crunch some numbers. There are many types of mortgage calculators online, including home affordability calculators.

3.    Compare loan types: There are many different types of mortgage loans, each of which comes with different requirements and different fees.

4.    Pay down your debts: The fewer debts you have, the more room in your budget you’ll have for a higher mortgage.

5.    Know that you can always refinance in the future: A mortgage refinance will take a fresh look at your credit score and income, and will also include your existing home equity when determining your new rate.

The Takeaway

You’ll need an annual income of around $130,000 if you want to be in a good position to make payments on a $450,000 home mortgage loan. Remember that your payments will likely include principal and interest, but also homeowners insurance and property taxes. Getting preapproved by a lender can help make your search less stressful.

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

FAQ

How much do you need to make to qualify for a $450K mortgage?

Just considering the P&I payment of a $450K mortgage, the minimum you would need to make is around $130K a year. This is for a 30 year mortgage with a 7.00% interest rate.

What would my mortgage be on a $450,000 house?

How much money you would have to borrow to buy a $450,000 house would depend on the size of your down payment. First-time homebuyers can sometimes put down as little as 3% ($13,500). In this case, you would need a home mortgage loan for $436,500. If you put down 20% ($90,000), you would need a mortgage loan for $360,000.

Can you buy a house with a $40,000 salary?

Yes, but it depends on the purchase price of the home. The gross monthly income is $3,333, which means the maximum amount spent on housing should be $933. This puts the purchase price around $140,000.

Photo credit: iStock/FreshSplash

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

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

SOHL-Q224-1906859-V1

A second chance checking account can help those with negative past banking history access banking services. It can be a place to deposit and spend money, though it may not offer all the features of a standard checking account.

These second chance checking accounts can be an important step for many people on their journey to enjoying full banking privileges. Learn more about them here.

Who Is a Second Chance Banking For?

Second chance banking can help those who have negative marks on their past banking record. To understand this, it’s important to know a bit about what ChexSystems is. Think of it as the banking equivalent of a credit bureau. It catalogs information on consumers’ banking histories, including basics like name, contact information and Social Security number, as well as information on account closures, bounced checks and overdrafts, unpaid balances, suspected fraud, and more.

When a customer applies for a new checking account at a bank or credit union, the institution may look up the ChexSystem report to determine whether or not it’s willing to extend its services. Negative report items — such as unpaid overdrafts, involuntary account closures, or a high number of recent inquiries — can cause a bank to refuse regular checking services to the client.

That’s where second-account checking comes in. A second-chance bank account is one where the bank offering the account is willing to overlook a less-than-stellar banking history. This means a client can continue to use a bank account while rebuilding their ChexSystem report.

While this type of account isn’t available at all banks, it is available at many, including some major traditional and online banks, like Wells Fargo, Chime, and Varo.

In other words, an imperfect banking history doesn’t have to mean living an unbanked existence.

How Does Second Chance Banking Work?

Here’s how second chance banking operates: much like any other regular checking account. The account holder deposits money into the second chance checking account, which they can then access using a debit card or making a withdrawal at an ATM.

Specific account features will depend on which institution is offering the account. For example, some banks may offer free paper checks, and many have convenient mobile banking features.

However, some banks may charge monthly service fees or minimum opening deposits, and may not allow second chance checking account holders to use paper checks. And although checking account interest rates are notoriously low, it’s unlikely your second chance checking account will accrue any interest at all.

That’s why, as when opening any other kind of bank account, it’s important to review the fine print closely to ensure you know what you’re getting into before you apply.

Applying for one of these accounts typically works in the same way as opening a bank account of any kind.

•   The bank will ask for a variety of personal information, and you may be asked to verify your identity with a form of official identification like a driver’s license or Social Security card.

•   You can do this in person or entirely online.

•   Depending on the institution, you may be required to put down a minimum initial deposit. However, in many cases, you will find second chance checking with no opening deposit, meaning the account will be 100% free.

•   You may need to wait a few business days for your application to process, and then you should be in.

Recommended: How to Set Up a Bank Account

Once you’ve opened a second chance checking account, you can use it as normal to pay bills, restaurant tabs, and grocery store totals — whatever expenses come up in your day-to-day life. Meanwhile, the negative items that might be on your ChexSystems report will slowly vanish. Most records fall off after five years.

If you’re interested in cleaning up your ChexSystems report, know this:

•   Consumers also have the right, under the Fair and Accurate Credit Transaction Act (FACTA), to request a free ChexSystems report once a year. A request can be made by phone, mail, fax, or online form, allowing review of the report for any incorrect negative items and disputing them.

•   If you do dispute something on your record, the investigation will generally take about a month. You will receive a letter in the mail notifying you of the results.

Over time, it’s possible to clean up a ChexSystems record — which can unlock the ability to pursue other types of banking services, including high-interest deposit accounts.

Recommended: Guide to Reopening a Closed Bank Account

Pros and Cons of Second Chance Banking

While second chance banking does provide a valuable service, there are some drawbacks to these accounts as well. Here are the pros and cons of second chance checking accounts.

Pros:

•   Allows clients to use a checking account even without a perfect banking history.

•   Gives account holders time to rebuild their banking history and let negative items fall off their ChexSystems report.

•   In many cases, second chance checking accounts are free and don’t require a minimum opening deposit.

Cons:

•   Some accounts may assess monthly bank fees and have minimum opening deposits — and may not offer waivers.

•   The account may have limited capabilities (such as an inability to use paper checks or to access overdraft protection).

•   The account is unlikely to offer interest growth on account balances.

Alternatives to Second Chance Banking

Second chance checking accounts are a solid option for those who might not be able to open a traditional checking account because of their banking history. But they’re not the only alternative. Here are two options:

•   Prepaid debit cards. A prepaid debit card can be used to pay bills and other expenses without using cash. It works like a gift card: Clients load the card with a certain amount of money, which they can then use as they see fit. The cards are also reloadable, making them a fair option for working around the handicap of not having a bank account.

   What’s more, many prepaid debit cards don’t require a credit check to open. This makes them a viable choice for those with poor credit histories as well as poor ChexSystems reports.

   That said, there are pros and cons of prepaid debit cards. In terms of downsides, they often include a variety of fees — such as monthly maintenance fees, activation fees, and reloading fees — which can eat into the user’s balance and make them unsustainable for long-term use.

•   Cash. Others who find themselves unbanked might try to simply pay their way through life using cash. After all, you can often get a paycheck cashed at the nearest major grocery store or retailer.

   However, there are downsides: Check-cashing services generally come with a fee. Plus, many utility companies, landlords, and other bill collectors don’t accept cash as payment. And if your cash is lost or stolen, there’s no reliable way to get it back. It’s gone.

The Takeaway

Second chance bank accounts can help those who are unable to get a standard bank account. While it doesn’t have all the features of typical accounts, it can offer a path to being banked and graduating to a full-fledged checking account.

FAQ

What is second chance banking?

Second chance banking is a kind of account that serves people who may not have a perfect banking record. If you have negative items on your ChexSystems record, you may still qualify for this kind of account.

What is a second chance bank account?

A second chance account is one that can be opened even if you have a less than perfect history with banking. It may have some downsides (monthly fees plus no overdraft protection, for example), but it allows people to get back in the game and have checking privileges.

Who is second chance banking for?

Second chance banking is for people who have negative items in their banking history. These typically include unpaid overdrafts, involuntary account closures, and other events which show the account holder did not use their privileges responsibly.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details 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.

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