A Beginner’s Guide To Getting The Loans You Need To Graduate
Unless their parents have somehow saved enough moneyor earn massive salariesmost students need to borrow to pay for college today. Working your way through college is largely a thing of the past, as well. Few students can make enough to pay for college while they’re also taking classes. For that reason, student loans have become increasingly common. Here’s what you need to know about applying.
What Borrowers Can Use Student Loans For
Whether you take out federal or private student loans, your student loan funds can be used to pay for school-certified educated expenses. According to the Office of Federal Student Aid, you can use your loan amount for the following purposes:
College tuition and fees: Your loans can pay for your tuition and fees, which are the standard college costs that come with enrolling in a program and attending classes.
Room and board: Student loans can pay for your living expenses and meals, including campus housing and school meal plans or off-campus apartments and groceries you purchase yourself.
Institutional fees: If your school charges institutional fees, such as lab fees or parking fees, you can use a portion of your loans to cover those education costs.
Books and supplies: According to The College Board, the average college student spends $1,240 on books and supplies per year. You can use your loans to pay for textbooks, notebooks, pens, book bags, and other school supplies.
Personal expenses: If you need personal items, such as ben linens for the dorm or a microwave for your off-campus apartment, you can use your loans to buy those things.
Equipment: You can use your loans to buy the equipment necessary for your schoolwork, such as a personal computer, software, or a camera if you enrolled in a photography class.
Dependent care expenses: If you have a child that needs care while youre in school, your loans can pay for childcare.
What Is An International Student Loan
Federal student loans are popular with US students studying in the US, but they are not available to internationalstudents. Instead, international students are eligible for international student loans, specialized privateeducation loans available to international students studying in the US.
International Student Loans are now a very realistic way to finance your education in the US. Loans are veryflexible, and can offer loan amounts high enough to pay for your entire education, but with extended repayment termsand reasonable interest rates, so you can afford the repayment after you graduate.
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Personal Loans Vs Private Student Loans
It isnt surprising that providers limit borrowers from using personal loans for educational expenses: Students just dont have the same needs and ability to repay as your average borrower.
Key differences between personal loans and private student loans include:
Should I take out a personal loan for school?
It depends on your circumstances and finances. Ask yourself the following questions to help you decide if a personal loan is right for you.
When to consider a personal loan
- Youre employed and have good to excellent credit.
- You can afford immediate repayments.
- You have limited educational expenses and a creditworthy cosigner.
- You arent eligible for public or private student loans.
When to look elsewhere
- Youre eligible for a private or federal student loan.
- Youre eligible for scholarships, grants or work-study.
- Youre not employed, have poor credit and dont have a cosigner.
- Youre looking to borrow $35,000 or more.
Complete A Parent Plus Loan Application
You can complete a parent PLUS loan application online using the FSA ID and account you created to file a FAFSA, or through your financial aid office. Youll provide basic info on yourself as the parent, your child, their school, and your loan. You can also indicate how you want loan funds disbursed and whether you want to defer payments while your child is in college.
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How Your Parents Income Affects Financial Aid Eligibility & Awards
Getting financial aid if parents make too much may be a challenge, but its not impossible. The biggest reason financial aid is partly based on your parents income is because parental income can impact a students Expected Family Contribution .
Your Expected Family Contribution is the amount the Department of Education determines you and your family should be able to pay towards your schooling. The EFC the DOEs formula calculates is compared to the schools Cost of Attendance to determine what type of need-based financial aid you will receive.
Because financial aid is partly based on your parents income, if your parents income is very high, your expected family contribution may be large enough that you dont qualify for any need-based help. EFC takes many factors into account, though, including how much your parents make as well as whether you have siblings attending college.
Its also worth noting that your parents income doesnt count in determining your EFC under certain circumstances. For example, your parents finances arent considered if you meet any of the following criteria when you complete your FAFSA:
How To Get More Financial Aid For College
- To get any college aid, students must file a Free Application for Federal Student Aid.
- For the 2022-23 school year, the FAFSA filing season opens Oct. 1 and the sooner you file, the better.
- “Just about everyone is going to qualify for something,” said Sallie Mae spokesman Rick Castellano.
The Covid-19 pandemic and economic downturn that followed made it even more difficult for many students and their parents to afford college just as costs went up.
Tuition and fees plus room and board for a four-year private college averaged $50,770 in the 2020-21 school year at four-year, in-state public colleges, it was $22,180, according to the College Board, which tracks trends in college pricing and student aid.
Now, in order to obtain a four-year degree, nearly all students rely on some sort of financial aid.
More from Personal Finance:Fewer students are going to college because of the cost
“Financial aid is becoming a larger piece of the college admissions puzzle, as tuition costs continue to rise,” said Marnix Broer, co-founder and CEO of EdTech platform StuDocu.
“Many students are choosing a college based on where they can afford, so it’s more important than ever for students to understand their options when it comes to where the best financial aid may be available for them.”
That’s where the Free Application for Federal Student Aid comes in. Students must fill out the FAFSA to access any kind of assistance, including scholarships and grants, work-study and loans.
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Which Fees Should I Look Out For When Choosing A Private Student Loan
Just like you should read the fine print on a credit card, you should understand the fees you might incur on private student loans. Some lenders will add your fees to the loan principal. When you apply for a private student loan, seek out answers to the following questions:
- Is there a loan application fee?
- Is there a loan origination fee?
- Which types of fees could I incur for making a late payment?
- How do I pay the fees?
Stafford Loan Aggregate Limits
Students who borrow money for education through Stafford loans cannot exceed certain aggregate limits for subsidized and unsubsidized loans. For undergraduate dependent students, the maximum aggregate limit of subsidized and unsubsidized loans combined is $57,500, with subsidized loans limited to a maximum of $23,000 of the total loans. Students who have borrowed the maximum amount in subsidized loans may take out a loan of less than or equal to the amount they would have been eligible for in subsidized loans. Once both the subsidized and unsubsidized aggregate limits have been met for both subsidized and unsubsidized loans, the student is unable to borrow additional Stafford loans until they pay back a portion of the borrowed funds. A student who has paid back some of these amounts regains eligibility up to the aggregate limits as before.
Graduate students have a lifetime aggregate loan limit of $138,500.
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What To Do If You Hit Your Federal Loan Limits
If youve hit your annual or total federal loan limits, you can consider federal PLUS or private student loans. But first, it might be a good idea to:
If you decide to take out a private student loan, be sure to consider as many lenders as possible to find the right loan for you. Credible makes this easy you can compare your rates from multiple lenders in two minutes.
Find out how much youll owe over the life of your federal or private student loans using our student loan calculator below.
Enter your loan information to calculate how much you could pay
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Which Type Of Loan Should You Take Out
If you learn anything about financial aid for college, let it be this: There is a significant difference between federal and private loans. Before you apply for a private loan from a bank or credit union, use all possible federal aid available to you, including subsidized and unsubsidized loans.
Federal loans, which are provided through the federal government, have certain protections for student borrowers. First, they offer fixed and low interest rates that private loans typically do not. Second, federal loans include income-driven repayment plans, which set your monthly repayment fees to match your income. That means if you lose work, you can adjust your repayment plan to reduce your monthly fees. Third, with federal loans, you generally do not have to start making payments until you graduate and with subsidized loans, the federal government pays the interest on the loan while you are in school. An added bonus, when you file taxes, the interest on your federal loan may be tax deductible. Federal loans, include Perkins Loans, Direct Plus Loans, Direct Subsidized Loans, and Direct Unsubsidized Loans.
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Alternative Funding Options If You Cant Get A Student Loan
If youre having a hard time getting a student loan without your parents, here are a few other options to consider:
- Scholarships: Unlike student loans, college scholarships dont have to be repaidwhich makes them a great way to pay for school. There are a wide variety of scholarships available to students from various backgrounds, including awards based on financial need, merit, athleticism or factors like your race or college major. Common organizations that offer scholarships include local and national businesses, nonprofits and professional associations.
- Grants: Like scholarships, grants are essentially free money that you can use for education expenses. You might be able to qualify for federal grants, state grants or private grants, such as those offered by your school or nonprofit organizations. Keep in mind that theres no limit to how many grants and scholarships you can get, so its a good idea to apply for as many as you can.
- Emergency student loans: Some schools provide short-term loans to enrolled students facing an emergency, such as a death in the family or financial hardships. If youre facing a circumstance like this, contact your schools financial aid office to see if these kinds of loans are available and how to apply. Even if your school doesnt offer emergency student loans, your financial aid office might have access to additional resources to help you cover your costs.
Appeal Your Award Letter
If your circumstances have changed since you submitted the Free Application for Federal Student Aid , you may be able to get more financial aid money. You have options to appeal your award with the school. Job loss or a change in income, divorce or separation, high medical expenses or other special circumstances that affect your family’s finances are worth discussing with the school. You’ll likely have to submit additional documentation, but it could mean that you end up getting more financial aid.
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Other Sources Of Funding
Registered Education Savings Plans
A Registered Education Savings Plan is a long-term investment account that lets people save up to $50,000.00 for a childs education. Money deposited into an RESP grows in 2 ways:
- Funds are put towards either fixed investments or equity investments . Interest earned on these investments is not taxed.
- Through the Canada Education Savings Grant , the federal government matches annual RESP contributions by 20% if the the future students receiving the funds are 17 or younger. The CESG applies on the first $2,500.00 of annual contributions up to a lifetime limit of $7,200.00.
- Through the Canada Learning Bond program, children from low-income families will get up to $2,000.00 in RESP contributions from the federal government. This is not a matching program no personal contributions are necessary to get the CLB.
Contributions to an RESP are not tax deductible. Withdrawals from an RESP for educational purposes are called educational assistance payments and count as part of the students annual taxable income. Should funds go unused and get returned to the contributor, he or she can receive the funds without paying additional tax.
What Are Plus Loans
These are federal direct loans that are made to parents of dependent undergraduate students, as well as to graduate or professional students enrolled in school at least half time. PLUS loans don’t have a cap on the amount that can be borrowed, but you can’t borrow more than the cost of attendance at the specific school youor your child, if you’re the parentsare attending. This kind of loan does have drawbacks, so research them carefully.
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Colleges Have Programs So Does The Military And Maybe Your Employer
A college degree is almost a necessity for most working Americans aiming for a comfortable lifestyle. In fact, a bachelor’s degree is worth close to $3 million in wages over a lifetime, according to a study by the Georgetown University Center on Education and the Workforce. The question is how to get one without being crushed under a mountain of student debt. Here are some ways to find grants, scholarships, and other tuition benefits that will pay you, or at least repay you, for earning a degree.
What To Do When You Run Out Of Financial Aid
Federal financial aid has limits, so its not uncommon for it to run out. Students in need of immediate funding have a number of alternatives including scholarships, payment plans, employment, and private student loans.
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Running out of financial aid is the last thing you want to worry about when youre getting a college education. Still, it happens to many students during the course of their college careers.
Simply put, there isnt enough money earmarked for financial aid to go around. Only certain people qualify for Pell Grants and there are federal student loan limits, which means its all too possible to run out of money.
If youre reading this because you ran out of financial aid mid-semester, there are a few steps you can take to get back on track and make sure you have enough money to cover your remaining college costs.
Steps to take if you run out of financial aid:
Ran Out of Federal Aid? Consider Private Loans
- Loans up to 100% of the school-certified cost of attendance
- You choose how long it takes to repay your loan
- Apply and receive a credit decision in just three minutes
- Loans up to 100% of the school-certified cost of attendance
- Offers four months of free Chegg®
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Private Or Alternative Loans
Some private institutions offer education loans that do not require the FAFSA form. While we recommend federal aid first, we realize it does not always cover the cost, especially for pricier schools. Private loans will almost always require a cosigner and may have higher fees or interest rates depending on your credit.
I encourage you to first ask your financial aid office if they have a list of lenders for you to consider, but not all schools maintain such a list. If not, you can search for lenders on your own, but compare products before making your choice: look at interest rates, fees, repayment terms, creditworthiness requirements, satisfactory academic progress requirements, etc. Students and parents are free to choose whichever lender best fits their needseven if it is not on a schools preferred lender list.
Before making any final decisions on how to fill the gap between your aid and your costs, it is always recommended that you meet with a representative in your financial aid office to determine what campus resources might be available before going out on your own. It might also be possible that you still have the time to change some of your choices before the semester begins: Can you change the type of meal plan you chose? The type of housing? The number of classes in which you are enrolled? Check with campus officials to see if you still have time to select a different, more affordable option.
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