Borrowing money is not the best option when it comes to financing college education. For many students, however, borrowing money is a necessity. The National Center for Education Statistics reports that 46% of the Class 2018 attended public universities. They were granted student loans at a higher rate than those who borrowed from private for-profit and private nonprofit institutions (59%) respectively.
A federal student loan is the best option for most college students who need to borrow money. Private student loans may be an option for graduate students or parents trying to support their child through college.
How to get a federal student loan
Your school may offer federal student loans as financial aid. Federal loans are provided by the U.S. Department of Education and offer certain benefits that private student loans don’t.
This includes student loan forgiveness programs, income-driven repayment plans, and generous deferment or forbearance options.
It is easy to get a federal student loan. The Free Application for Federal Student Aid is available. This will allow you to share financial information about you and your family with your school’s financial aid department. They can then determine the amount of aid you are eligible for, including student loans, scholarships and grants.
Federal student loans do not require credit checks. You can fill out the FAFSA even if you have bad credit or no credit history. Only Direct PLUS Loans are available to professional and graduate students. Parents and grandparents do not need credit checks. Even then, only very specific negative items will be considered by the government.
Students in need of financial aid may be eligible for subsidized student loan. This means that the federal government will pay the accrued interest while you are in school, during the six month grace period after your graduation, and during any deferment periods.
Unsubsidized loans will be available to all borrowers. You’ll have to pay the interest. Unsubsidized loans may also be available to undergraduate students if they do not meet the requirements for subsidized loans, or they have borrowed more than they can afford.
Federal student loans are standardized in terms. This means that everyone who is eligible for a particular type of federal loan has the same terms. The fixed interest rate for federal loans, whether unsubsidized or subsidized, that are issued to undergraduates between July 1, 2020 and June 30, 2021 has been set at 2.75%.
How to get a private student loan?
Because they are not eligible for loan forgiveness programs or have higher interest rates, private student loans tend to be less attractive than federal loans. They also don’t offer the option of income-driven repayment plans and often carry higher interest rates.
However, if your federal loan limits have been exhausted (there are annual and cumulative caps) or you’re a parent or graduate student, these may be worth looking into.
Private student loans can be obtained by applying to individual private lenders. Each lender has its own eligibility criteria and its own set interest rates and repayment terms.
Private student loans are more expensive than federal loans because they require credit checks. You may be eligible for a lower interest rate than the federal government offers on parent and graduate loans if you have good credit and a cosigner.
However, if you have poor credit or have some other negative marks on your credit report, it may be difficult to get approved.
Private student loan companies often allow you to be preapproved before you actually submit your application. The process involves a simple credit check that won’t affect your credit score. It allows you to compare rates to determine if you are eligible and helps you find the best rate.
There are other ways to pay for college
Although student loans are a great way to get by school, it can also make a big difference in your financial security. These are other ways to pay for college, but you don’t have to repay the money.
Scholarships: You can check the website of your school to find out if it offers scholarships for academic, sports, or other reasons. You can also search scholarship websites such as Scholarships.com or Fastweb. To find the right one for you, you can filter through millions of possibilities.
Grants: Students who are financially needy can apply for grants. Filling out the FAFSA is a great idea even if you don’t intend to borrow money. To find out more grants, you can also check with your school. You might not be eligible for some grants if you are enrolled in certain colleges or have specific study interests. It is worth asking a professor or advisor if they know anything about the subject.
Part-time employment: You can search for jobs on-campus and off-campus if your schedule permits it. This will help you to pay tuition, fees, or any other living expenses. Even if you work only a few hours per week, your income will add up over time and can help you avoid thousands in debt over the course your college career. You may be eligible for work-study programs through your college. This can help you find a job faster.
You can also reduce your dependence on student loans by choosing a school that is less expensive and finding other ways to save money while you are in college.
For future borrowing needs, build credit
The sooner you get started, the better, if you believe you will need private student loans in the future or if you just want to build credit for the time you need it.
Although student loans may be helpful, you will not see any benefit until you begin making regular payments. Most students won’t make these payments until they graduate. You can avoid interest charges by using student credit cards. As long as your balance is low and you pay your bill in full each month, you can build credit.
