FINANCIAL AID | 4 MIN READ
Taking out a loan to pay for college can be a scary prospect. Who wants to start their indebted adult life?
But if you view the loan as an investment in your future – and borrow wisely -a college loan becomes a realistic and manageable tool to help you achieve your educational and career goals. And you’re in good company: 40 million Americans have student loans.
Also, keep in mind that you have multiple options for paying for college. Before looking at loans, see if you qualify for any scholarship or grant that is non-repayable. A school counseling advisor or college admissions office can help you move in the right direction.
Step 2: Investigate Federal Loans. Federal loans have many advantages over private lender loans, so you’ll want to see how much these packages can cover you. Fill out a free State Student Aid (FAFSA) application.that determine how much you can borrow. Depending on your status and grade level, you may be eligible for $ 5,500 to $ 12,500 per year.
Federal Loan Basics
The U.S. Department of Education offers a direct loan program with four types of loans:
- Directly Subsidized Student Loans: These student loans are based on financial needs.
- Direct Unsubsidized Student Loans: The authorization does not depend on the need.
- Direct PLUS credits: These loans go to graduate or professional students, or to parents of dependent students. They are not need-based and require a credit-based application.
- Direct Consolidated Loans: Once you graduate from school, this program allows you to combine your existing eligible federal loans with a loan service provider.
Federal loan interest rates are set and determined each year by Congress. The interest rate is almost always lower than the one offered this resource from https://bridgepayday.com/ private lenders and definitely lower than the one on credit cards.
Other benefits of federal loans
- The interest is tax deductible.
- Most don’t require a credit check or co-signer.
- You don’t need to start paying back until you’ve graduated, left school, or gone below full-time status. Most also give a grace period of six months after graduation before you have to start making payments.
- The loan repayment can be postponed.
- If you go into certain professional fields, part of your federal loan can be granted.
Personal Loan Basics
Personal loans are another way to put together the money you need for higher education. Knowing what is available to you can complete the big picture of how student loans work.
Private loans have a different application process than federal loans. The interest rates are set by the lender you choose. This rate can be fixed (meaning it doesn’t change) or variable (it changes with the market) so it’s worth looking around.
Take a minute to compare the terms of the various personal loans. And don’t limit your research to the internet: you can contact a college financial help office or contact the lenders directly.
Banks, credit agencies, and other organizations that offer personal loans will determine the amount you can borrow and the repayment terms. You may need to start paying the loans while you are still in school and interest is usually not tax deductible.
How Much Money Should You Borrow for College?
This answer will depend on many factors including your own level of comfort and the amount of debt that you plan to take on after college. Also, consider other sources of debt you might have, such as credit card bills or a car payment.
Start by calculating your living expenses while studying – and give yourself a pillow. Another rule of thumb: try not to borrow more than the expected salary for the first year.
Still Need Help Identifying College Loans?
The Student Financial Services Office at Elmhurst University can help. Elmhurst makes low-interest student loans out of funds provided through federal programs, but can also guide you through loan securing requirements on your own. Contact us using the form below!