In the fall of 2019, there were over 19 million students enrolled in college in the US. Now that people are starting to slowly return to normalcy following the pandemic, you may be thinking it’s time to start your college career as well!
When you’re coming up with your list of college essentials, you are likely thinking about what types of sheets you need to buy for your dorm room, whether or not you need a new backpack, and if you need to upgrade to a better laptop. But have you thought enough about how you plan to pay for school?
Rather than waiting until the last minute, it’s important to consider your plans to cover the cost of tuition, room and board, and books (as well as everything else) well in advance so that you’re prepared. Luckily, there are a few different types of student loans that you can think about utilizing for school.
Keep reading as we explore what your main options are.
Private Loans
If you’re searching for a private loan as a student going back to school, you really only have two main options: private student loans and private parent loans.
Every lender is going to have their own conditions set for you to be able to take out a private loan for school, even if you’re a smart student, so you need to shop around if this is the main option that interests you.
If you’re getting a private parent loan, alternatively, you can work with your parents to figure out what their terms and conditions are for the loan that they are taking out in their own name. They may want to work out a plan with you in regards to their own requirements aside from what the bank wants.
Getting a private student loan means that you’ll have to take out the loan (since you’re the one going to school), but you will often need a cosigner, like a parent, to sign off on the loan.
Federal Student Loans
These are the loans that are much more popular in the education industry and tend to be somewhat mainstream for students going back to school today. There are three types of federal student loans: direct subsidized loans, direct unsubsidized loans, and direct PLUS loans.
Federal student loans are designed for basically all students that want to go to school but can’t afford it for whatever reason. Congress sets the interest rates for these loans each year. You can read more now about getting relief from some of these loans (as well as the interest rates) to get a better idea of how much you’ll pay.
Many federal loans are not going to require you to have a cosigner or even good credit, and almost all high school graduates are eligible to get these loans. To do so, you’ll need to fill out the FAFSA, which stands for Free Application for Federal Student Aid.
Direct Subsidized Loans
If you’re a graduate that has financial need, you’ll be able to qualify for this type of loan. The government will cover the interest while you’re in school, if you pause payments from deferment, or if you’re in your grace period. You’ll get a set amount that you’ll be able to borrow to put towards school.
Direct Unsubsidized Loans
These are for high school graduates that don’t necessarily have a financial need based on tax records. They are also available for undergraduate or graduate students. In this case, you’ll be responsible for paying off the interest throughout the entirety of the loan.
Direct PLUS Loans
While the direct PLUS loans are less common, they are still available for graduate students and their parents. They have a slightly higher interest rate and their fees for origination are a little higher as well. In addition to that, there is a credit check required to take this type of loan out, so you might have a difficult time obtaining this type of loan if you have bad credit.
Private Education Loans
Also called alternative education loans, these are a very specific option for students that aren’t able to meet financial requirements to attend college even after getting federal loan funds. This means that you may have applied for other loans, but still found that they aren’t going to be enough for you to go to school.
A private education loan looks like a personal loan, such as a loan for a car or house, more than a student or parent loan. Like the Direct PLUS loans, your credit history is going to be taken into account to see if you’re eligible for this loan type and how much interest you’ll be asked to pay.
Your interest rate for this type of loan could be variable or fixed, but it will usually be higher than what those common federal loans are going to ask for.
Understanding the Types of Student Loans Available
As you can see, you have options if you’re struggling to pay for school. These different types of student loans are meant to help you pay for your education, which will hopefully lead to higher-income jobs later on.
If you need to take a loan out for school, make sure that you’re seriously considering your options well before term actually starts. You’ll need plenty of time to apply, get accepted, and work out all of the details before you actually have “money in hand” to pay.
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