Student Loans

Everything You Need to Know About Student Loans

With the rising costs of tuition and textbooks, paying for college can be a challenge. Luckily, you don't have to do it alone--student loans are available through a variety of resources. The U.S. Department of Education offers government loan programs to help you pay for college. Banks and credit unions are other common resources for student loans.

There are many other options available, including loans through schools and financial institutions. Whatever route you chose, pay attention to terms and conditions for your loan and make sure you understand its funding source and repayment requirements. The following is an introduction to several popular sources for student loans.

U.S. Department of Education Loan Programs

The federal government offers several programs that allow you to borrow money for school. These programs include:

• William D. Ford Direct Stafford Loans are part of the government’s biggest student loan program. There are four different types of Stafford Loans, including:
• Direct Subsidized Loans, offered to undergraduates who demonstrate financial need. The government pays the interest on the loan while you are in school.
• Interest rate: 2.75%
• Maximum borrowing: $23,000
• Repayment: Payments begin six months after graduation; pay back within 10 to 25 years
• Direct Unsubsidized Loans are available to both graduate and undergraduate students. There is no need to demonstrate financial need, and you are responsible for all interest.
• Interest rate: Undergraduate: 2.75%, Graduate: 4.30%
• Maximum borrowing: Undergraduate: $57,500, Graduate: $138,500
• Repayment: Payments begin six months after graduation; pay back within 10 to 25 years
• Direct PLUS Loans are for graduate students and to parents of dependent undergraduates for education expenses.
• Interest rate: 5.30%
• Maximum borrowing: The cost of attending college (determined by the school), minus any other financial aid.
• Repayment: Payments for graduate students begin six months after graduation; payments for parents begin immediately, though they may request a deferment until six months after their student graduates.

The first step to being eligible for these loans is to enroll in an approved university. Begin that process here.

Banks and Credit Unions

When borrowing a student loan from a bank or credit union, the type of loan and the security on the loan play a big role in the interest rate and terms under which the loan will be made. Some banks and credit unions offer discounted interest rates for school loans, though the interest rate can vary.

Homeowners can often access Home Equity Lines of Credit (HELOC), which uses the equity in their home as collateral for the loan. In some cases, this type of loan can have a very low-interest rate.

Credit Cards

Generally, credit cards aren't a good resource for school funds, but with proper use and discipline, a credit card can help you get through difficult financial times. As a student, you’ll have to make careful decisions when charging college expenses on a credit card. Some cards initially offer discounted rates that can be very attractive, but the interest rate can skyrocket after the initial special program expires.

School-Sponsored Loans

In certain cases, you can borrow money from your school. These arrangements generally cover only the cost of tuition and may require you to make a down payment.

Normally, these schools are using a third-party financing partner to provide the funding, so you would need to determine whether or not the terms and conditions for the loan are acceptable. In some situations, the college will extend the deadline for tuition payment, sometimes with a nominal fee.

Other Resources

Finance companies frequently offer you special deals for reduced interest rates and extended repayment terms. Be sure to carefully read and understand the changing interest rates and repayment terms. Often, a missed payment or other slip up can result in an astronomical interest rate for the balance of the loan.

Special "student-only" lenders can offer funds with favorable interest rates and repayment terms, but once again, as the borrower, you must read all the fine print to make sure something will not go wrong further downstream.

Check with the Experts

As you consider which students loan options are right for you and your situation, make sure to analyze and carefully review loan documents and requirements before you sign anything. Consult with parents, family, friends, bank personnel, current students, and anyone else in your network to help with your decision.

Never sign an agreement without first reading through all the terms and conditions. Never accept a "standard contract," because no one's life is ever standard. Read, consider, and revise as necessary; otherwise, go loan shopping somewhere else.

Financial aid advisors at accredited universities can also help guide you as you decide which type of loan is best for you. Get in contact with an advisor today.