For those who can’t pay, student loans could be the solution. Student loans are a type of financial aid that helps students pay for their college expenses, including tuition, fees, books, and living expenses. There are different types of student loans for college and graduate schools. Who qualifies, and how can one apply? These articles answers all that.
Student loans are a popular lending source for many students who want to further their education. These loans, also referred to as education loans, are engineered mainly to help students pay for their tuition, fees, and any other charges related to college or graduate studies.
Even if the thought of taking on the debt is frightening, you can use student loans as a great opportunity to fulfill your academic desires. A lot of students would not be able to go to college or enroll in graduate school without the loans. This is because of the high cost of schooling.
Who qualifies for a student loan?
Eligibility for federal student loans:
- U.S. citizenship or eligible noncitizen status.
- Enrollment in an eligible degree or certificate program at least half-time.
- Completion of the Free Application for Federal Student Aid (FAFSA).
- Maintaining satisfactory academic progress.
- Have a valid Social Security number (SSN)
Private Student Loans
- Eligibility criteria for private student loans vary by lender but generally include factors like credit history, income, and enrollment status.
- Many private lenders require a cosigner, especially for undergraduate students or those with limited credit histories.
- International students may also be eligible for private student loans with a cosigner who is a U.S. citizen or permanent resident.
Student Loans for College and Graduate School
There are different types of student loans for college and graduate schools. They are grouped into federal and private.
`1. Federal Student Loans
a) Direct-subsidized loans
Federal student loans also known as called “Stafford loans are issued by the government, and to qualify, you have to complete the Free Application for Federal Student Aid (FAFSA®). Direct-subsidized loans are federally backed student loans intended for undergraduates who have documented financial needs.
The U.S. Department of Education gives Direct Subsidized Loans to students who are within a college or university among its participants. Federal loans have a common interest rate (that’s set by the government) and are more flexible than private loans (especially in their repayment options.
Note that it is the government that would pay your interest while you are in school (you would also not be responsible for interest during your post-graduation grace period, which is six months, or during deferment). The interest rate is 5.50%, whereas the loan fee is 1.057%. How to apply
Eligibility:
To be eligible for Direct Subsidized or Unsubsidized Loans, you must meet the Federal and Penn State Financial Aid Eligibility Requirements. To be eligible, you must:
- Be enrolled in a degree-seeking program.
- Be enrolled half-time (6 credits for undergraduates and 5 for graduates).
- Meet the minimum requirements for satisfactory academic progress.
- Not be in default on previous federal direct loans
How to apply:
- You will automatically be considered for direct, subsidized, and unsubsidized loans if you submit the Free Application for Federal Student Aid (FAFSA). The loans will be added to your student aid financial aid offer in LionPATH once awarding begins for the academic year (April for first-time students and July for returning students).
- First-time borrowers also need to complete Entrance Counseling and a Master Promissory Note at studentaid.gov. In most cases, you will only need to complete these items once during your college career.
- Your subsidized or unsubsidized loans will appear as a credit on your tuition bill after you complete these requirements.
- Complete your loan counseling requirement by logging onto studentaid.gov and opening “Complete Counseling.”
- Sign an MPN* by logging onto studentaid.gov and choosing the Direct Loan MPN you want to preview or complete.
b) Direct Unsubsidized Loans
In the case of an unsubsidized loan, interest always accrues as soon as the amount borrowed gets sent (disbursed) to your college or university. Unlike a subsidized loan, the federal government will not cover the interest that accumulates when the time comes for the repayment period.
Unsubsidized loans are offered to both undergraduate and graduate students. When you begin to pay back your unsubsidized loans, the amount you repay will include the original amount you borrowed plus all the interest you have accumulated throughout the loan period.
Take note: Interest Rates (effective on new loans made between July 1, 2023, and June 30, 2024):
- Direct Subsidized Loan (Undergraduate): 5.50%
- Direct Unsubsidized Loan (Undergraduate): 5.50%
- Direct Unsubsidized Loan (Graduate and Professional): 7.05%
- Origination Fee (effective on new loans made on or after October 1, 2020, and before October 1, 2023):
- Direct Subsidized and Unsubsidized Loans (All Students): 1.057%
c) Direct PLUS Loans
If you are looking for student loans for college and graduate school, you should also consider the Direct PLUS loans. You should consider this only when the subsidized and unsubsidized federal loans did not pull through.
Direct PLUS loans are federal loans accessible to graduate or professional degree students as well as parents of dependent undergraduate students to pay education costs. This type of student loan comes with a fixed interest rate and are not subsidized, meaning that the interest accrues as long as the student stays in school.
To get the Direct PLUS Loan, you must pass a credit check first. Besides this, you will be charged an origination fee, which is taken from the total loan amount before you or your school receives the money.
There are two types of Direct PLUS loans: the Grad PLUS loan as well as the Parent PLUS loan.
Grad PLUS loans provide graduate and professional students with the opportunity to access funds that can be used to cover their expenses.
Graduate students may borrow Grad PLUS loans to cover all costs not covered by other financial aid sources, such as grants, up to the full cost of attendance. There is no total borrowing cap that graduate students might reach. To qualify for a Grad PLUS loan, you must meet three criteria:
- Be enrolled at least half-time at an eligible school in a graduate or professional program.
- Pass a credit check. If you cannot pass the credit check, you can still be approved for a Grad PLUS loan if you obtain an endorser (someone who agrees to pay the loan if you do not repay it) or are approved by the Department of Education through an explanation of extenuating circumstances related to your adverse credit history.
Parent PLUS loans allow parents of dependent undergraduate students to borrow money to cover any costs not already covered by the student’s financial aid package, up to the full cost of attendance. The program does not set a cumulative limit on how much parents may borrow.
Parent PLUS loans are the financial responsibility of the borrowing parent, not the student, and cannot be transferred to the student upon the student’s completion of school.
To qualify for a Parent PLUS loan, you must meet three criteria:
- Be the biological or adoptive parent (or, in some cases, the stepparent) for a student enrolled at least half-time at an eligible school.
- Grandparents and legal guardians are not eligible to borrow Parent PLUS loans, even if they have primary responsibility for raising the student unless they have legally adopted the dependent student.
- Pass a credit check. If you cannot pass the credit check, you can still be approved for a Parent PLUS loan if you obtain an endorser (someone who agrees to pay the Parent PLUS loan if you do not repay it)
- Or are approved by the Department of Education through an explanation of extenuating circumstances related to your adverse credit history.
| Maximum Loan Length: | 30Â years, depending on the amount borrowed and the repayment plan chosen.
|
| Interest Rate
|
Variable does not exceed 8.25%
|
| Max Loan Amount
|
$2,625 to $8,500
|
| Payment Frequency
|
Monthly
|
| Prepayment Penalties
|
None |
For the current PLUS Loan interest rate, visit the PLUS Loan information page.
2. Private Student Loans
I. Sallie Mae
Sallie Mae is one of the largest and most popular private student loan lenders in the USA. First, it was created as a government-sponsored enterprise (GSE) that was set up to handle loans under the student loan program. Later, Sallie Mae became a private company, specializing in private student loans.
The minimum credit score here should be 600. The fixed APR varies between 4.50 and 15.49%, while the variable APR ranges from 6.37 to 16.70%.
II. College Ave
College Ave., being a quite new participant in the private student loan market, has quickly gained recognition among users for being user-friendly and consumer-oriented.
College Ave. offers several options for loans, including undergraduate and graduate loans, parent loans, and refinancing options. The fixed APR is 4.07–15.48%, and the variable APR is 5.59–16.69%.
III. Ascent Funding
In addition to among the best providers of private college and graduate student loans, Ascent is one of them. It is also a good choice for international students who need private student loans. However, this loan is credit-based and needs a cosigner. The fixed APR is 4.09%–15.66%, and the variable APR is 6.22%–16.08%.
Student loans for college and graduate school: Tips
- When picking your college, do a deep search for factors like academic reputation, program offerings, location, campus culture, and cost. For graduate student loans, pay attention to the interest charges, repayment schedule, grace period, and whether they are federal or private ones.
- Do not be quick to apply for one. If it is the best option, consider the consequences if you fail to repay the loan.
- If you must go for a student loan, you should consider a federal student loan. Check between the subsidized loan and the direct plus loan.
Read also:Â Top Student Loan Offers For International Students
Conclusion
Student loans can be of great help in fulfilling your educational objectives; however, they also have a price. You have to be very cautious and borrow only what is necessary to handle your debt efficiently and be in charge of it.
Before you opt for a student loan, you might first consider if there are options like scholarships, which many universities offer both at the graduate and undergraduate levels.
If you do not meet the criteria for a scholarship, you can then go for a student loan. However, you need to know the different types of student loans and read the terms and conditions before applying.
