Last Updated: June 27, 2021
Student Loans for Higher Studies
Student Loans or Educational Loans are one of the many means through which candidates can fund their college education. Though it isn’t the most popular option for students due to the added interest rates and commitment of repaying the loan immediately after graduation, students still opt for this method to meet their cost of attendance depending on the course they have taken.
The diligence with which candidates look and apply for student loans can save them from debts that can last even a lifetime. While foreign students applying to the US may struggle to find the right kind of student loan, it is easier for local students to find loans that fit their needs and will not bury them in debt eventually. Candidates will be able to take up Federal Student Loans offered by the government or even rely on private organizations that can provide them with the necessary funding.
Applying for any student loan is a process that includes a lot of paperwork with a lot of preparation and it has to be started way before candidates apply to their colleges. The options that candidates can take without relying on student loans are scholarships, grants, teaching assistantships, work-study options and even fellowships. While these methods are popular, most of them might not cover the entirety of the cost of attendance leaving students with the option of applying for educational loans.
Finding Suitable Student Loans
Students who have started looking for financial aid
will be able to come across plenty of plans and sites that claim to provide them with scholarships and loans. It is important that candidates know where to look for loan plans that will not scam them and ensure that they do not pay or provide their credit card information for any of the application processes involved before they are sure of the safety procedures involved.
Familiarizing oneself with the sources of loans and knowing the necessary documents that will be required for the process will help candidates in the process of receiving the loan. It is best to apply at the earliest due to the competition involved in the same. The major sources that provide loans are
- Federal Government
- Financial Institutions
- Other Private Sources
Federal Student Loans for Higher Education
For U.S. born students or students who have become citizens the best student loan options are those made available by the U.S. Government. In order to avail themselves of these loans, candidates will have to familiarize themselves with the eligibility criteria for each of these loans and submit a duly filled FAFSA form for free. Student loan options for undergraduates are divided into subsidized and unsubsidized loans which have different interest rates. For graduate students, the allotted loans are not based on yearly allocations but rather on a total sum.
Candidates who require Federal Student loans will have to apply for the same by filling the FAFSA form. They will have to complete their entrance counselling and sign a Master Promissory Note whereby they will learn about the obligation they have to repay the loan and agree to the terms of the loan. Federal loans do not require candidates to have a co-signer or a credit check. They will also not have to start repaying the loan while they are still doing the course. The interest rate of federal student loans is fixed and is often way cheaper than any other options that will be available to candidates.
Undergraduate students will be able to receive as much as $5,500 to $12,500 per year depending on external factors whereas graduate or professional students will be able to receive an amount of $20,500 every year if they take the Direct Unsubsidized Loans. The different types of loans provided by the US Department of Education under the federal student loan program are as follows-
- Direct Subsidized Loans- This type of loan is available for only undergraduate students who have financial need and can be used for both degrees at a college or a career school.
- Direct Unsubsidized Loans- This loan is taken by undergraduate, graduate and professional students and is not based on financial need.
- Direct PLUS Loans- This loan can be taken by undergraduate students who are dependent on their parents and by graduate and professional students. It is not based on financial need but often requires a credit check and a clean credit history.
- Direct Consolidation Loans- This loan helps consolidate all the federal student loans they have taken into a single loan.
Private Loans for Higher Education
Though Federal Student Loans are the best option that students have among loans, it is often not easy to procure the same. Candidates then move on to finding private loans that can fund their education even though this means paying a higher interest rate and having to repay it immediately after their education is completed. The best private student loans that they can take according to usnews are as follows-
- Earnest- This private institution offers loans to candidates with a credit score of 650 and above for an interest rate panning between 3.34% to 12.78%. They do not have a maximum loan amount and hence can be applied for by candidates irrespective of the amount they require.
- Education Loan Finance- This institution offers loans to candidates for interest rates between 4.50% and 10.20% if they have a credit score of 680 and above. They do not have a maximum loan amount.
- College Ave- They offer loans for an interest rate between 3.34% and 12.99% with no maximum loan amount.
- Sallie Mae- They offer loans to candidates who have a credit score in their mid-600’s with an interest rate between 4.25% and 12.59%.
- Discover- They offer loans between the interest rate of 4.24% and 12.99%.
Loans for Foreign Students
There are federal loans offered by the government for international students who meet certain requirements; however, the great majority of students interested in studying in the U.S. aren't going to meet them. But many universities make an effort to advise international students on the best loans available from banks and other private institutions.
The procedure for applying for loans will include a lot of paperwork with the government and the respective bank. This process can seem to be a little time consuming but is worthwhile at the end of it. Student finance offices at U.S. universities often take up the time and effort to help international students to attain financial aid if need be and this can be the best place for candidates to enquire about loans if they do not want to be duped in the process. The private loans offered to international students will often require a US resident to be the co-signer and the best place to guide candidates towards more suitable loans will be their university.
Taking Student Loans
Young people are attending college in greater numbers every year; today over one-third of Americans have a bachelor's degree or higher. A college degree can offer candidates jobs within a higher income bracket, a great career, and stable financial life. In 2015, college graduates had lower levels of unemployment and earned about 56% more than those with just a high school degree. But at the same time, there has been an increase in the cost of attendance at colleges making students bear the burden of repaying even the basic tuition amount. During the 1971-1972 school year, Harvard charged $2,600, or about $16,00 in current dollars. Today, a year at Harvard will cost a minimum of $49,000.
In order to meet these massive tuition costs, many students and their families are turning to loans especially due to the extensive processes required to procure scholarships and grants. Student loans can make college dreams a reality, but they come with serious drawbacks. In the United States, more than 40% of young adults have debt from school, and Americans collectively owe about $1.71 trillion in student loans. It is therefore important to understand whether the candidate does require a loan for their education and figure out other means for funding their education even if the procedures can be long and tiring.
Factors to Consider
There are a number of factors every student should consider before taking out student loans. This will include the institution they wish to attend, the options they have for attaining scholarships and grants, the cost of attendance, the living expense in the city, the course of study, and the career they aspire to have along with the common salary expectations of the job. Calculating the salary expectations that they have from the job they hope to have immediately after college and the amount they have to repay will be the best place to start if students are looking to rely on student loans.
The calculation for the same will have to move beyond the basic cost of attendance and include the amounts required for food, rent, personal expenses and the like on a higher note so as to get an estimate of the actual number they will spend on their education. They will then have to reduce the amount they can procure from personal funds and odd scholarships which will give them an idea of how big a loan they will have to take to complete their education. Candidates who cannot fund their education at high-ranking places due to financial issues will have to be practical and opt for community colleges or colleges that have a lower cost of attendance in order to make it work. Though this may seem like a downgrade, being debt-free with a degree is considerably better than completing the same degree from a reputed place but having a financial burden.
The factors that candidates can consider can be summed up into the following-
- Choose the field of study
- Find suitable colleges and make a list of their cost of attendance
- Find the living expense in the city the college is situated in
- Make a note of the funds that are available to them
- Apply to big and small scholarships and grants even if it is as low as $500 since it all adds up in the end
- Find out if they will be able to take a work-study option and the amount that they can get from this
- Calculate the amount that they will have to take as a loan
- Find out the salary range of their expected career
- Calculate the time it will take them to repay the loan with the interest
The most important factor that candidates will have to consider while taking the loan apart from those mentioned above is that of interest. The interest rate is least in the federal student loans provided and the most in private institutions. It is also important to consider the window they will receive for repaying the loan and how soon they will have to start the payment.
Are Loans Worth It?
While student loans are a feasible option for candidates who cannot fully fund their education despite their scholarships and grants, most students are often not able to repay the entire amount as per their calculations. According to the recent statistics by educationdata, the total debt from student loans in the country is $1.71 trillion with around 43.2 million students in debt of at least $39,351 each. The outstanding Federal Loan Portfolio has been calculated up to $1.56 trillion. While there is a possibility of federal student loans being categorized under debt relief, this is not the same for the student who has taken loans from private institutions.
While these statistics can be unnerving for candidates looking for the right loans for their education, it is also to be understood that candidates who have graduated with an average level of debt and is earning a typical graduate employee’s salary will not have to worry too much about repaying their loan. But at the same time, it is important that candidates do not take huge amounts as a loan covering their entire period of education which can leave them in debts that can last half their lives.
When considering loans, the most important thing is to be realistic. Though cost shouldn’t stop a candidate from attending school, it might be in their best interests to make compromises by attending a university with lower tuition or a larger aid package, or by spending a couple of years at a community college first. Strategically taking loans by obtaining enough small-scale scholarships and taking the work-study option will indeed help the student from being trapped in crippling debt during the better part of their life.