Financing Education

Best Student Loans in the USA

Getting a college education isn't cheap anywhere, but the cost of a degree in the U.S. can be frightening for students who have to borrow their way to meeting their educational goals. If loans are your only option, however, a little research can save you a lot of debt. It's obviously much more of a challenge for foreign students who are in the U.S. to study but are not citizens; however, there are also reasonable choices for foreign nationals that simply require time and diligence to seek out.

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. Stafford Loans are available to both undergraduate and graduate students based on need as shown in the FAFSA form which can be submitted online. 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. A graduate student can borrow up to $138,500 it total loans for both undergraduate and graduate studies.

There are also Direct Loans made by the U.S. Department of Education to students who meet certain criteria. Graduate students can also take out PLUS Loans, which are designated as loans for parents of undergraduate students. Graduate students may apply directly for these loans, but the interest rate is currently 6.31%, higher than a Stafford Loan. Finally, there are Consolidation Loans that allow graduate students to bring all loans taken through the federal government into one refinanced entity.

Loans for Foreign Students

There are some federal loans available 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. There will be the certain forms to fill out with the government as well as the bank; it takes a little patience. But university student finance offices at U.S. universities have some skills today working with international students; don't be afraid to ask for help from the schools you apply to. Many private loans to international students will ask for co-signers who are residents of the U.S., but there are also many universities that can steer you to loans without such a requirement.

Taking on Debt: What You Need to Know?

Young people are attending college in greater numbers every year; today over a third of Americans have a bachelor's degree or higher. A college degree can catapult you into a higher income bracket, a great career, and a 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.1,2 However, college costs are rising quickly, and students are feeling the strain. During the 1971-1972 school year, Harvard charged $2,600, or about $16,00 in current dollars. Today, a year at Harvard will set you back $49,000. It's no longer possible for most families to send their children to college without substantial financial help. In order to meet these massive tuition costs, many students and their families are turning to loans. Student loans can make college dreams a reality, but they come with serious drawbacks. In the United States, 37% of young adults have debt from school, and Americans collectively owe about $1.3 trillion in student loans. Before you take on debt, you should think deeply about whether loans are actually in your best interest, how much debt you can afford to take on, and what you can do to mitigate college costs.

Deciding on Debt

There are a number of factors every student should consider before taking out student loans. Where are you planning to attend school? Do you have scholarship or aid options? What will you study? What do you want your career to look like? Every student will have a different financial picture. Even two students attending the same school and studying the same major may each have a very different calculus when it comes to student loans.

Do the math before you even choose a school. Think about how much you will need to spend on tuition, food, rent, and personal expenses for the duration of your college career. Don’t forget to factor in summer costs; you may need to temporarily relocate for internships and other summer programs. If the math isn’t adding up at your dream school, you should consider choosing a college with a lower tuition rate or starting out at a community college and then transferring. You should also keep in mind that four in every ten college students drop out of college before obtaining their degree.7 When you’re looking at colleges, be sure to pick one that has a high graduation rate and strong support for students. You don’t want to take on thousands in debt unless you can be sure that you’ll end up with a degree to show for it.

As a general rule of thumb, you shouldn’t take out more debt than you expect to make in your first year of work. Though you probably don’t know exactly what you want to study yet, you should try to identify a couple of likely majors and careers. Take a look at your preferred school’s employment outcomes and research the average starting salary for new graduates in your field and career path. Your choice in major and career will have a big impact on how much you can take out in loans. For example, an English major is unlikely to command the same sort of salary as a finance major and therefore cannot take on as much debt. Though this may discourage you from pursuing your dreams in the humanities, there are ways around this problem. Double-majoring, for instance, will allow you to pursue both your passions and a field that will pay the bills. You can spend a couple of years paying down your student loan in a high-paying career, before switching gears and pursuing your dream job. However, you should keep in mind that major isn’t everything. Even people on similar academic paths may have very different salary outcomes. Your school, grades, and interests will all play a role in your starting salary. For example, a law student at a top-ranked law school can expect at least $160,000 as a starting salary at a law firm, and can thus take on far more debt than a law student from a lower-ranked university whose salary likely won’t crack six figures.

Student Loans

Lastly, you shouldn’t forget to consider the interest rate on the loan. Students often look at the loan’s principal and don’t think about how much the interest rate is going to add onto their costs. However, the interest rate is what will really determine what you end up paying. Even with relatively low-interest federal loans, borrowers can expect to pay thousands of dollars more in interest. The interest rate for federal student loans to undergraduates currently sits at 4.45%, so if you take out $40,000 in undergraduate federal student loans and pay it off over ten years, you will owe over $9,600 in interest over the life of the loan and be required to pay about $413 monthly.

Take on Debt, but Smartly

Last year, the average student borrower graduated with around $37,00 in student loan debt. This is actually good news given that the class of 2017 can expect to earn about $51,000 according to the National Association of Colleges and Employers. Students graduating with an average level of debt and earning a typical college graduate’s salary shouldn’t worry too much about repaying their loans. However, there are thousands of students who take on too much debt, earn less than they were expecting, and struggle with student loans for decades.

When considering loans, the most important thing is to be realistic. Though cost shouldn’t stop you from attending school, you may need 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. If you do your research and take on student debt strategically, you should have few problems earning your degree without breaking the bank.

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