What are loans?
Loans are borrowed money that you have to pay back with interest. They can be risky, but are often a useful tool for paying for college! Loans are meant to be a last resort. You should never, EVER borrow more than what you need to cover your expenses!!
What types of loans are available?
Subsidized Loans
Subsidized loans (or sometimes Perkins Loans) come from the Federal Government. Subsidized loans do not collect interest while you are in college, which make them the most affordable type of loan!! You can qualify for up to $3,500 in subsidized loans during your freshman year of college. However, not all students will qualify because qualification is based on your Expected Family Contribution (EFC). You do not have to start paying back a Subsidized loan until six months after you have graduated from college or dropped below being a full-time student. The average interest rate for Subsidized loans is 4.53%.
Unsubsidized Loans
Unsubsidized loans (or sometimes Stafford Loans) come from the Federal Government. Unsubsidized loans do collect interest while you are in college, which make them a bit more expensive than Subsidized loans are. You can qualify for up to $5,500 in Unsubsidized loans, but whatever you're offered in Subsidized loans will be subtracted from that total. So, if you receive $3,500 in Subsidized loans, you will receive $2,000 in Unsubsidized loans to add up to $5,500. Anyone who files a FAFSA will receive at minimum $5,500 in Unsubsidized loans! You do not have to start paying back an Unsubsidized loan until six months after you have graduated from college or dropped below being a full-time student. The average interest rate for Unsubsidized loans is 4.53%.
Parent Plus Loan
The Parent Plus loans come from the Federal Government and are taken out on your behalf in your parent's name. These loans do collect interest while you are in college and often require your parent to start paying into them while you are still in school. Taking out a Parent Plus loan requires your parent to pass a credit check. However, if they fail the credit check, you will be offered additional money in Unsubsidized loans. The average interest rate for the Parent Plus loan is 7.08%.
Private Loans
Private loans come from a bank, credit union, credit card company, or loan provider. These loans collect interest while you are in college and tend to have the highest interest rates. In order to take out a private loan, you will likely need a parent to cosign for you. Many private loans, like with Subsidized and Unsubsidized loans, do not require you to start making payments until six months after you have graduated from college or dropped below being a full-time student. However, all private loans are different. If you need one, be sure to ask the loan provider what their policies are so you know what you're getting into! The current average interest rate for private loans is 9.66%.
Subsidized loans (or sometimes Perkins Loans) come from the Federal Government. Subsidized loans do not collect interest while you are in college, which make them the most affordable type of loan!! You can qualify for up to $3,500 in subsidized loans during your freshman year of college. However, not all students will qualify because qualification is based on your Expected Family Contribution (EFC). You do not have to start paying back a Subsidized loan until six months after you have graduated from college or dropped below being a full-time student. The average interest rate for Subsidized loans is 4.53%.
Unsubsidized Loans
Unsubsidized loans (or sometimes Stafford Loans) come from the Federal Government. Unsubsidized loans do collect interest while you are in college, which make them a bit more expensive than Subsidized loans are. You can qualify for up to $5,500 in Unsubsidized loans, but whatever you're offered in Subsidized loans will be subtracted from that total. So, if you receive $3,500 in Subsidized loans, you will receive $2,000 in Unsubsidized loans to add up to $5,500. Anyone who files a FAFSA will receive at minimum $5,500 in Unsubsidized loans! You do not have to start paying back an Unsubsidized loan until six months after you have graduated from college or dropped below being a full-time student. The average interest rate for Unsubsidized loans is 4.53%.
Parent Plus Loan
The Parent Plus loans come from the Federal Government and are taken out on your behalf in your parent's name. These loans do collect interest while you are in college and often require your parent to start paying into them while you are still in school. Taking out a Parent Plus loan requires your parent to pass a credit check. However, if they fail the credit check, you will be offered additional money in Unsubsidized loans. The average interest rate for the Parent Plus loan is 7.08%.
Private Loans
Private loans come from a bank, credit union, credit card company, or loan provider. These loans collect interest while you are in college and tend to have the highest interest rates. In order to take out a private loan, you will likely need a parent to cosign for you. Many private loans, like with Subsidized and Unsubsidized loans, do not require you to start making payments until six months after you have graduated from college or dropped below being a full-time student. However, all private loans are different. If you need one, be sure to ask the loan provider what their policies are so you know what you're getting into! The current average interest rate for private loans is 9.66%.
Where do I get loans?
You can get Subsidized, Unsubsidized, and the Parent Plus Loan by filing the FAFSA.
Private loans can come from credit unions, banks, credit card companies, or loan providers like Sallie Mae. Credit unions often offer the best interest rates, so check with them first!
Private loans can come from credit unions, banks, credit card companies, or loan providers like Sallie Mae. Credit unions often offer the best interest rates, so check with them first!
How can I avoid student debt?
- Work during high school and save a portion of each paycheck for college
- Be diligent when applying for scholarships - apply for as many as you can by their deadlines
- Take dual enrollment classes while in high school
- Thoroughly research all loans before taking any out so you know what you're getting into
- NEVER, EVER take out more than you need in loans
- File your FAFSA so that you are not missing out on any grants you are eligible for and are able to access loans with the best interest rates
- Talk to your college's financial aid department. Sometimes they have extra money they can give out
- Get a part-time job while in college
- File a FAFSA each year you are in college
- Consider attending a community college to reduce college expenses
- Choose the most inexpensive meal and housing plan if you are planning on living on-campus
- If you are attending a four-year school, consider living off-campus in an apartment to save money
- Get a job after graduation that offers loan forgiveness or an education award (like your College Adviser did!)
I'm still confused about loans. Who can I talk to for help?
You can always see your College Adviser for assistance! You can also:
- Call your college's financial aid department
- Speak with a representative at a loan provider