If you’re considering student loans to help you afford undergraduate or graduate school, you’re not alone. No matter if you’re attending a state university or private college, many students and their parents need loans to cover the cost of attendance and their degree programs.
There is a host of private and federal student loan options available, and comparing them can help you make the best choice for you and your needs. Here’s a short guide on what to consider when choosing your student loan—undergraduate or graduate student or parent.
Undergraduate Student Loans
Undergraduate students can take advantage of loans from the federal government and private lenders. Here are some federal and private loan options available.
Federal Direct Stafford Loan
Undergraduate students interested in seeking federal student aid are eligible for a federal Direct Stafford Loan through the U.S. Department of Education. These are low-interest, fixed-rate student loans that students can use to cover the cost of their education at a four-year university or college, community college, or trade or technical school.
Direct Stafford Loans offer both subsidized and unsubsidized loans. A subsidized loan is awarded to students based on financial need, as determined by their Free Application for Federal Student Aid (FAFSA). These loans are subsidized while you’re in school and six months after you’re no longer enrolled, which means you are not charged interest during those times.
With an unsubsidized loan, you are charged interest as soon as the loan is disbursed and until it’s paid in full. However, you can opt to defer the payment of interest while you’re in school and during a grace period, but interest will be added to your principal, plus additional interest will be charged.
While you can enjoy fixed interest rates with a federal student loan, it’s important to note that the amount of money you can borrow is limited, and should you default, part of your wages and all of your tax refund could be taken by the federal government.
Private Student Loan
Undergraduate students can also opt for private student loans with 100% coverage, no matter their educational path. Many private lenders offer student loans that allow you to borrow larger loan amounts, and if you can show your ability to repay the loan, you can secure lower interest rates and monthly payments.
Some credit unions partner with other financial companies to offer education lines of credit that allow students to borrow up to their education’s full cost. Here, you must ensure that your school is on the credit union’s list of approved schools and that you can meet the credit union’s underwriting criteria.
Sometimes, you may need a cosigner to help you meet a private loan’s requirements or qualify for better repayment terms and rates. If you or your co-signer don’t have a strong credit history or your lender determines you don’t have strong creditworthiness, some private loans may be more expensive than federal aid options.
Graduate Student Loans
Similar to undergraduate students, those pursuing their graduate degrees have both federal and private student loan options available to them. These include federal Direct Unsubsidized Loans and Direct PLUS Loans.
Graduate students and those seeking their doctoral degrees are eligible for Direct PLUS Loans that help pay for their graduate education expenses that aren’t covered by other financial aid. Graduate and professional students can borrow up to $20,500 per year. This type of student loan is not based on financial need but requires a credit check.
Outside of these federal loans, graduate students can also seek a student loan from a private lender to cover their schooling’s full cost. If you or your cosigner have excellent credit, you may pay less in interest and student loan payments with a private loan.
Parent Loans
In many cases, parents of dependent students qualify for federal and private financing options as well. Like graduate students, parents with an excellent credit history and a dependent undergraduate student currently enrolled in school are eligible for Direct PLUS Loans. These loans offer fixed interest rates for the loan’s life and cover the full cost of attendance.
Similarly, parents can take out private loans to help finance their children’s education. If you have strong finances and credit, parents can find great deals with private lenders that rarely come with fees.
Many credit unions offer share secured loans, which match your savings amount and acts as security for the loan. This may be a good option for parents with less-than-excellent credit who need help financing their child’s education. Similarly, parents can apply for personal loans.
Choosing the Right Student Loan
Many students and parents opt to get a mix of federal and private student loans. Since there are limits on the amount you can get in federal student loans, seeking a private student loan may be right for you. To learn more about student loan options through T&I Credit Union and how you can make progress on your degree, call (248) 397-9456 today.