Consider Private Student Loans
Another option if you need to borrow more money than federal student loans can provide is to apply for a private loan from a bank, credit union, or other financial institution.
Private loans are available regardless of need, and you apply for them using the financial institution’s own forms rather than the FAFSA. To obtain a private loan, you will need to have a good credit rating or get someone who does have one, such as a parent or other relative, to cosign on the loan.
Having less-than-stellar credit can make it difficult to qualify for student loans. Private lenders will consider your income and credit history, and as a college student, you likely have poor credit or no credit at all. However, some lenders offer student loan options for borrowers with bad credit.
Generally, private loans carry higher interest rates than federal loans, and their rate is variable rather than fixed, which adds some uncertainty to the question of how much you’ll eventually owe. Private loans also lack the flexible repayment plans available with federal loans and are not eligible for loan consolidation under the Federal Direct Consolidation Loan program. However, you can refinance your private loans after you graduate, possibly at a lower interest rate.
The 50 Best Ways To Save Money In College And Live On A Tight Budget
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The idea of saving money in college might sound impossible – but it’s totally doable!
Let’s dive in on the best ways to save money in college!
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You can use apps like OfferUp or Facebook Marketplace to see items available in your area. If you don’t have a car, you can probably hire someone online to help you move! There are lots of moving service and delivery services in different cities.
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Dependent Versus Independent Student Loan Options
Whether the student is considered to be a dependent or independent student on the FAFSA affects federal student loan limits.
If the student is an independent student, parental information is not required on the FAFSA, and the loan limits on the Federal Direct Stafford Loan are higher.
How high? This table shows the loan limits for dependent and independent students:
Year in College
As shown in the table, independent undergraduate students get an additional $4,000 per year in annual loan limits during the first and second years, and $5,000 per year during the third and subsequent years.
Graduate students and students in medical school are automatically considered to be independent students.
In addition, the aggregate loan limits for independent undergraduate students are $57,500, compared with $31,000 for dependent undergraduate students. Graduate students can borrow up to $138,500 , including any undergraduate debt.
Graduate students may also be eligible for the Federal Grad PLUS loan, which depends on the borrowers credit history, but does not require a cosigner. If the graduate student has an adverse credit history, they may be able to still get a Grad PLUS loan with an endorser, which is like a cosigner.
There is no shortage of caveats in classifying a college student as dependent or independent when it comes to qualifying for student loans without parental help.
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How Much Should You Borrow In Student Loans
You should borrow as much as you need and not necessarily all that lenders make available to you. The more you borrow now, the more student loan debt youll have to pay off laterwith interest.
To determine how much you should borrow in student loans, calculate your cost of attendance. This includes:
- Tuition and fees
- Room and board or other living expenses
- Supplies and technology costs
- Loan fees
If your cost of attendance is less than what youd get from the maximum federal student loan limit, borrow only what you need.
If your cost of attendance exceeds what youll receive from federal student loans, you may need to tap into other resources. This includes private student loans or borrowing money from friends and family. If a certain college is just too much of a stretch financially, consider less expensive schools. Use resources like collegesnet price calculators on their websites to determine how much theyll cost you after taking into account grants and scholarships you could receive.
You also can set how much you borrow based on your anticipated future earnings, which might be a bit harder to estimate. But if you know the starting salary of your future post-graduate position, that can help you determine what you can afford when the time comes to repay your student loans. Some experts recommend limiting your total student loan borrowing to the amount you plan to earn your first year out of school.
Applying For A Student Line Of Credit
You may need somebody, like a parent, to co-sign your line of credit application. This person will also be responsible for the debt if you cant pay it back.
Your financial institution will set the maximum amount of money youll be able to borrow. The amount you can borrow may depend on the program youre studying and the school or academic institution offering the program. It may also depend on your living expenses, credit history and ability to repay the money you borrow.
You can apply for a student line of credit at any time. Usually, you apply online, over the phone or in person. Contact your financial institution to find out how to apply for a student line of credit.
You usually need to provide proof that youre either a full-time or part-time student at a recognized Canadian post-secondary institution to be eligible for a student line of credit.
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Undergraduate Federal Loan Limits
If your parents financially support you, then youre considered a dependent student. Federal student loan limits for dependents are $5,500 to $7,500 each year, up to a lifetime limit of $31,000.
You may be considered independent if you are over the age of 24, a military veteran or married, or if you financially support yourself. Independent students can borrow $9,500 to $12,500 annually and up to $57,500 total. If youre a dependent undergrad but your parents dont qualify for a parent PLUS loan, you may be able to borrow up to the federal student loan limits for independent students.
|Year in school
|Up to the cost of attendance, minus any other financial aid received
Accessing Money From Your Student Line Of Credit
You should be able to access the available credit in your student line of credit soon after:
- youve signed all of the necessary documents
- your application is approved
You can usually access the available credit from your student line of credit at:
- a branch of your financial institution
- an ATM
- through online, mobile or telephone banking
Some lines of credit will also let you access the money by writing a cheque.
Financial institutions each have their own terms and conditions for the lines of credit that they offer. Speak with your financial institution for more information about the student borrowing options they offer.
Borrow only as much money as you need to cover your needs while studying. Think about whether youll be able to make at least the interest payments while youre studying. Also think about whether youll be able to repay the money that you borrow from a line of credit when you graduate.
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Types Of Federal Student Loans
There are three types of federal student loans. Theyre all provided by the government through the Federal Direct Loan Program.
- Direct Subsidized Loans are based on financial need.
- Direct Unsubsidized Loans are not based on financial need. Theyre not credit-based, so you dont need a cosigner. Your school will determine how much you can borrow, based on the cost of attendance and how much other financial aid youre receiving.
- Direct PLUS Loans are credit-based, unsubsidized federal loans for parents and graduate/professional students. Direct PLUS Loans for parents are also known as .
Its important to consider federal student loans before you take out a private student loan, because there are differences in interest rates, repayment options, and other features.
Stop Before You Borrow: 4 Tips For Finding More Financial Aid For College
Whether youre an incoming freshman or preparing for your senior year of college, odds are youre planning to take out a loan to cover at least a portion of your education. After all, not everyone can afford to spend $35,087 on tuition every year, not to mention food, housing, books and countless other related expenses. Once your degree lands you a job, yes, you can pay off your loan in a matter of years, but its rarely quite that simple.
The average student borrower takes 20 years to pay off their debt, and some professionals take more than 45 years to repay theirs in full. Meanwhile, the average medical graduate doesnt even receive a high enough salary to make student loan payments. Thats why its best to think twice before you borrow. We put together the following tips to show you how to get more financial aid for college without racking up an insurmountable amount of debt.
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College Loans: The Basics
If your scholarships, grants, income and savings wont cover the cost of college, consider taking out a loan. Repaying the loan will cost you more money, but in exchange, youll get a college education.
A college education can increase your career opportunities and your future salary. This means that taking out a college loan as long as you borrow wisely can be an excellent investment in your future.
Have You Done Your Homework
If you must turn to private funding, research the best private loans for your financial situation. Factors to consider include:
- Interest rate while youre attending college: Is it fixed or variable? Does your credit score impact your rate?
- Rate once you graduate: Does the rate increase once you earn your degree?
- Fees: Are you on the hook for origination, late payment, repayment and application fees, etc.?
- Term of the loan
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Federal Student Loans Vs Private Student Loans
The following are some of the benefits and drawbacks of federal and private student loans.
Benefits of federal student loans
- The government funds federal student loans and parent loans
- Terms and conditions are set by law
- Income-driven loan repayment plan options
- Opportunities for student loan forgiveness
- No credit check
Drawbacks of private student loans
- Each bank sets its own terms and conditions
- Limited repayment options and hardship assistance programs
- No student loan forgiveness opportunities
- Requires credit check
- Origination, application, and early payment fees may apply
- No student loan forgiveness opportunities
- Online pre-qualification availability varies by lender
- The government and your school limits the loan amount
Types Of Student Loans
Since private loans dont offer the same protections that federal loans do, the general advice is to seek private student loans after youve exhausted every federal option.
Federal student loans
Federal student loans are the first choice for many due to their low rates, flexible repayment options and federal protections.
The U.S. Department of Education offers the following loan options:
- Need-based: Direct Subsidized Loan
- Non-need-based: Direct Unsubsidized Loan and Direct Plus Loan
To apply for federal loans and additional financial aid, students must submit the Free Application for Federal Student Aid once every school year.
Your school will calculate how much youre eligible to borrow based on the cost of attendance and your familys financial information.
Final loan awards cant exceed loan limits set by the federal government, but the school may award you less than what you request.
The federal government limits how much a student can borrow annually and over their entire college career across different categories:
- Academic year
- Possibility of loan forgiveness
Private student loans
Private student loans are similar to personal loans, as they are issued by private banks or credit unions.
Private student loan lenders look at students’ and to determine interest rates and loan approval. Since most students don’t have enough credit history, lenders often require a qualifying cosigner.
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An Alternative Version Of The Starting Salary Plan
Forbes also recommends using your estimated future income as a basis for deciding what to borrow, but with a twist. In this variation, your salary should be 1.5 times higher than your student loan balance. You can find the number by dividing your salary after graduation by 1.5, which mathematically limits your monthly payment to 12% of your take-home pay after taxes.
Use Federal Direct Loans First
Read that line again and make sure this is your plan. Federal loans are the cheapest, most protected, most effective loan choice available. Even if you are a high-income family that doesnt qualify for subsidized Direct loans, you should still use the unsubsidized version. Why? Interest rates are reasonable, and the student can participate in government programs like income-based repayment and loan forgiveness. The catch? The amounts available arent huge .
Its possible to cover the funding gap with just Federal Direct loans. If you cant, keep reading.
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How Much Student Loan Debt Can I Borrow
The federal government has a maximum student loan limit and a total limit to the amount you can borrow.
Financing higher education can be challenging. While financial aid applications are cumbersome enough, you also need to be mindful of the fact that theres a limit to the amount of student loans you can take out. Federal limits determine your eligibility for subsidized, unsubsidized, and PLUS student loans. Private lenders also cap the amount that you can borrow, but those limits are lender-specific.
Several different factors go into determining how much you can borrow each year and throughout your college education. The type of degree youre earning and your student statuswhether or not you are dependent on your parentsare used to calculate how much you can borrow.
Once weve covered the loan limits, well discuss what you can do if you find that you exceed them. There are a few options that you can pursue if you need more money. Keep in mind that though these caps are in place, youll always want to make sure that the amount that you borrow is compatible with how much money youll be making after graduation. Make sure that you can afford your monthly payment once you enter repayment. After all, these limits exist to make sure that you only borrow what you need.
So, what is the maximum student loan amount for your specific situation?
Insurance On A Student Line Of Credit
Your lender may offer you optional credit protection insurance on your student line of credit. This is a type of credit and loan insurance.
You dont have to take loan insurance to be approved for a student line of credit. This type of insurance may help cover your loan payments if you cant make them due to serious illness, accident, death or if you lose your job.
Not all illnesses, accidents, deaths or periods of unemployment will be covered by loan insurance on a student line of credit. For example, to be eligible for a job loss benefit, there is typically a requirement that you have been employed with the same employer for a certain amount of months and are eligible for employment insurance. As a student, you may not need job loss insurance coverage on your student line of credit.
Federally regulated lenders, such as banks, cant add optional loan insurance without your permission. If optional loan insurance has been added to your student loan without your permission, contact FCAC to file a complaint. You should ask your lender to remove the optional services and reverse the changes.
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