Student Loans for Higher Studies

Student loans or Educational loans are one of the many ways candidates can fund their college education. Though they aren’t the most popular option due to the added interest rates and the 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 chosen.

Choosing and applying for student loans diligently can save the candidates from significant debts. However, compared to international students applying to the U.S., it is easier for domestic students to find loans that suit their needs and will not accrue too much debt over time. Candidates can take up Federal Student Loans offered by the government or from private financial institutions that can provide them with the necessary funding.

The options that candidates can opt for without relying on student loans are:

• Scholarships
• Grants
• Teaching assistantships
• Work-study options
• 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. Applying for any student loan involves lengthy paperwork and sufficient preparation in advance. Hence, it must be started before candidates apply to their colleges.

How to Find a Suitable Student Loan?

Students who have started looking for financial aid will come across plenty of payment plans and financial aid websites that claim to provide them with scholarships and loans. However, the candidates must double-check the reliability of the website and be sure about the safety measures followed before trusting it with their card or bank details.

Familiarity with the sources of loans and the necessary documents that will be required for the process will help the candidates in the process of receiving the loan. It is best to apply at the earliest to ensure timely processing. The major sources that provide student loans are:

• Federal Government
• Private institutions like banks and financial institutions

Federal Student Loans for Higher Education

The best student loan options for domestic students are those made available by the U.S. Government. To qualify for these loans, students must familiarize themselves with the eligibility criteria for each and submit a duly filled FAFSA (Free Application for Federal Student Aid) form for free.

Loan Amount Offered Under Federal Student Loans

The eligibility for the loan amount under the Federal Student Loans at various educational levels are listed below:

Educational Level	Loan Amount
Undergraduate Students	$5,500-12,500/year (subject to other factors)
Graduate or Professional Students	Upto $20,500/year

• For undergraduate students, these loans are divided into subsidized and unsubsidized loans, which have different interest rates.
• For graduate and professional students, the loans are available only under the unsubsidized loan category.

Different Loan Types Under the Federal Student Loan Program

The different types of loans provided by the U.S. Department of Education under the Federal Student Loan Program are as follows-

Name of Private Loan	Eligible Candidates	Required Credit Score	Interest Rate	Maximum Loan Amount
Direct Subsidized Loans	Undergraduate Students	N.A.	6.53%	Determined by the school and cannot exceed the financial need.
Direct Unsubsidized Loans	Undergraduate, Graduate, and Professional Students	N.A.	For undergraduates: 6.53% For graduate or professional students: 8.08%	Determined by the school based on the cost of attendance and other financial aid received by the student.
Direct PLUS Loans	Graduate and Professional Degree Students and the parents of Dependant Undergraduate Students	N.A. But there should be no adverse credit history.	9.08%	Determined by the school based on the cost of attendance and other financial aid received by the student.
Direct Consolidation Loans	N.A.	N.A.	Determined by the weighted average of the consolidated loans.	None

Direct Subsidized Loans

Federal subsidized loans are designed to provide low-interest financial assistance to students who exhibit a need for financial support. While the borrower is enrolled in school at least half-time, for the first 6 months after leaving the school and during the deferment period, the US Department of Education covers the interest on these subsidized loans.

Direct Unsubsidized Loans

Students with unsubsidized loans must pay the interest on these loans while attending school and during any grace periods or deferments. These loans are not determined based on the financial need of the student. A credit check or cosigner is not needed. Students do not have to pay when they are pursuing the course or during deferment, but the interest amount will accumulate and will be student's responsibility.

Direct PLUS Loans

Direct PLUS Loans are a type of federal student loan designed to help graduate or professional students and parents of dependent undergraduate students cover educational expenses. A credit check is required, although there are flexible eligibility criteria. If the student has received any other financial aid, that amount is deducted from the total loan amount offered to the student.

Direct Consolidation Loans

Direct Consolidation Loans are a financial product that allows borrowers to combine multiple federal student loans into a single loan, simplifying repayment by providing a single monthly payment. Federal loans can only be consolidated when they are in repayment. Consolidation can result in a change in rate of interest, repayment period, and other benefits.

How to Apply for a Federal Student Loan?

To successfully apply for a Federal Student Loan, the following steps can be followed:

• Candidates who require Federal Student loans can apply for the same by filling out the FAFSA form.
• Depending on the results of the FAFSA form, the college will then send a financial aid offer, which might include federal student loans.
• Thereafter, they will be required to complete their entrance counseling.
• The candidates may then go through the terms regarding the repayment of the loan and agree to the same before signing the Master Promissory Note.

Advantages of Federal Student Loans

The following points add to the convenience of Federal Student Loans:

• Most Federal loans do not require candidates to have a co-signer or a credit check.
• The students are not required to start repaying this loan during the course duration.
• Federal student loans' interest rate is fixed and often way cheaper than any other option available to candidates.
• Federal student loans offer options for deferment and forbearance, allowing borrowers to temporarily pause their payments without defaulting on their loans.
• Students who apply for federal student loans are often also considered for other forms of financial aid, such as grants and work-study programs.
• Borrowers can pay off their federal student loans early without incurring any prepayment penalties. This allows graduates to save on interest costs if they can repay their loans sooner than expected.

Student Loan for International Students

The government offers federal loans for international students who meet certain requirements, but they are by far, few. Students interested in studying in the U.S. but unable to meet the criteria are often advised by many universities regarding the best loans available from banks and other private institutions.

The private loans offered to international students often require a US citizen or a permanent resident to be the co-signer. A valid proof of ID will be needed to verify the cosigner's creditworthiness.

Student finance offices at U.S. universities often dedicate time and effort to helping international students attain financial aid if necessary. This can be the best place for candidates to enquire about loans to ensure reliability.

Private Student Loans for Higher Education

Though a Federal Student Loan is the best option that students have among loans, it is often not easy to procure the same. Hence, 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.

Here are some of the best private financial institutions to rely on for student loans-

Financial Institution	Particulars of Loan Provided
Sparrow Student Loans	Credit Score Required: N.A. Interest Rate: 2.99% to 14.98% (Fixed Interest Rates with autopay); 0.99% to 12.99% (Variable Interest Rates with autopay) Maximum Loan Amount: Cost of Attendance minus any financial aid already received
Sallie Mae	Credit Score Required: Mid-600s Interest Rates: 3.69% to 15.49% (Fixed Interest Rates with autopay); 5.54% to 15.70% (Variable Interest Rates with autopay) Maximum Loan Amount: Cost of Attendance minus any financial aid received.
Earnest	Credit Score Required: 650 and above Interest Rate: 3.69% to 16.49% (Fixed Interest Rates with autopay); 5.62% to 16.85% (Variable Interest Rates with autopay) Maximum Loan Amount: None
Education Loan Finance	Credit Score Required: 680 and above Interest Rates: 3.69% to 14.22% (Fixed Interest Rates); 6.00% to 14.22% (Variable Interest Rates) Maximum Loan Amount: Total Cost of Attendance
College Ave	Credit Score Required: None, when applied with an eligible cosigner Interest Rates: 3.69% to 17.99% (Fixed Interest Rates with autopay); 5.59% to 17.99% (Variable Interest Rates with autopay) Maximum Loan Amount: Cost of Attendance minus other financial aid.
Discover	Credit Score Required: None. However, a co-signer may be required in case of an unsatisfactory credit score. Interest Rates: 5.24% to 15.99% (Fixed Interest Rates with autopay); 6.62% to 17.49% (Variable Interest Rates with autopay) Maximum Loan Amount: Cost of Attendance minus any other financial aid
SoFi	Credit Score Required: 670 Interest Rates: 3.99% to 14.83% (Fixed Interest Rates with autopay); 5.99% to 15.86% (Variable Interest Rates with autopay) Maximum Loan Amount: Cost of Attendance minus any financial aid received.
Ascent Funding	Credit Score Required: Low to Mid-600s Interest Rates: 3.69% to 14.71% (Fixed Interest Rates with autopay); 6.01% to 15.47% (Variable Interest Rates with autopay) Maximum Loan Amount: Upto $200,000 for undergraduate loans and up to $400,000 for graduate loans

How to Apply for a Private Student Loan?

The candidate must be at least 18 years old to apply for a private student loan. They should shop around for the best possible option and read the terms. Some things to keep in mind:

• Explore Various Private Student Loan Offers: With a significant number of financial institutions around, the candidates can try to collect details regarding the student loans provided by as many of them as possible.
• Check the Eligibility Criteria: The eligibility criteria for procuring a student loan may vary from one financial institution to another. Hence, checking the criteria listed therein before applying is always a great idea. Some loans are only provided to a certain community. It is important to verify if the student is eligible for the loan.
• Arrange for Necessary Documents: The documents required for the processing of a private student loan are a vital part of the entire process. The candidates can enquire and arrange for them well in advance to avoid last-minute panic.
• Decide on a co-signer: Having a co-signer may be a viable option for those with an unsatisfactory credit history or a low credit score. Most institutions offering private loans will require a cosigner with good creditworthiness.
• Confirm the payment plan: Candidates must verify the interest rate and the payment plan. They will often have to start paying the installments when they are still in school.

Advantages of Private Student Loans

• Private student loans often allow borrowers to choose the amount they wish to borrow, which can be tailored to cover specific educational expenses, such as tuition, books, and living costs.
• Depending on the borrower’s creditworthiness, private student loans can offer competitive interest rates compared to federal loans. Borrowers with strong credit histories may qualify for lower rates, potentially saving them money over the life of the loan.
• Many private lenders provide a range of repayment options, including interest-only payments while in school, deferred payments until after graduation, or immediate repayment.
• Unlike some federal student loans, many private student loans do not charge origination fees, which can reduce the overall cost of borrowing.
• Private lenders often provide customizable loan terms, allowing borrowers to choose the loan length (e.g., 5, 10, or 15 years).
• Some private lenders offer interest rate discounts for setting up automatic payments or having a good academic record.
• Private student loans often have a faster approval process than federal loans.

Deciding upon Student Loans

Before applying for a loan, students must understand whether they require it to finance their studies. This may entail weighing a variety of pros and cons.

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 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.

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 $1,600 in current dollars. In contrast, nowadays, a year at Harvard costs a minimum of $49,000. 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 have certain drawbacks. In the United States, more than 40% of young adults have debt from school and collectively owe about $1.77 trillion in student loans. It is, therefore, important to understand whether the candidate requires a loan for their education and figure out other means for funding their education if the procedures are long and tiring.

Factors to Consider Before Taking a Student Loan

There are several factors every student should consider before taking a student loan, be it federal or private. Most importantly, for calculating the loan amount, the miscellaneous expenses of the candidate must be considered on a higher note to get an estimate of the actual amount they will spend on their education. They can then subtract the amount they procure from personal funds and scholarships, giving them a fair idea of the loan amount to be taken to complete their education.
Candidates who cannot aim for high-ranking institutions due to financial constraints can also opt for community colleges or colleges with a lower cost of attendance.

The factors that candidates can consider can be listed as follows-

• Choose the field of study.
• Find suitable colleges and list their cost of attendance.
• Find the living expenses in the city the college is in.
• Make a note of the funds that are available to them.
• Apply for big and small scholarships and grants, regardless of the amount.
• Find out if they can take a work-study option and the amount they can get from this.
• Calculate the amount they must take as a loan accordingly.
• 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 interest. The interest rate is the lowest in federal student loans and the highest 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 repayment.

Are Student Loans Worth It?

Student loans are a feasible option for candidates who cannot fully fund their education despite their scholarships and grants. However, most students are often not able to repay the entire amount as per their calculations.

According to recent statistics by education data, the total debt from student loans in the country is $1.75 trillion, with around 42.8 million students in an average debt of $37,853. The outstanding Federal Loan Portfolio has been calculated up to $1.56 trillion.

While federal student loans may be categorized under debt relief, this is not the same for students who have taken loans from private institutions.

These statistics can be unnerving for candidates looking for the right loans for their education. However, it is also to be understood that candidates who have graduated with an average level of debt and are earning a typical graduate employee’s salary will not have to worry too much about repaying their loan. But at the same time, candidates mustn't take huge amounts as a loan covering their entire education period, which can leave them in significant debt.

Therefore, taking loans strategically, obtaining enough small-scale scholarships, and opting for the work-study option can save students from accumulated debt in the long run.