The cost of college continues to rise and many people have begun to question whether a 4 year degree is worth the time and money. However, according to a Forbes article from 2015, the lifetime earnings of an individual with a college education is still significantly greater than someone who does not attend college and the article concludes that if you can afford college, you should attend. However, the question that remains is how? Certainly the government provides some level of aid for those in financial need, but how that need is defined and how much aid is offered can vary greatly. If you are interested in a college education but don’t know if you will be able to afford the upfront costs of tuition, you may want to consider some form of student loan. Read on to learn more about the types of loans available and make an informed decide about which ones can help you reach your educational goals. Already know which student loans are right for you?
Types of Student Loans
Student loans can generally be divided into two categories:
- Federal Loans
- Private Loans
Federal Loans
Federal loans are often offered in conjunction with a number of grants, scholarships, or stipends that form the typical financial aid package given to students after they complete the FAFSA (Free Application for Federal Student Aid). If you are considering college and would like financial assistance, the FAFSA should be your first stop as you will have an opportunity to apply for financial aid that does not need to be repaid. During the FAFSA application process, you will be asked about your family’s wealth as means of determining how much your family can be expected to contribute towards your education and how much assistance you may still need in order to afford college. Unfortunately, even after receiving assistance from your family and the federal government, you ma still find yourself unable to afford the total costs of a college education. In these instances, you may want to consider a private loan.
Private Loans
When searching for private loans, you will come across a multitude of offers. However, not all private loans are designed for students and you may end up paying far more than you need to if you accept a loan designed for a working professional rather than a full time student. Loans designed specifically for college students will generally allow you to defer repayment of your loan until after you graduate. Unfortunately, this can sometimes result in a loan with a higher than average interest rate to offset the delay in repayment to the lender. However, many student loans offer the option for the student to add a co-signer to the loan, which has the potential to lower the interest rate of the loan if the co-signer has good credit history and is willing to vouch for the student’s ability to repay.
Choosing The Right Private Loan
When evaluating your private student loan options, you will want to pay close attention to the repayment terms and interest rates to ensure you will be able to make the payments once you graduate. While a loan may solve your immediate problem of affording college, you will want to ensure you can repay the loan after graduation. To ensure you will be able to repay the loan, first begin by calculating your monthly repayment minimum. You may also want to take into consideration any other federal loans you may intend to accept as well as your monthly living expenses. Once you have an idea of how much money you will need to bring in on a monthly basis to make your payments, you could then look at the monthly income you anticipate after graduation. This can be challenging to accurately predict since you might not know exactly what you will be doing for work after graduation, but you may be able to estimate by looking at some salary estimates for jobs that your college degree will qualify you for. Once you have a good idea of your total expenses and total income, you can then make an informed decision about whether a private student loan is right for you.
Ready to find the best student loan for your needs?
Resources
https://www.forbes.com/sites/laurashin/2015/08/26/is-college-even-still-worth-it/#8cb1b8cae0bc https://fafsa.ed.gov/ https://www.edvisors.com/college-loans/terms/cosigners/ https://loans.usnews.com/student-loans-without-co-signer#private-student-loans
