8 Student Loans: Understanding Your Options
Scholarships are fantastic, but they don’t always cover all your expenses. This is where student loans come in. Loans are borrowed money that must be repaid with interest. Understanding the differences between federal and private loans, as well as how loans work for domestic and international students, can help you make informed decisions.
Education loans also vary based on the situation of each individual. Please connect with University Financial Aid or contact advisors for further assistance.
Education Loans for Domestic Students (U.S. Citizens and Permanent Residents)
For U.S. students, the federal government provides a range of loan options that typically offer lower interest rates and more flexible repayment terms than private loans. To qualify for federal loans, you’ll need to submit the FAFSA form.
Federal Student Loans
- Subsidized Loans: These are offered based on financial need. The government pays the interest on these loans while you’re in school, so you’re not responsible for it until after graduation.
- Example: If you borrow $5,000 in subsidized loans during your first year, no interest will accrue while you’re enrolled at least half-time in school.
- Unsubsidized Loans: Unlike subsidized loans, these are not based on financial need, and interest starts accruing immediately. However, these loans still offer flexible repayment options.
- Example: If you take out a $6,000 unsubsidized loan, you can start paying off the interest while still in school to avoid a larger balance after graduation.
- Repayment Options: One of the main benefits of federal loans is the wide range of repayment options after you graduate, including income-driven repayment plans and loan forgiveness programs for certain careers (like public service).
Private Student Loans
If you need additional funding beyond federal loans, private loans from banks or credit unions can help, though they tend to have higher interest rates and stricter repayment options. Private loans are based on credit scores, so a co-signer may be required if you don’t have a credit history.
Education Loans for International Students
International students face different challenges when it comes to funding their education, as they’re not eligible for U.S. federal student loans. However, there are still options available:
1. Private Loans for International Students
Many banks and private lenders offer loans to international students, though most require a U.S. co-signer with good credit. Interest rates for international student loans tend to be higher than for U.S. citizens, but they can still be a valuable resource.
2. Loans from Home Country
In many cases, students may be able to obtain education loans from banks or government programs in their home country to help fund their education abroad. These loans can sometimes be tied to agreements that require students to return home after completing their studies.
- Example: A student from India might apply for an education loan from a national bank in their country to cover tuition at a U.S. university.
3. University-Specific Aid
Some U.S. universities offer financial aid packages specifically for international students, which may include grants, scholarships, and sometimes loans. Checking with your university’s financial aid office and international student services is a good way to explore these options.
Loan Repayment: How to Manage It After Graduation
Once you graduate, the focus shifts from borrowing money to repaying it. Here’s what to expect:
- Grace Period: Most federal loans come with a six-month grace period after graduation before you have to start making payments. Use this time to set up a repayment plan.
- Repayment Plans: Federal loans offer various plans, including standard (10 years of fixed payments) and income-driven repayment plans (where payments are based on your income).
- Interest Rates: Keep an eye on your loan’s interest rate. For federal loans, these rates are typically fixed, while private loans may have variable rates that change over time.
- Loan Forgiveness Programs: For those entering certain fields (like public service, government, or education), loan forgiveness programs can help reduce or eliminate the remaining balance on federal student loans after a certain period.
