Many students studying in the United States rely on Education loans to care for their personal and educational needs.
Education loans for students is a go-to solution to satisfy the yearning for a great future and a better life. This drives many youngsters towards the acquisition of a degree or certificate.
It is no secret that having an education doesn’t just make you employable, it also makes you smart and sophisticated.
However, getting a degree or certificate from an average learning institution costs a lot and could sometimes be too much for students who don’t have anyone to help cater for their education.
This is where the option of an Education loan or Student loan, as it is widely known, comes in.
Most countries have loan programs that provide financial aid to students, both local and international, in need with the understanding that they will pay the loan back at a later date.
This article will be exploring the details surrounding Education Loans for Students in the US.
What is an Education Loan?
An Education loan is an amount of money that a student gets from the federal government, their state government, or a private company to cater for education-related expenses such things as tuition, books, fees, transportation, room and board, and so on.
Who is Eligible to Apply for an Education Loan in the USA?
Both local and international students attending recognized Colleges or Universities in the United States are eligible to apply for Education Loans.
However, the rules are different for International students, in the sense that, in most cases, borrowers are mandated to have a credit-worthy cosigner who is either a U.S. citizen or at least a permanent resident.
How do I Apply for an Education Loan?
Below is a simplified process of applying for a loan:
1. Find the education loans that you’re eligible for.
2. Compare the loan options available for you.
3. Find out the amount of money you need to borrow.
4. Apply online.
5. Fill out the loan application.
6. Wait for approval.
7. Get the needed funds.
Types of Education Loans for Students
There are two main types of education loans, namely:
- Federal Education Loans.
- Private Education Loans.
Federal Education Loans
These are loans gotten from the federal government through the U.S. Department of Education. Compared to private loans, these loans have more flexible repayment plans and lower interest rates.
These loans are the most common among students and it is usually advisable to exhaust federal loan options before considering private loans.
How to get a Federal Education Loan
To get a federal education loan, a student will be required to fill out a Free Application for Federal Student Aid (FAFSA). You’ll need certain financial information such as your parents’ tax returns, bank and brokerage account statements, and others.
Types of Federal Education Loans
1. Direct subsidized loans: These loans are for undergraduate students. One of the benefits of this type of federal education loan is that the government helps to pay or subsidize the interest on your loans until you’re done with school. It is also important to note that the amount you can borrow depends on your current year in school. The loans are granted based on a student’s financial need.
2. Direct unsubsidized loans: This type of federal loan is for anyone but unlike Direct subsidized loans, you will have to pay the interest on your loan all by yourself.
3. Direct PLUS loans: What makes this loan unique is that it is the only federal loan that requires a credit check, although your eligibility doesn’t depend on it. This loan is accessible to graduate or professional students or parents of undergraduate dependent students.
4. Direct Consolidation Loans: This type of federal loan allows a student to combine two or more federal education loan into a single loan with a fixed interest.
Benefits of a Federal Education Loan
1. A federal education loan has flexible repayment plans.
2. It doesn’t require a co-signer.
3. You can get a federal education loan even if your credit history is poor.
4. You can make payments according to your income.
Federal Education Loan Eligibility
Below are some of the criteria to meet before a borrower can qualify for a federal education loan in the US:
1. The borrower must be a U.S. citizen, a permanent resident or an eligible non-citizen.
2. He/She must possess a high school diploma, GED or an acceptable equivalent.
3. The borrower must have a valid Social Security number (SSN).
4. They must be registered in an eligible institution.
Private Education Loans
When federal education loan is no longer an option, students turn to private loans to cater for their educational needs.
Unlike federal education loans that come from the federal government, private loans are gotten from private financial institutions, like banks, credit unions and online lenders.
There is no universal standard for eligibility, the amount a student can borrow, or the interest rate that will apply.
Another thing that differentiates private education loans from federal education loan is that private lenders look up your credit history and if it is not good enough, it could cost you the loan. You’ll also need to provide proof that you’ll repay the plan.
Also, getting a private loan sometimes requires a co-signer, in cases when you don’t qualify to borrow on your own.
How to Apply for Private Student Loans
You can apply either by reaching out to the lender or by filling out an application on the lender’s website.
You need to have a good credit score, as this will increase your chances of getting a loan and also lower the interest rate applied.
For international students who don’t have a credit score yet, you could always use a co-signer who will undertake the loan with you and is concomitantly accountable for repaying the loan should you default.
We believe we’ve been able to provide you with some pertinent information regarding Education Loans for Students in the USA. Remember, only consider going for private loans after you’ve exhausted all the federal education loan options.