What is a private student loan, how does it differ from a Federally backed student loan and what do you need to do to qualify.

  • Private Loans do not require financial aid forms and the process is usually quicker
  • The student can apply for a higher loan amount based on their credit score
  • There are usually fewer restrictions on what the loan can be used for
  • If the applicate's credit does not meet the lender's criteria, a co-signer can be used
  • Interest rates are usually higher than the Federally backed interest rates
  • The terms and repayment are usually more flexible
  • If a cosigner is used, the applicant has access to better rates and terms

Private loans will require that the borrower makes minimum monthly interest payment while they are attending school. This allows the student to start building a strong credit history for future loan/mortgage applications. It also teaches healthy financial habits and responsibilities. Many private student loans will allow the students to defer interest payments til after school or graduation - whichever comes first.


Lendkey a lender that specializes in Private Student Loans. They work with the student to help them get the financing they need with the best terms and interest rates that they can. These private lenders offer referral programs and offer cash fees for every friend you refer. See Lendkey for details. As well, America Loan Service student loan partners offer the following rates which are lower than the Federal Rates: 

Private Student Loan Reviews

  • Jennifer (University of Maryland): “It seemed like the easiest process! I enjoyed the one-on-one feedback and assistance from all the loan counselors. Their process has a lot of automation and they called you and helped you each step of the way.”
  • Gerald (University of Pittsburgh): “They seemed to have the most reasonable rates and everyone I talked with was very professional and seemed like they were on my side.”
  • Arlie (Brenau University): “Secure. Simple. Can always get someone on the phone to speak with about any issue and question I may have. Beats using the big guys for sure!” 

Student Loan Refinancing

If you already have student loans a great way to manage them is to refinance or consolidate the loans into one. This means that you will only be making one payment and that the loans will be paid off simultaneously.

Student loan refinance companies that can help you

Federal Subsidized and Unsubsidized Loans

What is the interest on Federal Subsidized and Unsubsidized Loans? Loans disbursed on or after July 1, 2017, through July 1, 2018:
- 4.45% interest rate for both Direct Subsidized and Unsubsidized loans for undergraduate degrees. The interest rate is fixed for the life of the loan. This means that regardless of the length of the term, the interest will not fluctuate or change.
- 6.0% interest rate for Direct Unsubsidized Loans for Graduate or Professional Degrees. The interest rate is fixed for the life of the loan.

Are there any other Fees associated with Federal Subsidized and Unsubsidized loans? 
- Yes, there is a 1.069% loan fee if disbursed before October 1, 2017, and 1.066% loan disbursement fee for after October 1, 2017, through to October 1, 2018. This fee covers the costs of the application process and disbursement.

How much money will I be eligible for with the Federally back loans? Information inserted on July 13, 2017 (Click this graph to go directly to studentaid.gov)

Federal Direct Loans Are Not Enough

What can I do if I need more money than I am eligible for with the Federal Direct Loans? Based on the chart above, Federally backed Student Loans do not begin to cover the cost of attending a college or University. College costs for an elite private college could cost up to $68,000 per year. The projected cost of an elite college from 2018 - 2021 could cost as high as $334,000 for a four-year degree. The national average cost of attending a four-year public college for the school year of 2016 -2017 was over $24,610 per year and approximately $49,320 per year for a private college. What makes up these fees - how can it be possible to cost so much? Tuition is charged per class per semester that the student is enrolled in. Tuition at a public college is fairly reasonable if you are a state resident, but if the student is living in another state, the tuition is significantly higher. Public colleges tend to give huge breaks for their residents. As well, tuition varies according to the major that the student is enrolled in. Fees for the library, gym, transportation are included in the overall cost. Tuition and fees for state residents at public colleges were estimated at $9,650 and for out-of-state residents, tuition and fees were as high as $24,930. Room and board are usually charged separately depending on meal plans, rooms etc. The College Board reported that the average cost for campus housing and meal plan was $10,500. Books and School Supplies average $1,250 per school year. The maximum student loan available from the Federal Government is $5,500 which falls short of covering the cost of a full school year, even if the student attends an in-state college.

Where will Students be after all of the Trump Administration Changes
 
In May 2017 approximately 44 million Americans owed over $1.4 trillion in student loan debt. The average monthly student loan repayment is $351 with a delinquency rate of 11.2%. The numbers are huge. Where do the new president, Donald Trump, and his administration stand on this crisis? President Donald Trump and Betsy DeVos's initial education budget will seek to eliminate the Public Service Loan Forgiveness (PSLF) program. What does this mean to the 44 million Americans who are trying to pay down huge student loans? As well, Trump and DeVos will seek to eliminate over $700 million in Perkins Loans and massively reduce work-study programs. 
 
Public Service Loan Forgiveness
 
The White House estimates that $143 billion would be saved over 10 years by allowing the Perkins Loan Program to expire and phase out the PSLF (Public Service Loan Forgiveness) program. The White House states that they have a new plan within the 2018 budget that would shorten the time frame for loan forgiveness, but this comes at a cost to the borrower. The White House is proposing that 12.5% of the borrower's income be used for repayment of student loans. A total loan forgiveness would then be given after 15 years. So what does the cancellation of the PSLF mean to the borrower? Presently under this program, eligible borrowers will have their federal student loans forgiven after 120 qualifying payments (10 years). Currently, there are no limits on the outstanding amount that can be forgiven and forgiveness is not taxable income. This is a great program for those borrowers who maintain monthly payments on time. The PSLF is a great program if you work in a 501(c)(3) non-profit organization or are employed by the government. As well, all student loans must be registered with the Federal Direct Student Loan Program. This is a program that provides low-interest loans for students and parents to help pay for the cost of a student's post-secondary education. See Federal Direct Student Loan Program here in Wikipedia.
 
Federal Direct Loan Program
 
There are 3 types of loans that currently fall within the requirements of the Federal Direct Loan Program. The three eligible Student loans that qualify are Direct Loans, FFEL Loans, and Perkins Loans. If the present White House Administration is able to pass their proposed policies, repayment would be based on the IBR plan. Debt forgiveness would occur only after 15 years for undergraduate borrowers and 30 years for graduate students. President Trump is also considering lowering the interest rates on Federally backed student loans. At present interest on Federally Backed Student loans are set at 10% with repayment of principle based on the repayment plan you choose. Any decrease in interest in Federally backed student loans will be a benefit to the borrower.
 
International Comparisons
 
In looking at a comparison to what other countries charge for interest for their Federally Backed Student Loans the following countries interest rates are as follows:
 

Canada - Prime plus 2.50%. The prime rate in Canada is currently at 2.95%. Interest for a student loan is 5.45%. If the Prime is lowered, so does the interest on the student loan. Students can choose a floating or fixed rate for repayment of their student loans.

United Kingdom - Interest Rate for 2016/17 is set at 1.25% with the total of 9% of your income. See this link for the full explanation  An example of repayment would be if you earn a salary $23,444 your monthly repayment would be $6 / month 

Elephant in the Room

The Huffington Post in the August 2016 stated that the education bubble of degrees vs. debt is becoming the 'elephant in the room'. Historically, individuals who earn a degree get better, more secure and higher paying jobs once they enter the workforce. We as a country have embraced this philosophy - higher education, better jobs, better quality of life, better for the next generation, better for our country. We began to judge public education institutions that taught K-12 based on their ability to qualify their students for entrance into grade 'A' universities and colleges. But, these 'A' universities and colleges come with a higher tuition and overall cost. It has become a status symbol as to which post-secondary college/ university you attended.

Proper Financial Backing

Where most students run into problems is trying to attend these schools without proper financial backing. They apply for student loans for the entire duration of attendance, accumulating more debt than they can reasonably pay off within a 10 year period. Add to that marriage, house, car, children with a salary that does not increase with the added financial load and it spells disaster. If a student ends up dropping out of college/university for whatever reason they still are obligated to repay their student loans. Dropping out or being unable to complete their degree means accepting a lower paying job which has the domino effect. Less money to live on = less money to repay their student loans.

Right Choice

Students entering post-secondary institutions need to be confident in their choices. Often the 'dream' needs to come with a dose of personal reality. Is this really the degree I want. Will this degree insure me a job within the industry I have chosen? How much debt will I incur and based on the entry salary for my degree how long will it take for me to pay it off? What are the best student loans and repayment schedules? Is there any way I can work part-time during the school year and summers. How can I minimize my debt loan to launch my future? First of all, you have to pick the right student loan for yourself. Regardless of the political mindset of the country, a college, university education is a long-term investment for yourself and your family. If you plan carefully, you will find the right school and funding that works best for you in the short and long term.

Steps to Choosing a College and Student Loan:

1) If you are finishing high school or looking for a new career path, what are your interests? What do you like to do? This is a good starting point. Start with what you like, but be open to new opportunities and subjects of interest. If you start with a direction and courses that apply to several degrees, you can change your mind and courses needed to end up where you want to go? Don't know? Same thing - choose courses of interest that apply to different degrees as you will not need to choose a major until your third year of college /university. Get started and the rest will fall into place.

Career Choices

Choosing a career based on salary alone, will not bring you fulfillment. Find a career that offers growth and innovation for career movement. A great resource for deciding on a career choice is to go to the Federal Student Aid site and research their 'Prepare for College' tab. This site offers a wealth of information on all career paths. It is important to look at what careers offer for longevity. Advancements in technology will change the face of careers. Be sure to choose one that works alongside IT. If you are a woman and are hoping to stay home with your children look at careers that would offer you this choice. Teachers, self-employment, bookkeeping, etc. are all fields that would lend themselves to spending maximum time with your children.

Your Future

Finding a career that is sustainable or will lead into a new direction in the future is extremely important. In this era of never-ending technology advancements, it is extremely important to choose a career that is forward-looking. Will what I want to do be sustainable in the next 10, 20, 30 years. What will my career look like, what will my pay scale be from the commencement of my career to retirement? Can my degree or parts of it be transferable to a new field of work? Once you have an idea as to the direction you want to go, the next step is to pick a college /university.

Staying Local

There are many benefits to attending a local college or university. The biggest reason is cost and convenience. If you and/or your parents are signing for a loan for your education, the cost of borrowing is much less as you will probably only need to borrow tuition and books. Living at home reduces living costs, you have the support of family and friends. Once you graduate, your student loans will be much minimal and easier to repay.

Leaving your State

You may need to attend a university or college in another city or state. Use a spreadsheet to figure out your costs - tuition, books, fees, room & board, transportation, and miscellaneous items. Look at the cost for the duration of schooling to obtain your degree. The thought of attending school away from home sounds appealing, but many a graduate laments the fact that if they had stayed home, their cost of repayment would have been less than half. Choosing a college or university is definitely a decision that you will want your parents' support. Federal Student Loans do not need a co-signer for most loans unless your credit history is poor.

Your Credit Score

You can find your score before you start by using an online Credit Bureau such as Equifax, Transunion, Experian. You are entitled to a free credit report every twelve months with all three credit bureaus. If you are a first-year student, it is a wise decision to firstly apply for a Federally Backed Student Loan. If you require more funds to complete your school year, then apply to banks and private lenders.

Apply June/July

If you are attending university or college in the fall, June and July are the time to apply for your student loans. Universities and colleges have deadlines for which tuition and room and board must be paid or they will cancel your application. Most schools look for room and board August 1 and tuition by the first to mid-September. As an upcoming student, you want to be ahead of the payment schedule and have your financing in place before payment deadlines.

If you are going to apply for Federal Student Aid, you must, first of all, meet the following criteria:

1) You must be a U.S. citizen or an eligible noncitizen with a valid Social Security Number (SSN)
2) Demonstrate financial need 
3) Have a high school diploma or equivalent (GED) certificate
4) be enrolled and accepted into an eligible degree or certificate program at a qualified college or university
5) maintain satisfactory academic grades in college or university
6) if you are male and between the ages of 18 and 25, it is mandatory that you are registered with Selective Service

What types of Federal Loans are available for eligible students?


1) Direct Subsidized Loans - for undergraduates who need financial help
- the college and university determines the amount you can borrow
- U.S. Dept. of Education pays the interest while you are in school and for the first six months after you leave school

2) Direct Unsubsidized Loan - available to undergraduate and graduate students whether or not they have financial requirements
-the college and university determines amount borrowed based on class load
- you are responsible for paying the interest during all periods
- if you choose to postpone interest till you have completed your schooling, the interest will accrue and be added to the principal loan amount

3) Direct PLUS Loan (Parent Loan for Undergraduate Students)

This is a federal loan that your parents can apply for to help with your college or university education. This allows your parents to help with your education if they choose without using their own savings. This loan becomes the parent's responsibility to repay. This loan cannot be transferred to the student upon graduation even through consolidation of other student loans. The Direct PLUS loan becomes the sole responsibility of the parents to repay. If the student chooses to help repay the loan and misses a payment, this missed payment does NOT affect the student's credit, it negatively affects the parent's credit. IF a parent chooses this option, their eligibility is based on their personal credit history. IF they have poor credit they will not qualify for a Direct PLUS loan.

Direct Subsidized Loan

The time limit for eligibility for the Direct Subsidized Loans is based on the published length of your current program. For instance, if you are enrolled in a 4-year education degree, you are eligible for a direct subsidized loan up to six years. If you switch majors, and it has a different length of completion, your years of eligibility is carried over from your previous degree and applied to your new program. There is no period of eligibility for Direct Unsubsidized and Direct PLUS loans.

Other ways to help Pay for my Education

Scholarships

The government, colleges, companies and various other donors provide money to help students cover the cost of their tuition and are usually 'merit-based.' Scholarships do not need to be repaid after you stop attending school. Scholarships vary in criteria and amount. Some may cover the entirety of your tuition, while others may only pay a portion. Every scholarship has its own criteria and if you are looking to apply for a scholarship you will need to look at each individual scholarship that applies to your program. The U.S. Department of Education recommends finding scholarships at the U.S. Department of Labor's scholarship search tool. Also note, that scholarships do affect your other student aid. All student aid added together cannot equal more than the cost of attendance at your specific college. Once you are awarded a scholarship, be sure to let your financial aid officer know, so that the amount can be subtracted from your attendance cost. 

Grants

Grants are considered 'free' money - financial aid that does not have to be repaid. Grants are need-based. They can come from the federal government, your state government, your college or a private or non-profit organization.

Conclusion

Having a college and/or university education should be everyone's priority. The opportunities and personal growth that earning a degree offset the cost. It is important, however, to do your research, enroll in a program that interests you and is at a college that suits your lifestyle. Earning a degree and being practical teaches financial responsibility.

  1. White House Student Loan Costs - Federal Budget Student acquired June 2018
  2. Federal Direct Student Loan Program - Federal Direct Student Loan Program acquired June 2018
  3. Student Aid - Student Aid Eligibility acquired June 2017
  4. Student Aid Preparing For College - Student Aid Preparing For College acquired June 2018