Cash loans for students
As a student, you might need some monetary aid if you do not have a separate source of income. However, it is difficult to get a loan if you are unemployed, as banks are not ready to give loans.
To get a loan as a student in the US, below are some of the most common criteria’s:
- The minimum age limit is 18.
- You should be a resident in the US.
- You need to have a bank account in your name.
Federal Student loans are the common and reliable source of loan for U.S students. You have to pay back the loan along with interest, so it is important to make an informed decision in choosing the loan type and related procedures.
When you apply for financial aid, you may get different offers depending on your institute’s financial aid offer. Please be sure to know which company or bank is paying the loan and the terms and conditions. Mostly these loans are funded by federal government, private banks or other companies. Federal loans have higher benefits than the loans provided by private sectors.
Types of Federal Loans
Federal loans are given by the U.S. Department of Education. We discuss below the types of federal loans provided by them.
- Subsidized loans: This type of loan is for undergraduate students who demonstrate their need for money to cover expenses of higher education at college or school.
- Unsubsidized loans: This is also a type of direct federal loan, but the eligibility is not dependent on the financial condition. The undergraduate, professional students can apply for this loan.
- Direct Plus Loan: This type of loan is provided to the graduate and professional students and also to the parents of dependent students to help them in paying the for the expenses which are not covered by the direct loans. Before approving such a loan, credit history is verified. So, persons having bad credit history may need to satisfy some other criteria to get the loan.
- Direct Consolidation Loans: Here, all the eligible federal loans can be summed up into a single loan from a single provider.
Amount of Federal loans
The amount of funds that you can borrow as a federal loan depends on what type of student you are (undergraduate, graduate or professional or a parent with a dependent child).
- For an undergraduate student, the maximum amount that can be taken under the subsidized and non-subsidized loan is between $5500 and $12500. This can also vary due to your dependency status or which year you are studying in the school.
- For a graduate student, a maximum amount upto $20500 can be obtained from the direct unsubsidized loans. In addition, some extra amount that is not covered in a direct loan can be borrowed as a Direct Plus loan.
- If you have to pay for your child’s education, you can take up direct loans for the amount that is not covered by the direct loan.
Things to consider
It is important to understand that by taking a federal loan, you are legally bonded to repay the amount you have received and the interest. You do not have to start repaying the loan immediately, but surely in the future. We list a few points that you should consider while taking the loan.
- Take a loan of the amount that you need only for school-related expenses. While repaying the loan, the amount per month should only be some percentage of your monthly income. Taking bigger loans will in you in debt longer than needed.
- Get to know the expected salary in your area of expertise. You can also consult your school to know the starting package of recently graduated in your division. You can also use online career search tools to have a better idea.
- Understand that you are liable to pay back the loan in all circumstances. This means even if you don’t get a job, or complete your studies or maybe you are no longer interested in the particular area. So, before taking any career-related decisions, please consider this point as well.
- Pay the instalments on time even if you do not get a remainder or a bill. Make a note of the terms and conditions of the loan and you need to pay the full loan amount in the pre-decided tenure.
- Update your loan servicer about changes like when you complete your studies, get a job, change to some other school. You should also inform them about any change in your address, social security number, etc. If you are not able to repay the loan, you should contact them. They might have some options to help you to keep the loan in a good state.
- You can do some part-time job as well to maintain your own expenses. This will prevent you from taking a high amount of federal loan.
Procedure to Apply
To apply for a federal student loan, you need to fill and submit a Free Application for Federal Student Aid (FASA) form. Based on your details in the form, your school or college will send you the offers of financial aid including federal student loan. You need to go through these and accept the ones suited for you. In case you are not sure about any of the steps, you can contact your school for the same.
To receive the loan, you need to complete the following steps:
- Entrance counselling: If you are taking any of the direct loans (subsidized or unsubsidized) and you have not done entrance counselling before it is mandatory to complete it. You have to complete this before you school pays out the first loan payment.
Even if you are a graduate student who is taking a Direct Plus loan, but do not have the experience of a Plus loan, you have to complete this step. This applies to you even if you have received a direct subsidized or unsubsidized loan earlier before graduation.
Different schools have a different mode of entrance counselling. This may require you to be physically present for this, or some schools have the online procedure. You will receive a link from your school to complete it online. This roughly takes 30 minutes.
- Master Promissory Note: This refers to a legal bond in which you have to sign. This is as part of your promise to pay back the full amount to U.S. Department of Education along with any interests.
You should read this document carefully and also keep a copy of this. This includes some important information like the interest rate, when and how frequently interest is charged, loan cancellation and postponement policies.
Once you sign an MPN, you can borrow additional loan up to 10 years if you have a person as an endorser who is likely to repay the amount when you are not able to pay. However, if your school does not allow additional loan on the same MPN, this will not work.
Before paying out a loan to you, the school will send you a disclosure statement with all the information on loan amount, fees, expected dates of payment.
Reason to choose a federal loan
As a student, a federal student loan is more advantageous than private loans. We discuss a few benefits of federal loan over others.
- The interest rate you are going be charged for this loan is fixed and generally less than that of private banks and credit agencies. Also, your credit card company charges more interest than this.
- Most federal loans do not require an endorser or co-signer to get the loan approved.
- You do not need to repay the loan until you finish your studies. However, if you leave your studies in between, you need to repay the amount immediately.
- If you have some urgent financial need, you can discuss that with your loan servicer. The government can pay some interest on the loan when you are still studying and also up to some period after completing your course.
- These loans have different flexible instalment options, so if you are unable to pay the loan at a certain point of time, you can extend it for a definite period of time.
- Depending on the job you do after your studies, you may be exempted of some loan depending on the terms and conditions.
Health Education Assistance Loans
Starting from July 1, 2014, the Health Education Assistance Loans (HEAL) has been shifted to U.S. Department of Education from U.S. Department of Health and Human Services (HHS). So, if you are undergoing Health education and need monetary assistance from the government, you can apply for this loan.
Cost of Attendance
Cost of Attendance for a student is defined as the combined cost of tuition fee charged by the school, book and material allowances, and living costs like rent, transport, food, and other utilities. In many universities, a student is granted any financial aid that does not exceed this Cost of Attendance. The financial aid comprises of any scholarship, private and federal student loan and any work-study involved. This does not pay for any other personal expenses like bills (mobile, insurance) and expenses related to one’s hobby.
At the discretion of the school, some student may be granted some extra funds for reasons like medical, dental, child-care expenses, etc.
Although federal loans are obviously the best choice for a student, some might need some extra funding to cover the bridge between educational expenses and total expenses. Some banks provide such loan to students and their interest rates vary. However, there are some laws which protect your loan. The interest you have to pay depends on the credit, whether you have a co-signer with you andthe type of loan you are applying for.
Similar to the federal loans, the private companies can pay for your undergraduate, post-graduation studies and also if you are a parent with a dependent undergraduate child. In addition to this, banks also provide loans for certain technical college or training program for students for a period of 2 years.
The loan repayment tenure depends on your monthly instalments, starting from 5 years to 20 years. If you are ready to repay the loan with high instalments, you can choose a shorter loan. However, it is important to consider your income to debt ratio before making a decision.
The loan amount depends on various factors like the year you are studying, the time you need to graduate, the field of your study, etc. Banks provide a bit more amount for technical or medical education, as they involve most cost than others.
Unlike federal loans, the private loans charge interest on either fixed or variable interest rates.
- Fixed interest rates: In this type of loan, the interest rate is fixed when you are taking the loan. Once you have taken up the loan, you will not be able to change that. The interest that you are charged depends on your credit, the bank, market-rate, and type of the loan.
The advantage with fixed interest is you need not worry about changing market rates. So, in the future when you repay the loan from your salary, even if the interest goes high, your bill will remain the same.
- Variable interest loans: If you are someone who can afford to pay the loan with high instalments in a shorter time, you can take the variable interest loan. The interest rate is actually a sum of the prime rate and some margin percentage which depends on your lender. So, if you can repay the loan quickly if the interest rate rises, this is an option that you can consider.
Finally, to summarize, you need not be afraid to take a loan for educational expenses as it is necessary for your future. However, before taking a loan, you should carefully analyse the terms for each of the loans available. Also, it is advised to use the most of the federal loans arranged by the government before taking any additional private loan.