How to Get A College Tuition Loan
Getting a college tuition loan seems hard at first, but it gets easier as you learn how to do it and what to look for in a loan.
Here you’ll find several places to look for a loan, and what kind of loans work best. These pointers are guidelines, of course, but can help you get better loans.
First, places to look for a college tuition loan:
1. Your bank or credit union
2. Your school
3. Federal financial aid (using the FAFSA form)
4. State financial aid
5. Independent lenders like Sallie Mae, Citibank, Chase, and so on.
What Makes The Difference in a College Tuition Loan
Borrowing money for school hinges on just a few points. Your credit is important typically in the case of a private loan. Your school mainly becomes a factor because it needs to participate in the government financial aid system if you use government aid. Qualifying for government aid, whether grants or loans, depends on your income or the income of your parents.
Beyond those, you may have to be careful of hitting the ceiling on your government loans, or limiting yourself to less private loans.
The above comprise the top sources for a student loan. I’ll give you a few more below, less common.
Get The Best Student Loan You Can
First, look at these things to remember when you look for a college tuition loan. Remember, I list these as guidelines. If you can get all of them, great. If not, get the best you can, and understand how the loan characteristics affect you.
1. Low, fixed interest rate
The benefits here should be obvious – stable and hopefully less interest, lower payment, faster payback. A variable interest rate opens your loan up to a higher rate. Of course, during recent events, many variable rates have dropped, but that is not the rule. With a fixed rate, you can set your payment and not have to worry that it will rise over time.
2. Forbearance and deferment available
These can be very helpful. Deferment and forbearance allow you to miss payments at certain times. You will have to apply for these, but the application is easy.
In many cases, when you do not have a government subsidized student loan, you will your interest capitalized, which is bad and increases the balance of your loan.
However, having the safety valve of deferment and forbearance available is a good idea in any college tuition loan. Just don’t use it much. If you have to use it, often you can still pay the interest payment on your loan to avoid capitalization.
3. No capitalized interest
When you use forbearance or deferment, many unsubsidized loans will capitalize your interest. This means that the bank adds it onto the loan, and you then pay interest on the capitalized interest.
Your small loan can become much larger very fast – bad idea. If you can, get a loan that doesn’t capitalize interest. This one can cost tens of thousands in your future.
When you finish school, you might have more than one loan. If so, consolidation may help you get a lower payment or a longer payoff. This can really help you.
Those are the most important options to look for in a college tuition loan.
When you can’t find a loan from the tuition sources listed above, consider some less common places. IF you have a 401K, you might want to borrow from it. Understand that this may mean you will not have it to grow for your retirement, but you might finish your degree.
Another place to look, your home equity loan. Many people have used a HELOC to go to school. And finally, if you expect a sizable tax refund, use it for tuition instead of a cruise.
Now get to it!
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