Education Tax Credits | AOTC & LLC

What Are Education Tax Credits? | Comparing AOTC & LLC

The United States government offers Education Tax Credits (ETCs) to eligible students and people who pay for education. Tax credits are a dollar-for-dollar deduction on a tax bill that lower the amount of taxes you owe. If the deductions bring the amount of taxes you owe to below zero, you might receive a refund.  These credits were designed to reward students for going to college and help make tuition more affordable.

There are two possible tax credits students can receive: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). To receive either one, students have to meet a variety of criteria. Some are the same and others differ.

To receive either the AOTC or LLC credit, you must, at a minimum, meet the following criteria:

  1. You, your dependent, or a third party must pay qualified expenses for higher education. Qualified expenses include tuition and fees required for enrollment.
  2. An eligible student must be enrolled at an eligible higher education institution. Eligible higher education institutions are ones that qualify for federal student aid. They must have a Federal School Code.
  3. The eligible student (whether it’s you, your spouse, or a dependent) must be on your tax return. An eligible student cannot be married and file separately.

Beyond this, students must meet additional different criteria to be eligible for the AOTC and LLC.

AMERICAN OPPORTUNITY CREDIT

The American Opportunity Tax Credit is a modification of a previous credit, the Hope Credit.

Students, spouses of students, and third parties (such as parents of students) can claim the AOTC. The person who claims it must have paid the qualified expenses (such as the tuition and fees) of someone in school. That person can request the AOTC to apply toward expenses paid during the prior year or during the first three months of the year, the taxes are being filed.

Once you’ve qualified, you can apply for the AOTC once per calendar year for the first four years of a student’s college education. That student must be in a program that leads to a degree or certificate, and they must be enrolled at least half-time during one academic period (such as a semester) for the tax year.

This credit is calculated in two parts, meaning students can receive the tax credit on the following:

  1. 100% of the first $2000 of eligible expenses
  2. 25% of the next $2000 of eligible expenses

In short, the AOC is worth up to $2500 in tax credit per year. If you do not owe any taxes, you can have up to 40 percent of the tax credit refunded to you.

To remain eligible for this tax credit, your modified adjusted gross income must be $80,000 or less. For married couples filing jointly, it must be $160,000 or less.

LIFETIME LEARNING TAX CREDIT

The Lifetime Learning Credit is easier to qualify for than the AOTC.

Students become eligible for the LLC by taking at least one course during the tax year. Their course or courses can apply toward a degree or certificate, or they can simply stand alone. Said another way, students can earn this credit simply by taking a course or two to enhance their job skills.

There is no limit to the number of years students can apply for the LLC. Therefore, they can apply for one as they earn their undergraduate and/or graduate degrees. They can also apply for it to supplement the costs of undergraduate or graduate courses.

To be eligible for the LLC, applicants’ modified adjusted gross income must be $52000 or less. For married couples filing jointly, it must be $104,000 or less. You can only claim an LLC for one student per tax return.

The LLC is worth up to $2000 per return. Unlike the AOC, it does not offer a refund if you do not owe any taxes.

Like the AOTC, the LLC is available to U.S. Citizens and Resident Aliens. It is not available to students who are already claimed as a dependent on someone else’s tax return (such as a parent’s).

Key terms and forms for the LLC:

  • Modified Adjusted Gross Income: this is the adjusted gross income, found online seven of Form 1040. Use Publication 970 through the IRS to help find this number. It helps you identify whether or not you’re eligible for the AOTC.
  • IRS forms to use: Form 8863 (Education Credits) and Form 8863 Instructions (note that this is the same form you will use for the AOTC).

AMERICAN OPPORTUNITY TAX CREDIT VS. LIFETIME LEARNING CREDIT

CriteriaAOTCLLC
Maximum CreditUp to $2500 per eligible studentUp to $2000 per credit return
Refundable or Not Refundable40% of creditNot refundable 
Limit on MAGI for Married Filing Jointly$180,000$134,000
Limit on MAGI for single, head of household, or qualifying widow(er)$90,000$67,000
Number of Years of College Education Available4Unlimited
Type of Program RequiredThe student must be pursuing a degree or certificate  The student does not have to be pursuing a degree or certificate
Number of CoursesThe student must be enrolled at least half time for at least one academic period beginning in 2018Available for one or more courses
Qualified ExpensesTuition, required enrollment fees, required course materialsTuition and fees required for enrollment or attendance
Whom Can You Claim the Benefit for?
  • You
  • Your spouse
  • The student you claim as a dependent
  • You
  • Your spouse
  • The student you claim as a dependent
Who Must Pay the Qualified Expenses?
  • You or your spouse
  • Student
  • Third party
  • You or your spouse
  • Student
  • Third party

Source

Taking advantage of the American Opportunity Tax Credit and the Lifetime Learning Credit help make higher education more affordable. Remember that to qualify for either, you must:

  • Pay qualified expenses for higher education
  • Have a student (or be a student) registered at a qualified college (one that has a Federal School Code)

Otherwise, the LLC is easiest to qualify for. To receive that tax credit, students can take as few as one class. They do not have to be pursuing a degree or certificate. And they can apply for the LLC for the duration of their academic career; there is no limit to the number of years it’s available.

The AOTC meanwhile, is more difficult to qualify for. To receive that tax credit, students must be enrolled at least half time for one academic period per year. They have to be pursuing a degree or certificate. And they can only apply for the credit for the first four years of college education.  

The IRS makes applying for the AOTC and the LLC relatively simple. Applicants can use Form 8863 for both, and instructions for applying are available online.

Be sure to take advantage of the government-supplied benefits.

Student Loan Consolidation

Student Loan Consolidation

IS IT SMART TO CONSOLIDATE YOUR STUDENT LOANS?

Consolidating a loan means combining several loans into one. If you borrowed many student loans during college, consolidating them can make your life easier in the following ways:

  • You can turn several loans into a single loan
  • You can make a single monthly payment instead of many
  • You can switch variable interest rates to a single, fixed interest rate
  • You might be able to lower your monthly bill
  • If you have loans that don’t currently qualify for a federal loan forgiveness program, you could turn them eligible

Students who borrowed federal student loans may apply for a Direct Consolidation Loan. This lets you combine different kinds of loans, like Unsubsidized and Nonsubsidized Federal Stafford Loans.

Often, students consolidate after their grace period is over. The grace period is when your loans are temporarily in deferment after you graduate.

What about private student loans? While not eligible for a Direct Consolidation Loan, you can consolidate your loans through a lender. This is called refinancing.

HOW TO CONSOLIDATE STUDENT LOANS

1. IF CONSOLIDATING FEDERAL LOANS, START AT STUDENTLOANS.GOV

You can to fill out a Federal Direct Consolidation Loan Application and Promissory Note online. You may need information such as your Social Security Number, driver’s license number, and two personal references.

2. CHOOSE THE LOANS YOU WANT TO CONSOLIDATE

You may not wish to consolidate all of your federal loans. Why? Because some may come with extra benefits, like Perkins subsidized interest, or cancellation and discharge programs. You’ll lose those benefits after you consolidate.

Plus, if you have a loan with a higher interest rate than the others, you may wish to pay that off on its own. That’s because the interest rate of your Direct Consolidation Loan depends on the weighted average of the interest rates for all your loans. It may be smart to pay off that higher interest loan quickly, instead of including it in your Consolidation Loan.

What about private student loans? Since these don’t come with federal benefits, you could potentially refinance them all with a private lender.

3. CHOOSE YOUR STUDENT LOAN SERVICER

For federal loans, you can choose from several servicers. One possible option is FedLoan Servicing, which manages the Public Service Loan Forgiveness program (PSLF). If you plan to work toward PSLF, it may make sense to choose FedLoan Servicing.

For private student loans, there are several private student loan companies that do refinancing. When choosing a company to work with, consider factors like:

  • Interest Rate Ranges: The interest rate you qualify for depends on your lender, your credit report/eligibility, and the market. As of 2018, variable interest rates range from about 2.5 to 9.09%. Remember that variable rates can get higher or lower over time. Fixed rates, which stay the same, range from about 3.35 to 9% in 2018.
  • Loan Amount: Some lenders have minimum or maximum amounts you can refinance.
  • Loan Period: How quickly do you want to pay off your loan? Refinancers may have a minimum loan period, usually from five to 15 years. They may also have a maximum loan period. Remember that the quicker you pay off your loans, the higher your monthly payments will be. But, you’ll save on interest if you pay off your loans quickly.
  • Hardship Options: Does your lender have deferment and forbearance options? If you have trouble paying off your loan due to an event like the loss of your job, these options could help.
  • Fees: Compare late fees or other kinds of loan servicing fees.
  • Extra Benefits: What extras make a particular lender stand out? For example, some offer interest rate reductions if you hit milestone goals – like repaying the first 10% of your principle.

4. DECIDE ON YOUR REPAYMENT PLAN

For federal loans, there may be several ways to repay your consolidation loan.These include:

Standard Repayment Plan – Fixed payments, made over a period of 10 to 30 years Graduated Repayment Plan – Payments start out low and increase over 10 to 30 years Extended Repayment Plan – Fixed or graduated payments; pay off your loans in 25 years Income Driven Repayment Plans – Payments are recalculated each year based on factors like your income and family size

Private student loan refinancing companies do not have the same kinds of repayment options. That said, some lenders may offer more flexible plans.

5. SUBMIT THE APPLICATION

Once you’ve fully understood your options, it’s time to take the next step. Contact the loan servicer if you have questions or need help with your application.

LOAN CONSOLIDATION VS. LOAN REFINANCE

Both student loan consolidation and refinancing are ways to simplify repayment and change your loan terms. Consolidating only works for your federal loans, though.

If you want to combine several private student loans (or private + federal loans), you’ll have to refinance. Student loan refinancing means applying for a new private student loan and using it to pay off your other loans.

There are pros and cons to both. For starters, consolidation typically won’t lower your interest rate. Refinancing usually does, meaning you could save money over the life of your loan.

That said, refinancing student loans depends on factors like your income, credit report, and debts. In other words, your loan terms are based on your creditworthiness. That’s not the case when you consolidate federal student loans.

And, refinancing federal loans with a private lender could mean you lose out on key benefits – like subsidized interest or loan forgiveness.

Depending on the types of loans you have, a combination of consolidation and refinancing may be the ideal plan.

 Student Loan ConsolidationStudent Loan Refinance
Which Loans Can I Combine?Most federal student loansBoth private and federal loans
Can I Lower My Rates?Can I Lower My Rates? The interest rate on Direct Consolidation loans is based on the weighted average of the interest rates of the loans you’re combining. The good news? This interest rate is fixed, which means it can’t get higher over time. Yes, you may qualify for lower interest rates. It helps if you (or your cosigner) have a high credit score and low debt-to-income ratio.Yes, you may qualify for lower interest rates. It helps if you (or your cosigner) have a high credit score and low debt-to-income ratio.
Can I Save Money?Probably not (though fixed interest rates could help). Consolidation usually increases the length of your repayment period. Taking longer to repay what you borrowed could mean you’ll pay more interest over the life of the loan.Yes, you could save money if you qualify for a lower interest rate. Paying off your loan quicker can also help you save money.
Can I Use Federal Loan Protections and Forgiveness Programs?

Consolidating federal loans other than Direct Loans may give you access to:

  • Income-driven repayment plan options
  • Public Service Loan Forgiveness (PSLF)

But, consolidating your current loans means you’ll lose credit for any payments you’ve already made toward income-driven repayment plan forgiveness or PSLF.

And if you have Federal Perkins Loans, you’ll lose benefits like subsidized interest and cancellation/discharge options.

When you refinance federal student loans with a private lender, you lose federal benefits and programs. These include:

  • Income-based repayment options
  • Federal loan forgiveness programs
  • Interest discounts or rebates
  • Federal deferment and forbearance options (if you have trouble paying back your loans)
Will I Pay Only One Bill?YesYes
Who Offers These Loans?The U.S. Department of Education (often through consolidation loan servicers). Your first step should be to apply for a Direct Consolidation Loan at StudentLoan.gov.Private lenders, like banks and financial institutions

STUDENT LOAN CONSOLIDATION: THE BIG PICTURE

Average Debt Per Borrower (2016-17)

  • Public Four-Year Institutions: $26,900
  • Private, Nonprofit Four-Year Institutions: $32,600

PRIVATE STUDENT LOAN CONSOLIDATION LENDERS

LenderWhy this LenderEligible DegreesEligible Loans
LendKeyChoose from flexible repayment plans, like interest-only payments for the first four years. And, pay no origination fees.Undergraduate and/or GraduatePrivate and/or Federal
CommonBondThey offer up to 24 months of forbearance over the life of your loan. And, you’ll pay no origination fees or prepayment penalties.Undergraduate and/or GraduatePrivate and/or Federal
College AveThey offer 16 loan term options. Choose how long it will take to pay back your loan, between five and 20 years. Plus, qualify for a lower interest rate when you use autopay.Undergraduate and/or GraduatePrivate and/or Federal

Repaying Student Loans

Repaying Your Federal Student Loans

PICKING A STUDENT LOAN REPAYMENT PLAN

Federal student loans come with eight student loan repayment options. It is important to know what these are so you can choose the best one for your wallet. To do so, you’ll need to figure out your needs. This includes understanding the amount of time and money you have each month to pay back your loan.

One online tool you can use to help you decide on a plan is the Department of Education’s Repayment Estimator. It will ask you to plug in your loan balances, interest rates, tax filing status, income, and family size. Based on your answers, the Repayment Estimator generates a list of:

  • Which repayment plans you are eligible for
  • The amount of your first and last monthly payments
  • Total amount paid
  • Any projected loan forgiveness
  • How long you have to repay your student debt

Since there are different plans and grace periods, it is crucial to get to know the features of each choice. Often, a student loan servicer can work with you, but it is a good idea to go into a meeting prepared. For quick reference, the main types of student loan repayment plans are as follows. Before you start, these differ from the ways you’d pay back a private loan, which we discuss further on in the article.

  • Standard Plan
  • Extended Plan
  • Graduated Plan
  • Income-Driven Plans
  • Income-Sensitive Plan

STANDARD REPAYMENT PLANS (SRP)

Standard plans are the default payment plan for Federal Direct Loans and Federal Family Education Loans (FFEL). They allow you to pay off your loan within 10 years, and you’ll have a monthly fixed amount to repay for this period. This amount depends on your balance and whatever it will take to pay it off in 10 years. That said, you may need to pay at least $50 per month through the life of your loan.

One of the draws of the Standard Repayment Plan is that it doesn’t lock you in. Should you start to struggle financially, you‘ll be able to switch out. Then again, if all goes according to plan, you’ll be student-debt free after 10 years. You can then move onto other financial goals.

There’s also the issue of interest fees. Compared with Income-Based Repayment Plans, which we discuss below, these will be lower. Reason being is that IRPs stretch out over a longer period and so may increase your interest fees. The down-side with this plan is that your monthly payments with an SRP may be higher than some other plans.

INCOME-DRIVEN REPAYMENT PLANS (IDR)

Income-driven repayment (IDR) plans may help you manage your student loan debt. They do this by reducing your monthly payment amount. As a result, in the short term these plans can help you with cash flow. Long-term though, you may have to deal with taxable income on forgiven loans, plus pay more in interest fees.

There are four income-driven repayment plans available to borrowers who qualify. These may suit students who struggle to make payments on their current salary. With IDRs, the money you have after expenses (discretionary income) becomes important as you’ll see in the synopsis below.

1. REVISED PAY AS YOU EARN REPAYMENT PLAN (REPAYE)


Monthly payments are generally equal to 10 percent of your discretionary income divided by 12. Any remaining balance is forgiven after 20 or 25 years.

2. PAY AS YOU EARN REPAYMENT PLAN (PAYE)


Monthly payments are generally equal to 10 percent of your discretionary income divided by 12. Any remaining balance is forgiven after 20 years.

3. INCOME-BASED REPAYMENT PLAN (IBR)


Monthly payments are generally equal to 15 percent of your discretionary income divided by 12. You pay 10 percent if you are a new borrower. Any remaining balance is forgiven after 20 or 25 years.

4. INCOME-CONTINGENT REPAYMENT PLAN (ICR)


Monthly payments are 20 percent of your discretionary income divided by 12. Or, however much your monthly payment would be over a fixed monthly payment plan of 12 years (longer than the 10-year SRP). Any remaining balance is forgiven after 25 years.

EXTENDED REPAYMENT PLAN (ERP)

The Extended Repayment Plan allows you to repay your loans over a longer period of time than the Standard and Income-driven plans. Unlike the 10-year SRP term, you’ll be able to make payments for up to 25 years. These payments are either fixed or graduated for up to 25 years. In general, this means lower payments than under the Standard and Graduate Repayment Plans. However, if you want to get your student debt out of the way to save for a house, retirement, travel or other goals, this may not work for you.

GRADUATED REPAYMENT PLAN (GRP)

The Graduated Repayment Plan starts you off with lower payments that increase every two years. This means, you’ll be on the same 10-year plan (or 30-year plan for consolidated loans), but your monthly payment starts out low and gets higher over time. This type of plan anticipates you’ll be able to make substantive payments once you are underway in a career.

UNDERSTANDING LOAN REPAYMENT

Your loan servicer takes care of your student loan billing and each has its own payment process. It is your duty to make direct payments to your servicer, though they can often work with you if you need help. If you don’t know who your servicer is, check your account in My Federal Student Aid .

How much will I need to pay? Your payment, which is usually made on a monthly basis, depends on four things:

  1. The type of loan you received
  2. How much money you borrowed
  3. Which repayment plan you use
  4. Interest rate on your loan

WHAT IS A GRACE PERIOD ?

The time lapse after graduation and before you start making payments is a “grace period”. Usually it is a set time frame which gives you the space to settle your finances and select your repayment plan.

No grace period – PLUS Loans (possible eligibility for deferment)
6-month grace period – Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans
9-month grace period – Federal Perkins Loans
Up to 3-year extension – Military service members

Caveat: While it may sound great to have this breathing room, interest will mount up if you have unsubsidized loans. It’s the same when you don’t pay a credit card balance on time.

In contrast, Perkins loans, direct subsidized loans, and subsidized Stafford loans don’t accrue interest during the grace period. You can, however, use your grace period to make interest payments. If this is easy for you to do, it’ll put you one step ahead when your grace period is up.

DEFERMENT OR FORBEARANCE ON FEDERAL STUDENT LOANS

Do you need to postpone your payments? In some cases, one may be eligible to receive a deferment or forbearance. These are temporary pauses which allow you to stop making payments. Or, reduce your monthly payment amount for a specified period.

For instance, there’s a provision in the Department of Education Appropriations Act, 2019 which allows cancer patients to get deferments while they are in treatment. Part-time students, military persons and others may also be eligible for a deferment.

One thing to remember is that with a deferment, you may not be responsible for paying the interest your loan amasses. This applies only to specific types of loans. During a forbearance though, you are responsible for paying the interest that accrues on all types of federal student loans.

LOAN CONSOLIDATION

Do you have many federal student loans? You may be able to merge them into one loan with a fixed interest rate. The amount of the loan depends on the average of all the joined interest rates and there is no cost to you. To do so, you need to file a Federal Direct Consolidation Loan Application and Promissory Note. Overall, this may simplify your repayment process.

PUBLIC SERVICE LOAN FORGIVENESS (PSLF)

The Public Service Loan Forgiveness Program is a federal program. It forgives the remaining balance on Direct Loans for eligible student loan debt holders. How do you qualify for public service loan forgiveness? To be eligible for PSLF, you’ll need to meet several criteria:

  • Where you work matters. Qualifying employers include the government or not-for-profit organizations.
  • You must first enroll in a qualifying repayment plan. Examples include REPAYE, PAYE, IBR, ICR and SRPs.
  • You need to be a full-time employee. This means more than 30 hours per week.
  • Under one of these plans, you’ll have to make 120 qualifying monthly payments.

UNDERSTANDING FEDERAL INCOME-DRIVEN REPAYMENT PLANS

Are your federal student loan payments high compared to your income? If so, you may want to repay your loans under an income-driven repayment plan. Most federal student loans are eligible for at least one (of the four) income-driven repayment plans.

If your income is low enough, your payment could be all of $0 per month. Remember though, you’ll need to make calculations using your discretionary income as a guide. To calculate your discretionary income, find the difference between your adjusted gross income and 150 percent of the annual poverty line for a family of your size and in your state.

You may also want to familiarize yourself with the different repayment periods and payments. The table below is an overview of this information.

Income-driven Plan NameTerm LengthMonthly Payment CapDescription
Income-based repayment (IBR)20 years if you’re a new borrower on or after July 1, 2014
OR
25 yearns if you’re not a new borrower
After July 1, 2014
10% of discretionary income (for new borrowers) on or after July 1,2014 but never more than the 10-year Standard Repayment Plan amount
OR
15% of discretionary income if you’re not a new borrower on/or after
July 1,2014
  • Low monthly payments
  • Loans eligible for forgiveness after repayment period
  • Possibility of higher interest fees
  • If your loans are forgiven, the balance may be taxable
Income-contingent repayment12 yearsThe lesser of either 20% of your discretionary income
OR
what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
  • No income eligibility requirement may make it easier to qualify
  • You may be eligible for loan forgiveness
  • Parents with PARENT PLUS Loans can qualify once they consolidate their loans into a Direct Loan
  • Highest potential payment amount of all 4 plans
  • If your loans are forgiven, the balance may be taxable
Pay as you Earn20 years10% of discretionary income
  • Lowest payment amount for eligible borrowers
  • Loans eligible for forgiveness after repayment term
  • Only new borrowers can qualify
  • If your loans are forgiven, the balance may be taxable n qualify
Revised Pay as you Earn (REPAYE)20 years if the loans are for undergraduate study
OR
25 years if the loans are for professional or graduate study
10% of discretionary income
  • Lowest payment amount for eligible borrowers
  • Loan forgiveness terms depend on whether you’re an undergraduate or graduate student
  • Monthly payments factor in your spouse’s income regardless of filing status
  • If your loans are forgiven, the balance may be taxable

APPLYING FOR INCOME-DRIVEN REPAYMENT

To apply for one of the Income-driven Repayment Plans, there are some easy steps to follow. You won’t need an application fee, but the process requires you to complete it in one session. If you’re nervous about filling out official forms, you can download a PDF version of the Request and do it manually. Otherwise, here’s how to prepare.

  1. Create an FSA ID (or have your ID number handy)
  2. If you are married, make sure you have your spouse’s SSN and information
  3. Have your personal information and income figures handy
  4. Set aside at least 10 minutes
  5. Go to StudentLoans.gov
  6. Log in to start the application
  7. Complete the Income-Driven Repayment Plan Request

Each year you’ll need to recertify, in order to remain eligible for the lowest possible monthly payment amount.

BASIC FEDERAL STUDENT LOAN REPAYMENT PLANS

Basic Federal Student Loan Repayment Plans often balance a monthly payment you can afford today and a lesser total amount overall than income-driven plans. That said, an IDR may lower your payments today even though in the long run, you may be paying more.

Basic Repayment Plan NameTerm LengthDescription
Standard Repayment10 yearsFixed Monthly Costs
Graduated Repayment10 or 30 years for consolidated loansMonthly payment starts out low and gets higher over time
Extended Repayment25 yearsYour payments are either fixed or graduated for the term of the loan

PRIVATE STUDENT LOAN REPAYMENT OPTIONS

Private Student Loans do not qualify for federal income-driven repayment plans. Or forgiveness programs. Yes, a debt is a debt, but Federal Student Loans begin with the U.S. Department of Education. They also come with standard benefits and protections.

The reason for this is that to get a private student loan, you’ll usually deal with a bank. Or, you’ll borrow from a private financial institution. In general, neither comes with either income-based repayment plans or forgiveness options.

Also, because these institutions don’t have to offer financial assistance to student borrowers, there aren’t as many ways to repay the loan. This limits the ways you can repay your loan, although may have a few options if you start to struggle.

To help you better grasp how to potentially lower your private student loan payments, check out some suggestions below. These may give you some food for thought on how to better manage your monthly payments.

LOWER YOUR PAYMENTS YOURSELF

If you are up for giving it the ‘old college try’, setting a budget that covers your needs rather than wants is a good place to start. Some loan lenders also suggest that you make auto-debit payments which may lower your interest rate. This is useful if you can count on your income (and can generate more money). Not so good if you think you might be hit with overdraft fees.

LOAN REFINANCING

You do need to go through hoops (credit scores for e.g.) set by your financial institution. Yet refinancing student loans may help you manage any flux in your budget. This is where you’ll have to shop around for lenders to see what terms they offer – 5, 7,10, 15 and 20 are common. Some also allow you to merge private and student loans. As such, you may be able to find a lower interest rate, decrease your monthly payment, or both.

LENDER-SPECIFIC REPAYMENT PLANS

Some lenders may offer Repayment Assistance Options to help students manage their loan repayments. Some of these are similar to federal loans, only you’ll have to qualify with a
Lender such as Discover.

  • Deferment – A temporary postponement of payments
  • Forbearance – postpones your loan payments for up to 12 months during the entire term of your loan, though there are stipulations
  • Hardship – A temporary reduction of interest rates for up to 12 months, subject to stipulations
  • Early Repayment Assistance Program – A 3-month postponement of payments
  • Payment Extension –Allows students to bring their loan current by making 3 minimum monthly payments (or the equivalent amount of 3 minimum monthly payments) within a 90-day period
  • Reduced Payment – The Minimum Monthly Payment is reduced, subject to a $50.00 minimum, for an initial period of six months.


5 WAYS YOU COULD PAY OFF STUDENT LOANS FASTER

If you don’t have trouble paying off your debt but what bothers you is that it seems to drag on forever, there are some ways to pay off student loans faster. To begin, you should know what your payoff date is. Then, strive to bring this date closer. Does one of these options feel like an opportunity to reach this goal?

1. MAKE AN EXTRA STUDENT LOAN PAYMENT

Yes, it’s tempting to spend but you if you come into some money, let’s say through overtime, commission or a tax refund, bank it towards an additional or lump-sum payment. Remember, any amount brings the goal in focus.

2. PAY MORE THAN THE MINIMUM PAYMENT

If you can free up some cash, make more than the minimum payment either weekly or monthly. It’s easy enough to do and you’re in control of how much you pay above the minimum payment. Or, set up a slightly higher amount than the minimum in auto-pay. Even foregoing 5 coffees a week adds up.

3. APPLY FOR LOAN FORGIVENESS

If you enter a career like teaching or public service, as we’ve seen above, you may be eligible to apply for loan forgiveness. Some states also offer Loan Repayment Assistance Programs (LRAPs). Naturally you’ll have to qualify. But it is one way to get money toward paying off your federal (or in some cases, private) student loans.

4.CALCULATE YOUR DEDUCTIONS

Make sure you make use of any tax credits and deductions where eligible. If you’re paying off student loans, you may be eligible for the student loan interest deduction on your federal taxes. Now, assuming you get a huge refund, stick to your plan and see numbers 1 and 2.

5. REFINANCE YOUR STUDENT LOANS

Refinancing is one way to get rid of debt faster while you lock in lower interest and monthly payments. To do this, you’ll want to compare refinance terms and see which lines up with your goals. For instance, when you refinance, it will change your monthly payments. Make sure they will be more manageable. If you’re financially in trouble, this may only add to your troubles, but if you have good credit and income stability do some research, shop around and see if it is a viable option.

Private Student Loans

Private Student Loans

Private student loans help bridge the gap between federal financial aid and what your college tuition actually costs. First, max out financial aid from other sources – like grants, scholarships, work study, and federal loans. Then, applying for private loans may be the next step in your college financing plan.

Here’s what you need to know before getting started!

FEDERAL VS PRIVATE STUDENT LOANS

Federal student loans are funded by the federal government, whereas private student loans come from lenders like banks and credit unions. Other differences include:

  • Overall Cost of the Loan. Private education loans tend to cost more, overall.
  • Interest Rates. Private student loan interest rates may be higher than federal rates. Sometimes, private loans have variable interest rates that change over the life of the loan.
  • Loan Repayment Terms. Private loans generally have less favorable repayment terms. Federal student loans may offer income based repayment plans and other benefits.
  • Borrower Eligibility. Your credit score may be a factor in determining your eligibility for private student loans. You may also need a cosigner. Most federal loans, on the other hand, don’t require a credit check or cosigner.

You should exhaust all government financial aid programs before applying for private student loans. That said, you might need a private loan if federal loans don’t cover the full cost of college.

FINDING LENDERS

Many banks, credit unions, and other financial institutions offer private student loans. It’s wise to compare interest rates, terms, and conditions for a few top rated lenders to find the loan that’s ideal for you.

COMPARE THESE PRIVATE STUDENT LOAN LENDERS:

  • Sallie Mae
  • SunTrust 
  • College Ave
  • PNC
  • Citizens

APPLY FOR A LOAN

Applying for a private loan online doesn’t take long, and you can see your result in a matter of minutes. Apply with one of our loan partners online:

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Not all private student loans are the same, and some lenders may offer loan products, features, and terms that better suit your goals. As you research potential lenders, here are a few key factors to keep in mind:

  • Your Eligibility. Are you looking for private student loans without cosigner requirements? Do you have low credit? Depending on your credit history and eligibility, some private loans may be a more optimal fit than others. Lenders may look at your citizenship status, your income, whether you are a part time or full time student, and other criteria.
  • Loan Cost. Examine factors like the loan’s interest rate, interest type (fixed or variable), and fees associated with taking out the loan. All of this will figure in the total cost of your loan. For example, be wary of choosing a low, variable interest rate over a higher, fixed rate. Particularly if you plan on paying off your loan over a period of many years. Variable rates can spike with the market, meaning you end up paying more than you bargained for.
  • Loan Features. Some private loans offer potential benefits and features like cosigner release, deferment due to financial hardship, or early repayment options. Many lenders even offer an auto pay discount, which is usually a reduction of 0.25 or 0.50 percent off the interest rate. Compare several lenders to see what features may be available.

HOW TO APPLY FOR PRIVATE STUDENT LOANS

Before turning to private student loans, you should always submit your FAFSA and maximize any federal grants or loans you may qualify for. And don’t forget to apply to scholarships! If it turns out you need more funds, start the process of choosing a lender and applying for private student loans.

IF YOU’RE ELIGIBLE, HERE’S HOW TO GET A PRIVATE STUDENT LOAN:

  1. Get Ready to Apply. Generally, you can apply for private student loans online. To start, you’ll need to prove your basic eligibility – like citizenship and college enrollment status.
  2. Submit Documentation. You’ll need to provide your personal and financial information to your lender. Your lender may require documents like your Social Security number, a pay stub for proof of income or your monthly housing costs. They may also as for your school’s cost of attendance, the amount of financial aid you’ve already received, your cosigner’s details (if applicable), and other information.
  3. You’ll Receive a Decision. Your lender will need to process your application and analyze your financial and eligibility information, to let you know whether you’re approved. If you’ve applied for your private loan online, you may receive a result pretty quickly – sometimes in minutes! In other cases, a lender may need more information from you to move forward.
  4. Choose and Accept the Loan Terms. Once you’ve been approved for the loan, you’ll need to decide on your interest rate type (fixed or variable), loan term, and repayment plan. You and your cosigner (if you have one) will then sign the loan agreement.
  5. Wait for Disbursement. Your private student loans will be sent directly to your college or university. If you have borrowed more than your tuition actually costs, your school will generally refund the difference to you. You can return that money to your lender. Or you could use it to cover other college costs, like room, board, or your textbooks. It’s always best to borrow the minimum amount you need to cover your education related expenses.

PRIVATE STUDENT LOANS ARE AN IMPORTANT RESPONSIBILITY

Taking out private loans for college may help make your education possible. College may help you achieve new career goals and pursue a rewarding future. But, it’s important to know your risks and responsibilities as a borrower. You need to ensure you are ready to take out and eventually repay your private loans.

Military Benefits

What Online Students Need to Know About Military Education Benefits

Military education benefits offered under the GI Bill might help you pay for college and transition into the next phase of your life. But for many active service members or veterans, a traditional college experience isn’t the perfect fit. Online learning may better suit your lifestyle, schedule, and goals. And the good news is, online degree programs may be eligible for military education benefits.

ABOUT YOUR GI BILL BENEFITS

You may qualify for the Post-9/11 GI Bill if you have at least 90 days of aggregate active duty service following September 10, 2001, and you are still on active duty; if you are an honorably discharged veteran; or if you were discharged with a service-connected disability after at least 30 days of service.

The Montgomery GI Bill (MGIB) may be available to active duty military members or selected reservists. In the Montgomery GI Bill Active Duty (MGIB-AD) program, service members must pay $100 a month for twelve months and complete a minimum service obligation. In the Montgomery GI Selected Reserve (MGIB-SR) program, the VA makes monthly payments toward your benefits.

Both the Post-9/11 and Montgomery GI Bill programs may be used to pursue a variety of educational paths. These include college degree and certificate programs, vocational and technical courses, and even online or correspondence courses.

Check out our chart at the bottom of this article, to compare military education benefits programs you may qualify for!

HOW TO USE GI BILL FOR ONLINE SCHOOLS AND PROGRAMS

Wondering how to use your VA online school benefits? Actually, using the GI bill for online schools isn’t any different from using these benefits at a traditional college…as long as your school and program are eligible.

ACCORDING TO THE U.S. DEPARTMENT OF VETERANS AFFAIRS, YOU SHOULD FOLLOW THESE STEPS WHEN APPLYING FOR BENEFITS:

  1. If You’re Ready to Apply, Do So. You can apply for VA military education benefits online, or else apply in person at your regional VA office. You can also call 1-888-GI BILL-1 (888-442-4551) to have an application mailed to you.
  2. If You Have Questions About Your Benefits, Talk to Someone. You can consult with the VA Certifying Official at your school of choice, to learn more about using your military education benefits. This person is usually in the Registrar’s or Financial Aid office. If you plan to study online or at a school far from home, that’s okay. Just contact the Registrar’s or Financial Aid office by phone or email. You can also seek assistance from an employee at your regional VA office.
  3. Wait for Your Claims to Be Processed. It usually takes about 30 days for VA to make a decision about your claims.

Servicemembers, veterans, and even military spouses and dependents may qualify for various military education benefits, many of which can be used to pursue an online degree program. But yes, it can get confusing. Use our handy chart to compare programs you may be eligible for. Remember to always check with The Department of Veterans Affairs to verify your eligibility and learn more about these and other programs.

LIST OF MILITARY PROGRAMS AND BENEFITS

PROGRAMELIGIBILITY REQUIREMENTSREQUIREMENTS FOR MONTHLY BENEFITSBENEFITS CAN BE USED TOWARDTIME LIMITATIONS
Reserve Educational Assistance Program (REAP); also known as Ch. 1607REAP ended on November 25, 2015. However, veterans who were attending an educational institution on (or on the term ending before) November 24, 2015, may remain eligible for REAP benefits until November 25, 2019.N/AN/AFor most service members, REAP benefits are no longer offered. Others have until November 25, 2019 to use benefits.
Veterans Education Assistance Program (VEAP)You must meet these requirements:
– Entered service for the first time between January 1, 1977, and June 30, 1985
– Opened a contribution account before April 1, 1987
– Contributed from $25 to $2700
– Completed your first period of service
– Were not dishonorably discharged
You must have elected to make contributions to this program from your military pay. The government matches your contributions, 2-for-1.Degree and certificate programs, technical or vocational courses, correspondence courses, and other programs that may potentially be pursued online.Benefit entitlement is for one to 36 months. After your release from active duty, you have 10 years to use VEAP benefits. After that time, your contributions will be refunded.
Survivors’ and Dependents’ Educational Assistance (DEA) ProgramYou must be the son, daughter, or spouse of:
– A veteran who died or is permanently and totally disabled from a service-connected disability that arose out of active service in the Armed Forces.
– A veteran who died from any cause while a service-connected disability was in existence.
– A service member missing in action or captured in line of duty.
– A service member forcibly detained or interned in line of duty by a foreign government or power.
– A service member who is hospitalized or receiving treatment for a service-connected permanent and total disability and is likely to be discharged for the disability.
If you are attending a college or vocational program, you must be attending full time, 3/4 time, or halftime. The number of your benefits will vary depending on this status.
Check with the U.S. Department of Veteran Affairs to learn more about requirements and current benefit rates.
Degree and certificate programs,
apprenticeships, and on-the-job training. Spouses may take correspondence courses.
You may receive up to 45 months of education benefits, if you began using the program before August 1, 2018. If you began your program on or after August 1, 2018, you have 36 months to use the benefits.
Tuition Assistance Top-UpYou must be a recipient of the Montgomery GI Bill – Active Duty or Post-9/11 GI Bill programs and be approved for Federal TA, among other potential requirements.You may receive up to the difference between the total cost of a college course and the amount of Tuition Assistance that is paid by the military for the course.College programs,
vocational programs, correspondence courses, apprenticeships, job training, flight training, and more
Top Up is limited to 36 months of payments. (For example, a six-month course would use up six months of your benefits.)
Work Study ProgramYou must be a full-time or 3/4-time student in a college degree, vocational, or professional program.
You must be in one of the following programs:
– Post-9/11 GI Bill
– Montgomery GI Bill – Active Duty
– Post-Vietnam Era Veterans’ Educational Assistance Program
– Dependents’ Educational Assistance Program
– Montgomery GI Bill – Selected Reserve
– Or other select programs.
You must perform approved VA-related work while you are in school. You’ll earn the Federal minimum wage or your State minimum wage, whichever is greater.College degree, vocational, or professional programsThe total number of hours you work cannot exceed 25 times the number of weeks in your enrollment period.
Entrepreneurship TrainingYou must be eligible for any of these VA Education Programs:
– Montgomery GI Bill – Active Duty
– Montgomery GI Bill – Selected Reserve
– Veterans’ Educational Assistance Program
-The Post-9/11 GI Bill
You may receive benefits for courses offered by Small Business Development Centers (SBDCs). Individual courses mustCourses offered by Small Business Development Centers (SBDCs)Varies
Yellow Ribbon ProgramYou must be eligible for the maximum (100%) benefit level under the Post-9/11 GI Bill. Check with the U.S. Department of Veterans Affairs for more specifics.
In addition, your school must meet certain eligibility requirements. For instance, they must participate in the Yellow Ribbon Program and certify your enrollment to VA.
You must be enrolled in a school that participates in the Yellow Ribbon Program, and you must have been accepted to the Yellow Ribbon program, in order to receive potential benefits.
The Post-9/11 GI Bill will pay qualifying candidates:
– All resident tuition and fees for a public school
– The lower of the actual tuition and fees or the national maximum per year for a private school
Educational programs at schools that participate in the Yellow Ribbon ProgramYour participation may be reassessed on a year-to-year basis, depending on factors like your enrollment, your school’s continued participation, and your remaining entitlement under the Post‐9/11 GI Bill.

Disclaimer: This is a private website that is not affiliated with the U.S. government, U.S. Armed Forces or Department of Veteran Affairs. U.S. government agencies have not reviewed this information. This site is not connected with any government agency. If you would like to find more information about the benefits offered by the U.S. Department of Veteran Affairs, please visit the official U.S. government web site for veterans benefits at http://www.va.org.

FIND GI BILL ONLINE SCHOOLS AND START USING YOUR MILITARY EDUCATION BENEFITS

Finding online degree programs that suit your goals, academic interests, and VA education benefits may be easier than you think. Search online for Montgomery GI Bill and post 9 11 GI Bill online classes and programs. Or, let Education Connection help match you to colleges and universities for free!

Grants and Scholarships

How to Get Money for College Through Grants and Scholarships

According to some research, 66% of parents and students reported high levels of stress about paying for college. Luckily, if you’re one of these families, there are plenty of grants and scholarships available to help you pay for college.

Continue reading to learn about some available scholarships and grants and how to apply.

ec-grants-scholarships

COLLEGE SCHOLARSHIPS

Scholarships are a great way to help you earn some money for college because there are so many out there. Plus, the scholarship awards range from a couple hundred dollars to paying for your entire tuition.

While the larger amounts are less common, there are plenty of ways to find scholarships that you qualify for.

WHO QUALIFIES FOR COLLEGE SCHOLARSHIPS?

Unfortunately, many students don’t think they’ll qualify for college scholarships because they weren’t valedictorian or a star athlete.

However, that’s simply not the case.

There are plenty of available scholarships that offer free money for college based on a number of different characteristics, such as those listed above. That means that anyone can qualify for a college scholarship, even you.

All it takes is doing some initial research to find out which scholarships you qualify for and submitting the application requirements, which usually includes an essay or writing sample.

HOW TO FIND COLLEGE SCHOLARSHIPS

Finding scholarships, and learning how to apply, used to be a challenge as you’d have to flip through worn out and dated books at the library.

Now, there are plenty of resources online that are updated in real-time and allow you to find the perfect scholarship for you.

One way is to use Unigo.com, a college scholarship database, which is the premier network for current and future college students as they figure out how to pay for college.

Other ways of finding scholarships include:

  • High school guidance counselor
  • College financial aid office
  • College guidance counselor
  • Federal agencies
  • Public library
  • Foundations, religious or community organizations, or civic groups
  • Ethnicity-based organizations
  • Professional organizations related to your field of interest
  • Your employer (or your parent’s employers)
  • Local organizations and clubs

FEATURED PARTNER SCHOLARSHIPS 

SCHOLARSHIP POINTS $10,000 SCHOLARSHIP 

Amount:  $10,000
Deadline:  Quarterly (March 31, June 30, September 30, December 31)
Requirements: No GPA. No Essay.  Just complete an online registration form.  

NICHE “NO ESSAY” COLLEGE SCHOLARSHIP

Amount:  $2,000
Deadline:  Monthly (last day of the month)
Requirements: Easy scholarship with no essay required.

SCHOLARSHIPOWL “YOU DESERVE IT” SCHOLARSHIP

Amount: $1,000
Deadline:  Monthly (last day of the month)
Requirements:  Easy scholarship with no essay required.

i-SAY SWOP TO SHOP DRAW

Amount:  up to $5,000
Deadline:  Monthly (last day of the month)
Requirements: Earn points by taking surveys.  Redeem for cash and electronic gift cards.

EASY SCHOLARSHIPS FOR COLLEGE 

Check out some easy scholarships below and click on any to apply before the deadline.

UNIGO $10K SCHOLARSHIP 

Amount: $10,000
Deadline: Annually by December 31
To apply for this scholarship answer the question: If a historical figure was back to life in the present day, who is and what is their favorite app?

I HAVE A DREAM SCHOLARSHIP

Amount: $1,500
Deadline: Annually by January 31
Requirements: Dreams can have a powerful impact on our lives, as well as reveal your subconscious thoughts. Here’s your chance to earn a scholarship for sharing them.

SWEET AND SIMPLE SCHOLARSHIP

Amount: $1,500
Deadline: Annually by February 28
Requirements: The Sweet and Simple Scholarship Committee wants to hear about a sweet and simple gift you received that had a big impact.

SUPERPOWER SCHOLARSHIP

Amount: $2,500
Deadline: Annually by March 31
Requirements: We’ve all thought about what superpower we’d like to have. Now, those thoughts may help you earn a scholarship!

ALL ABOUT EDUCATION SCHOLARSHIP

Amount: $3,000
Deadline: Annually by April 30
Requirements: It’s often been said that education is the key to success; What doors could earning a degree open for you?

FIFTH MONTH SCHOLARSHIP

Amount: $1,500
Deadline: Annually by May 31
Requirements: What’s so special about the number five? Now’s your chance to potentially earn some money to help pay for college by sharing what you think makes five stand out.

DO-OVER SCHOLARSHIP

Amount: $1,500
Deadline: Annually by June 30
Requirements: What if you had a chance to do-over a moment in your life? What would it be and how would the change impact your future?

FLAVOR OF THE MONTH SCHOLARSHIP

Amount: $1,500
Deadline: Annually by July
Requirements: July is National Ice Cream Month, so it only makes sense to ask: if you were to be an ice cream flavor, which would it be and why?

DIXIE BELLE PAINT COMPANY SCHOLARSHIP

Amount: One Grand Prize of $3,500; Two Additional Prizes of $1,250
Deadline:  July 31, 2020
Requirements:  Open to all high school, college and grad school students.

MAKE ME LAUGH $1,500 SCHOLARSHIP

Amount: $1,500
Deadline: Annually by August 
Requirements: The Make Me Laugh Scholarship is a great way to show how funny you are.

SHOUT IT OUT SCHOLARSHIP

Amount: $1,500
Deadline: Annually by September
Requirements: Whether it’s a message to the world or a simple greeting, this scholarship gives you the platform you’re looking for.

ZOMBIE APOCALYPSE SCHOLARSHIP

Amount: $2,000
Deadline: Annually by October
Requirements: If you’ve ever envisioned a zombie apocalypse and how you would survive, here’s your chance to share it with the world.

EDUCATION MATTERS SCHOLARSHIP

Amount: $5,000
Deadline: Annually by November
Requirements: Have you come across those who told you not to pursue your degree? How did you respond? Why does education matter to you?

TOP TEN LIST SCHOLARSHIP

Amount: $1,500
Deadline: Annually by December
Requirements: The Top Ten List Scholarship thinks you’re amazing and they want to hear the top ten reasons.

REVIEW YOUR COLLEGE

Amount: $2,000
Deadline: Annually by May 31 & November 30
Requirements: Tell other students about your experience so they can make better decisions about college.

TIP FOR APPLYING TO SCHOLARSHIPS

When writing an essay for a scholarship, always:

  • Keep in mind your audience
  • Apply as early as possible
  • Follow instructions
  • Double check your spelling and grammar

DIFFERENCE BETWEEN SCHOLARSHIPS AND GRANTS

Unlike some of the other types of financial aid, both grants and scholarships don’t need to be repaid, which makes them some of the most sought after ways of paying for college for both undergraduate and graduate students.

However, there are some differences between these two. For instance, many scholarships are merit based, which means that they are awarded to students who have achieved certain goals or have certain qualities. For example, there are scholarships awarded based on:

  • Where you live
  • Race or religion
  • Academic or athletic record
  • Extracurricular activities
  • Essay competition

On the other hand, grants are usually awarded as need-based. However, many schools offer both need-based and merit-based grants to students.

On the other hand, most of the federal grants are need-based and for those students who meet certain criteria.

DIFFERENCE BETWEEN GRANTS AND COLLEGE SCHOLARSHIPS

BenefitCollege ScholarshipCollege Grants
Offered ByState Government, Institutions, Private SourcesFederal Government, State Government, Institutions
How Winners Are DecidedMerit-basedFinancial need-based (some exceptions)
Amount AwardedVariesVaries
Have to Repay?NoNo

GRANTS FOR COLLEGE

Grants work a little bit differently than scholarships, though they can be beneficial because you don’t have to repay them either. So, just like scholarships, they’re free money for college.

However, often these are based on financial need, though as mentioned, many colleges and universities also offer grants through the institution that are merit-based or a combination of merit-based and need-based.

There are two types of grants for college:

  1. Federal Grants
  2. Institutional Grants

As every school has unique grants, the list would be entirely too long to publish here. So, contact your financial aid office.

FEDERAL GRANTS

As most federal grants are awarded to students with financial need, they use the FAFSA to determine what amount of need you qualify for, just like the different types of federal student loans. Keep in mind that you need to complete the FAFSA every year to update the information.

TYPES OF FEDERAL GRANTS

There are four types of federal grants, each with slightly different requirements. Be sure to check the specific requirements to see if you qualify.

1. FEDERAL PELL GRANTS

Usually, these grants are only awarded to undergraduate students who display exceptional financial need and have not earned a bachelor’s or professional degree.

2. FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (FSEOG)

The FSEOG program is administered directly by the financial aid office at participating schools and not all schools participate. Check with your school’s financial aid office to find out if your school participates.

Similar to the Pell grants, FSEOGs are awarded to undergraduate students with exceptional financial need and the school’s financial aid office will award the grant to students with the most financial need.

3. TEACHER EDUCATION ASSISTANCE FOR COLLEGE AND HIGHER EDUCATION (TEACH)

These grants are different than others because they require you to take certain kinds of classes in order to get the grant and then do a certain kind of job to keep them from turning into a loan.

Awarded to undergraduate teaching students, you are required to teach for a minimum of four years at an elementary school, secondary school, or educational service agency that serves students from low-income families.

If this service obligation is not met, the grant is converted to a Direct Unsubsidized Loan.

4. IRAQ AND AFGHANISTAN SERVICE GRANT

The Iraq and Afghanistan Service Grant is only available to those whose parent or guardian served in the U.S. armed forces and died as a result of service in Iraq or Afghanistan after September 11, 2001.

In addition, you need to have been under 24 years old or enrolled in college at least part-time at the time parent’s or guardian’s death.

FIND GRANTS AND SCHOLARSHIPS TO HELP YOU EARN FREE MONEY FOR COLLEGE

Visit Unigo.com to find even more scholarships. Unigo has a database of over 3.6 million college scholarships and grants worth over $14 billion dollars!  To make your search easy from the start, Unigo divides its list of scholarships into comprehensive categories. You can also create an account to find personal scholarship results. 

Your Guide to Federal Student Loans

Federal Student Loans

Federal student loans offer you the chance to borrow funds for college that you must repay with interest. Often, these federal loans offer a lower interest rate and more flexible repayment terms than private student loans.

Learn all about what types of federal student loans are available to find the best option for you and don’t forget to discover grants and scholarships to help you earn free money for college.

Percentage of Undergraduates Who Receive Financial Aid

ec-federal-student-loans

In 2015-16, 85% of first-time, full-time degree / certificate-seeking undergraduate students were awarded financial aid. Overall, 72.3%of all undergraduates received some type of financial aid.

TYPES OF FEDERAL STUDENT LOANS

There are two main types of federal student loans:

  • William D. Ford Federal Direct Loans
  • Federal Perkins Loan Program

These loans have unique requirements, interest rates, and maximum awards per year, which are explained below.

WILLIAM D. FORD FEDERAL DIRECT LOANS

This is the largest federal student loan program where the U.S. Department of Education is the lender. These loans include:

  1. Direct Subsidized Loans
  2. Direct Unsubsidized Loans
  3. Direct PLUS Loans
  4. Direct Consolidation Loans

Check out the table below to learn about the differences between these loans.

FEDERAL PERKINS LOAN PROGRAM

As opposed to direct loans, which have the Department of Education as the lender, the Perkins loans are school-based loans, which means that the individual school is the lender.

These loans are offered to undergraduate and graduate students with exceptional financial need. In addition, the amount awarded depends on the amount of funds available at a particular school.

Often, the students with the greatest financial need are awarded Federal Perkins Loans.

TYPES OF FEDERAL STUDENT LOANS

Federal LoanCollege Degree LevelFederal Student Loan Program DetailsInterest Rate (First Disbursed on or After July 1, 2018 and Before July 1, 2019)Maximum Annual Award
Direct Subsidized LoanUndergraduateFor those with financial need5.05%$5,500 (depending on grade level and dependency status)
Direct Unsubsidized LoanUndergraduate, graduate, and professional degree studentsFinancial need is not required5.05% (6.6% for graduate or professional)$20,550 (depending on grade level and dependency status)
Direct PLUS LoanParents of dependent undergraduate students; and for graduate or professional degree studentsFinancial need is not required; borrower must not have adverse credit7.6%Maximum amount is cost of attendance minus any other financial aid you receive
Federal Perkins LoanUndergraduate, graduate, and professional degree studentsEligibility depends on financial need and availability of funds at your school5.0%$5,500 for undergraduate students; $8,000 for graduate and professional students

PERCENTAGE OF GRADUATE STUDENTS WHO RECEIVE FINANCIAL AID

71.6% of all graduate students received some type of financial aid, including 44.2% of graduate students who took out some type of loan.

HOW TO APPLY FOR FEDERAL STUDENT LOANS

In order to apply for federal student loans, you must complete and submit a Free Application for Federal Student Aid (FAFSA). Based on these results, your college or career school will send you a financial aid letter, which may or may not include an offer of federal student loans.

This offer includes instructions on how to accept all or part of the loan. However, before you receive your loan funds, you will have to complete two steps:

  • Complete entrance counseling to ensure that you understand your obligation to repay the loan
  • Sign a Master Promissory Note (MPN), agreeing to the terms of the loan

As some students may not receive federal student loans as an option after completing the FAFSA, don’t forget about private student loans. While each lender and type of loan have different requirements than federal loans, private loans are available to all students.

BENEFITS OF FEDERAL STUDENT LOANS

Some of the benefits of federal student loans include:

  • Interest rate on federal loans is usually lower than private student loans
  • You don’t need a credit check or cosigner for most federal loans
  • You don’t need to begin repaying your federal loans until you leave college or drop below half-time
  • If you demonstrate financial need, you may qualify to have the government pay your interest while you are in school
  • Many federal student loans offer flexible repayment plans and options to postpone your loan payments if you’re having trouble
  • You may be eligible to have a portion of your federal loans forgiven if you meet certain conditions and work in certain jobs

FAFSA Application Deadline

Normally, online FAFSA applications must be submitted by midnight Central Time on June 30 of a given year. For instance, the 2019 FAFSA deadline is midnight Central Time, June 30, 2019.

FEDERAL STUDENT LOANS – HOW MUCH SHOULD YOU BORROW?

Whether you’re taking out a private student loan or a federal loan, it’s important to consider the legal obligation you have to pay back then loans, so responsible borrowing is key.

Some of the things to consider when borrowing money for college:

  • Understand your total amount of loans and how this will affect your future finances
  • Research starting salaries in your field
  • Understand the terms of your loan
  • Make payments on time

Often there are flexible repayment terms for both federal loans and private student loans. This includes options such as, grace period, interest-only payments while in school, and interest rate reductions for automatic debit.

Looking for private student loans? Check out some of your options here!

Percentage of Students Stressed about paying for college

According to a 2017 study by The Princeton Review, 98% of college applicants and their parents said financial aid would be necessary to pay for college. Plus, 65% said financial aid was extremely necessary.

OTHER TYPES OF FINANCIAL AID

As the price of college tuition continues to rise understanding the types of financial aid and finding the right combination of financial aid to pay for your degree is just as important as finding the perfect program for you.

Luckily, there are plenty of other options of financial aid for you to choose from, including:

  • Federal Grants
  • Scholarships
  • Federal Work-Study
  • Private Student Loans
  • Institutional Aid
  • Employer Funding

All of these options mean that you don’t have to worry if you need to supplement your federal student loan offer. Discover some private student loans to find the perfect one for you.

FIND THE FINANCIAL AID PACKAGE AND FEDERAL STUDENT LOAN THAT’S PERFECT FOR YOU

Finding the right mix of financial aid is one of the key aspects of earning your degree. That’s why it’s important to consider all of your options and be sure to do your research.

A good starting point is talking to your counselor or the financial aid office at your school, both of which should have specific details for you to explore.

In the meantime, check out some of our private scholarships and find the perfect degree for you.

© Education Connection 2019. All Rights Reserved.

EducationDynamics maintains business relationships with the schools it features.

Sources for school statistics is the U.S. Department of Education’s National Center for Education Statistics.

This is an offer for educational opportunities that may lead to employment and not an offer for nor a guarantee of employment. Students should consult with a representative from the school they select to learn more about career opportunities in that field. Program outcomes vary according to each institution’s specific program curriculum.