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Whether voluntary or involuntary, the loss of one’s employment when a child is attending college can leave a parent distraught. Questions like “how will I come up with tuition?” and “will my child have to leave school?” are very common and real. There’s no doubt that the loss of a job has incredibly serious consequences for families–especially those with one or more students currently enrolled in college. Find out how you can receive financial aid from the FAFSA and unemployment status. Financial aid may be available to those who qualify.

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Financial Aid Job Loss or Income Reduction

As with many such issues, the best way to approach the problem is pragmatically. And when it comes to financial aid, there is actually a prescribed approach that you should take to help get your financial aid squared away as soon as possible. Let’s take a look at the next steps you’ll need to take so you can rest easy and get back to your number one priority–finding a new job.

Dealing with FAFSA and Unemployment When You’ve Lost Your Job

1. Before we get started, don’t panic. You are not the first family to have this crisis while one or more students are attending college. In fact, the financial aid office will see this situation many times each academic year.
2. Gather documentation regarding your job loss. This may include a separation notice or even COBRA eligibility paperwork provided by HR. You will also want to have a copy of your final paycheck.
3. Ask for reconsideration of your student’s financial aid. Write a detailed letter to the financial aid office explaining your circumstances and provide the documentation from step 2 above. Your letter should both explain the nature and extent of your unemployment as well as a projection of your family’s gross income for the remainder of the year in question.
4. Call the financial aid office and ask if they have a form you need to complete to address special circumstances such as a loss of employment. Have the office email the form or download it from the school’s financial aid website, if that is an option. Carefully and thoroughly complete the form.
5. Send the school’s appeal form, as well as your letter and documentation, to the financial aid office. It never hurts to send via UPS, FedEx or certified mail so you know when your letter has arrived. Keep the receipt date handy because you’ll want to follow up a few days after to inquire about the status of your request.

Financial Aid School Review Process

Now what? Each school has its own review process when it comes to making adjustments to your financial aid package, particularly if unemployment will alter FAFSA. Generally, they will use your adjusted income for the current academic year and update your FAFSA information to see if you may be eligible for additional federal student aid. If you attend a private school, they will also determine whether or not they are able to offer additional assistance from the school.

It’s important to remember that even though you have lost income, your financial aid package may not change. For example, if you did not receive need-based assistance prior to your job loss, it’s possible that the income you earned up until your loss of employment, combined with other assets and factors, may still leave you ineligible for such assistance.

Making these adjustments falls under the financial aid office’s ability to exercise professional judgment. It is fully and wholly their decision as to how they factor your job loss into their calculation of financial aid.

Whether you receive an adjusted award or not, you will still be anxious to find your next employment opportunity and to determine how you will afford any upcoming educational expenses. Many families turn to federal student loans, including the federal PLUS Loan for Parents.

One of the advantages of the PLUS Loan is that you can defer making payments until after your student graduates college or drops below half-time status. Some families also consider private student loans. Assuming you have good credit, cosigning a private student loan leaves the student as the primary borrower. Due to historically low interest rates at the time of this writing, private student loans can actually be less expensive than the PLUS. Even if you are denied PLUS, you still have options.

While we know borrowing is never the preferred option for paying for school, it does buy time and that is a very important consideration when your family is struggling to make ends meet after a loss of income.

What Can the Student Do to Help? Scholarships and Work-Study!

Finally, it’s important to have an open and honest discussion with your student. Let him/her know that he/she may need to pitch in financially. That may mean pursuing part-time employment or work-study opportunities (if eligible). Even a small amount of extra income from your student can help offset his/her day-to-day expenses.

It’s also important for him/her to continue to look and apply for outside scholarships. Stress how critical it is for your student to give these applications his/her full attention and encourage him/her to carefully review prior to submission. Even if your student may not be eligible for need-based awards, there are thousands of other programs that may reward him/her for academic achievement, talent, athletic skill, and a variety of other reasons.

If you’re thinking about taking out a private student loan for college, chances are you’ll need a cosigner to get one. Very few students meet the qualifications for securing a loan on their own, so getting your student loans with cosigner may be a necessity.  In fact, “more than 90 percent of private student loans for undergraduate students…require a creditworthy cosigner” according to Mark Kantrowitz of Cappex. There are several student loan cosigner requirements to look into.

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A good student loan cosigner cannot only help you secure a student loan, but also obtain a more favorable interest rate. It’s important, however, to understand the risks a cosigner assumes when he or she agrees to help you obtain a loan. He or she will be equally responsible for paying off the debt, even if you don’t finish college.

Should you fail to make payments, your cosigner will be required to not only cover the past due amount, but also any interest fees and other charges that have been assessed. You should only turn to private students loans with a cosigner once you have exhausted all other possible funding sources, such as federal student loans and scholarships. If you do need to pursue a private student loan, you should know who can cosign a student loan and also be aware of the student loan cosigner requirements before asking someone to set up as your cosigner.

What are the Student Loan Cosigner Requirements?

Cosigners for student loans typically need a good credit score, stable income, be in good health and be willing to help you if you are unable to meet your loan payments.

1. Credit History of Cosigner

After the financial and credit crisis of 2008, it became more difficult to qualify for unsecured consumer credit. In the case of private student loans, most borrowers will need a cosigner who has a favorable credit history and a reliable source of income. Your cosigner should have a low debt to income (DTI) ratio, as well as a history of making payments on time.

There are frequently student loan cosigner minimum credit score requirements.  Lenders are more likely to approve your loan if your cosigner’s credit score is 720 or higher. If your cosigner has a credit score between 680 and 720, he or she may still be able to help you secure a loan, but the interest rate will probably be higher.

2. Stability

Along with a good credit history, lenders will also look at the stability of your cosigner. This includes job history, as well as the length of time your cosigner has lived in his or her home.

You’ll want to choose someone who has worked for the same company for at least a year, if not longer, and has verifiable income. The longer he or she has lived in the area, and maintained a steady income, the better your chances are of securing a private student loan.

3. Good Health

Believe it or not, the age and health of your cosigner does matter. Maybe not so much to the lender, but it should be something you take into consideration. If you choose a cosigner who is in poor health, or over the age of 65, you may be in for an unpleasant surprise later on.

Why? Some lenders include a clause in your student loan agreement that allows them to demand your loan be paid in full upon the death of your cosigner. Or worse, the lender could place your loan in default, even though you have made all your payments on time.

This can happen automatically, without any notice, and effectively ruin your credit.

4. Relationship to Student Loan Cosigner

You may think that your parents are the only ones who can cosign a loan for you, but that is not the case. Other relatives, including siblings and cousins, as well as a friend or a spouse, may act as your cosigner. Basically, anyone with a good credit history and the willingness to help you could act as your cosigner.

Just remember that this is a binding contract. If you fail to make your payments or default, you run the risk of not only ruining your credit and your cosigner’s, but also destroying your relationship.

It might be a good idea to draft a contract prior to asking someone to act as your cosigner. You could include specific details about how you plan to repay the debt, such as setting up automatic payments, as well as a clause that states you will reimburse any missed payments and/or fees covered over the life of the loan.

It’s not required, but it may give your cosigner some peace of mind. Finally, don’t forget to thank your cosigner for helping you out. It’s a serious commitment to make and one that should not be taken lightly.

What is an Unsubsidized Student Loan?

An unsubsidized loan is a type of federal student loan for college or career school. The unsubsidized student loan means once loan funds are in a borrower’s account, the interest starts accruing while you’re in school and after you leave. Borrowers are responsible for the whole amount from day one through the life of the loan. This includes when you’re in school and during grace periods. 

As far as repayment options go, a borrower may choose to pay the interest charged each month. You may also allow it to add onto the outstanding principal amount in which case it adds to the total cost of the loan. A recent Sallie Mae study found that 3 in 10 students use loans from the federal government to pay for college.

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What are the differences between subsidized and unsubsidized student loans? 

Subsidized vs unsubsidized student loans differ in who they are for, how to qualify and the interest payments. 

Who they are for: Unlike Subsidized Direct Student Loans, unsubsidized loans (also federal loans) do not require a borrower to have financial need to qualify. Financial aid may be available to those who qualify. However, only undergraduate students with financial need may be eligible for a Direct Subsidized Loan.

How to qualify: Unsubsidized loans are typically available to graduate and professional students too. Because they do not use financial need as a criteria, they have different terms regarding interest. 

Different terms regarding interest. A Federal Direct Subsidized Loan is also called subsidized Stafford Loans. The U.S. Department of Education may pay the interest for you for the following periods: 

• while you’re in school (at least half time)
• for the first six month grace period after you leave school
• during a period of deferment 

This effectively could waive the need to pay back the interest during those time periods. Once you start your repayment plan the government may stop paying that interest. As a result, you must repay the original loan amount plus interest which begins to accrue from that moment.

Should I pay off unsubsidized or subsidized loans first? 

Your priority should be to pay the direct unsubsidized loans first because the interest accrues over time. For instance, let’s say you don’t pay the interest while you are in school. Then, each new month of interest starts to add to the loan balance. As the balance grows, the amount you pay interest on also goes higher. If you are a recipient of an unsubsidized loan, you may want to contact your loan servicer to set up a payment plan. Making these smaller installments is a way to keep the interest from adding to the principal balance of the loan.

How Do You Apply for Unsubsidized Student Loans?

To apply for an unsubsidized student loan, you may need to fill out a Free Application for Federal Student Aid. Once it’s submitted, schools use the information from the FAFSA to make any financial aid package that they send you. To be eligible to fill out the FAFSA, you must be a U.S. citizen or eligible non citizen with a valid Social Security number. You also must meet other requirements:

• Registered with the Selective Service if you’re a male student
• Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program
• For Direct Loan Program funds, be enrolled at least half time
• Maintain satisfactory academic progress 
• Attest you are not in default on any federal aid (including loans and grants)
• Have a high school diploma or equivalent

When you are ready to complete the FAFSA, you typically use your Social Security Number to create an FSA ID, username and password. If you are a dependent student, you also need your parents’ SSNs in order to electronically sign the form. 

You must also have the following documents ready when filling out the FAFSA. 

• Your driver’s license
• If you are not a U.S. citizen, you must be an eligible non citizen and provide your Alien Registration number
• Federal tax information for you and your spouse if married or for your parents if a dependent (IRS W-2, IRS 1040, foreign tax returns)
• Records of any untaxed income (child support, interest income, veterans non education benefits for you and for your parents if a dependent)
• Information on cash, savings and checking accounts (stocks, bonds, college 529, real estate with the exception of the home you live in.)

Who is Eligible to Receive Unsubsidized Loans?

Direct Unsubsidized Loans are for eligible students enrolled at least half time at a school that takes part in the federal direct loan program. Unlike subsidized loans, the unsubsidized student loan are available for

• Undergraduate students
• Graduate students
• Professional students
• Dependent undergrad students (if your parents are ineligible for a Direct PLUS Loan)

Let’s say your financial aid package includes federal loans, your school could tell you how to accept the loan. For first time borrowers this is a two step process. First, you go through entrance counseling. This is a tool to ensure you understand the obligation to repay the loan. Second, you sign a loan contract called a Master Promissory Note agreeing to the terms of the loan.

How Much Can You Borrow in Direct Unsubsidized Loans?

Your school determines the amount you may borrow based on your cost of attendance and other financial aid you receive. The school also sets the loan type(s) if any as well as the maximum amount you are eligible to borrow in any academic year. 

That said there are annual loan limits and total amounts that one may borrow for undergraduate and graduate study (aggregate loan limits). These limits reflect what year of school you are in and your status as a dependent or independent.

Unsubsidized Annual Loan Limits

The following loan limits may vary over time according to the Federal Student Aid.

First Year Undergraduate: Ranges from $2,000 to $6,000 with a total limit of $5,500 to $9,500.

Second Year Undergraduate: Ranges from $2,000 to $6,000 with a total limit of $6,500 to $10,500.

Third Year and Beyond Undergraduate: Ranges from $2,000 to $7,000 with a total limit of $7,500 to $12,500.

Graduate/Professional (Independent students): You may borrow up to $20,500 each year. 

Unsubsidized Aggregate Loan Limits 

Dependent (except students whose parents are unable to obtain PLUS Loans): $31,000

Independent undergrads (and dependent undergraduates whose parents are unable to obtain PLUS Loans): $57,500

Professional and grad students: $138,500

How Does Interest Accrue for Student Loans?

First off, interest (which you pay to a lender) is the cost of borrowing money. It is calculated as a percentage of the unpaid principal amount. Any loan fees associated with your account may also impact the interest that accrues. Direct loans are daily interest loans which means that interest accumulates or accrues daily. Any unpaid interest you are responsible for and do not choose to pay may add to the principal (capitalized). As for interest rates, these are fixed for the life of the (federal) loan. But, do vary by type of borrower and loan as well as the loan disbursement date.

The following shows the interest rates for federal loans first disbursed on or after Oct. 1, 2020, and before Oct. 1, 2024.

• Undergraduate borrowers: 5.50%% for Direct Subsidized Loans / Direct Unsubsidized Loans
• Graduate and professional borrowers: 7.05% Direct Unsubsidized Loans only
• Parents, graduate and professional borrowers: 8.05% Direct PLUS Loans

All variable and fixed rates may vary over time.

How Do You Pay Back Direct Unsubsidized Loans?

Once you graduate, leave school, or are no longer enrolled half time, you may have a six month grace period before you begin to pay back your unsubsidized loan. During this period, your servicer should notify you of your first payment due date. Payments are usually due monthly. However, there are a number of different repayment plans available. We go into more depth on that topic on our Federal Student Loan Repayment Plans. 

Why You Should Consider Borrowing Federal Student Loans?

If you must take out a student loan for college, you are likely determining whether to borrow federal vs private student loans. Keep this in mind, remember to borrow only what you need, be clear on what you have to pay back and set a budget. Here are a few things to consider as you make this important choice.

1. Federal loans tend to cost less. 

According to the Consumer Financial Protection Bureau private loans from a bank tend to have variable interest rates which means interest and payments may go up over time. In contrast, the interest rate on federal loans is fixed.

2. Federal loans may be easier to repay.

When it is time to repay, private loans may not offer as many options to reduce or delay payments. You don’t have to begin repaying your federal loans until after you leave college or drop below half time enrollment. There are also various repayment options if you are having trouble making a payment.

3. Federal loans typically don’t need a credit check.

In order to receive a private loan you are likely to need a cosigner or credit check. If you don’t have a cosigner or a great credit score, you may not qualify.

4. Federal loans may offer larger amounts.

If you are a qualifying graduate or professional student, you may borrow up to $20,500 each year in Direct Unsubsidized Loans. For qualifying undergrads, the maximum amount you may be able to borrow each year in Direct Unsubsidized / Subsidized Loans ranges from $5,500 to $12,500 per year.

International students hoping to study full time in the United States may find several ways to do so. Many students need to pay for their college education out of their pocket. Sponsorship for international students could help cover the high costs of higher education.

Many U.S. student loan programs and grants are typically available only to U.S. citizens. Some may have some opportunities for students, but these are generally not from the government. A financial sponsorship can may come from a variety of sources. The key benefit here is that the sponsor typically helps to cover some or all of the student’s expenses.

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What Does It Mean to Sponsor an International Student?

Sponsorship for international students are usually from a group or organization that agrees to help pay for the student’s costs. It may be an individual. It may also be a company or an agency. This party is typically willing to offer money to the student. The funds may be used for books and tuition. Sometimes it may help cover living expenses if attending a US college.

Sponsorships may be very valuable. It is typically hard to find. Students who secure it may be able to make their dream of getting a higher education in the U.S. possible. There are may be a few things to keep in mind about them, though. The funds usually have to be available right away. Schools will may not wait for funds to become available later.

A student who may have the expectation of employment cannot use those promised funds to pay for education. Rather, they must be able to make tuition payments. More so, they often have to show financial support is available for various degree programs.

Students interested in these funds should work with organizations willing to offer a sponsorship. Many schools publish a cost of living estimate each year. This info may help you make decisions about how much funding a sponsor may need to provide. These expenses plus the cost of tuition and fees can may be a good estimate of the funds needed from the sponsor.

Do International Students Need Sponsorships for Internships?

Students who plan to study and seek employment opportunities in the U.S typically need to have a sponsor for it. Many students may also need to have J1 Visa. This student visa may allow a student to enter into training programs while they are an intern.

To get this visa, students must first apply for a J1 Visa sponsorship. This is done through the U.S. Department of State. It is also done through a state department sponsored organization.

Sponsorship for international students looking for internships could be confusing. In short, students must typically apply with a program sponsor. These sponsors are usually responsible for selecting those who will enter into the J1 Exchange Visitor Program. They may then provide support to the student while they are in the U.S. A person may apply for the J1 Visa sponsorship. Then, they may need to provide documentation for their visa.

This is called the DS 2019 Certificate of Eligibility. The next form is the DS 7002 Training and Internship Placement Plan. This document likely requires all of the details of the process. It typically includes where the student will train. It may includes information about when they will hold the internship.

It may also require the student to provide information about the employer host. Students can may apply for this through their Consulate or Embassy whether first year of beyond. No visa is granted without these documents. This makes it important to get this information completed properly. This process is required for all who plan to intern in the U.S.

Who Can Sponsor an International Student?

Many nonprofits, private organizations, and U.S. and international government may offer sponsorship for international students. It is typically difficult to obtain this type of support. Here are some organizations that may provide sponsorship for international students to receive an education.

U.S. Government Funding

Rarely it is possible to find support from the U.S. government. Many financial aid such as Pell grants are meant for U.S. citizens. There may be some funds for students from some companies. This may come through the U.S. Department of State. In addition, the U.S. Agency for International Development may help.

Some students may find funding this way. These programs control the student’s application process. They also may have very strict rules about the school selected. It will may also limit how the funds may be used. According to Education USA, students who qualify may get up to 100 percent of their tuition covered. It may be worth checking into either of these programs to find financial help. This is typically a good starting point.

Funding from an International Government

Some students may be able to secure funding from the government of their home country. This varies significantly. Some countries may help cover the cost of their citizens to study abroad. This may be done for experience. Sometimes it may be done to encourage students to get a more advanced education. They may also offer it if they do not have a program for the student’s interests.

A country’s Department of Education usually offers these programs, if available. Sometimes a Ministry of Education may also offer it. They may help find partnerships with U.S. schools. These partnerships can may be very lucrative. Students may qualify for a significant amount of funding if these connections exist. This may lead to free or reduced costs for education.

Sponsorship for International Students from Private Organizations

Another option for finding a sponsorship for international students come from private organizations. Many companies may seek out international students for key job positions. They may also offer scholarships for them. They typically want to build relationships between countries. Some organizations could want to create new avenues for untapped talent. There are many reasons private companies may do this including being a potential employer.

Often, companies may do this if their interests are tied to a country’s goals or economics. They may also set very strict rules for this. Students should learn what the company’s goal is before choosing this option. They may have very specific goals for the student after completing their course of study. Missions and values should generally align with the student’s goals as well.

These types of private organizations typically set the rules for where these funds may come from. It also includes how the funds may be used. Sometimes the conditions may tie the student to the private organization for years after. They may control many aspects of the student’s experiences.

Some organizations may cover all of the costs of the student whether you are part time or full time. That includes costs related to tuition and books. It may also include funds for relocating to the U.S. Some could offer internships as part of the program of study. If so, the J1 visa rules still apply.

Sponsorship for International Students from Nonprofit or Other Organizations

There are some nonprofit organizations that may help cover these costs. They may offer sponsorship for international students who wish to study in the U.S. Most often, these are companies located outside of the U.S. Some may do this if they will benefit from improved global travel or international between cultures. Many non government organizations have a goal or benefit in mind. Students should learn what these rules are.

They should gather information on the organization and its goals. Some of these programs could be somewhat limited. Many may offer to pay 100%of the student’s costs. This may include books, fees, and tuition. Some will also cover the cost of housing.

They may even provide a stipend to use for needs. It can be hard to find these types of organizations. Some are available through the education department. Most often, students need to have a working relationship with the organization. This may open doors for them to get this type of support.