When you have exhausted all other possibilities for getting enough money to pay for your college expenses, you can take out a loan.
What is a loan?
A loan is borrowed money that you must pay back with interest. Some loans are better than others.
Question: Is it better to take out a car loan or education loan? Why?
Answer: Education loan. A car loses value the minute you drive the car off the dealer’s lot. If you take out a $10,000 loan for an $11,000 car, you’ve already started losing money. Once you take the car home, its value will drop to $10,000 or less depending on the year, make and model. Each year, the value of your car will decrease even if you keep it in very good shape.
What is an education loan?
An education loan is specifically for students attending college. You can only take out an education loan if you are in school at least part-time, which usually means taking at least 6 to 8 credits.
You do not have to begin repaying your loan until six months after you have completed your degree. You have up to 10 years to repay your loans.
Things to Consider Before Taking out an Education Loan
Before you take out any educational loans, you should consider the following:
- How much are you going to take out in loans?
- What is the interest rate?
- How long will it take for you to complete your degree program?
- What is the outlook for your potential career?
- What is the starting salary for your potential career? Will it cover your current expenses plus your monthly loan payment?
To help you figure out how to afford your education loan, you can use this online calculator. Read the explanation, then go down to the bottom of the page and fill out the form.
Types of Loans
The federal government offers several types of loans. You should know that some of these loans are subsidized and some are unsubsidized. On subsidized loans, the government pays the interest that accrues while you are in college. On unsubsidized loans, you pay the interest that accrues while you are still in college. To learn more about different types of loans, check out the College Board website
Here is an activity to help you understand the loan process: Look at the following list of terms. Do you know what they mean? Using the Finaid.org website research the terms and write down what they mean.
- Private loans
- Student loans
- Parent loans
If you still think you need more financial support, learn about Other Aid Resources which may be available to you!