Though federal student loans, such as the Federal Stafford Loan, help many students to attend college, families often find that even the maximum loan amounts are not enough to pay for their education. For instance, the average cost of college the 2022 - 23 academic year is $35,551— yet the most money first-year college students can borrow under the subsidized Federal Stafford Loan program is only $5,500!
Financial aid forms required
Loan limits determined by grade level
Schools must authorize the loan amount
Funds are sent to the school
Satisfactory Academic Progress required to receive additional loans
Standard 10-year repayment term
Income-Driven Repayment plans
Restrictions on how loans may be used
Financial aid forms not required by private student loan lender
Higher loan limits
Signer and co-signer must have good credit
Faster application process
Funds may be sent to borrower
Longer repayment loan terms
Variable loan rates
Fewer restrictions on how the loan may be used (as for a computer for college or transportation)
Borrow federal student loans first.
Though there is a limit to the dollar number students can borrow per year from the federal government, it still makes sense to borrow federal loans first. Of the student loan options, these are the cheapest. They have the lowest student loan interest rates, and offer fixed interest rates.
Some students may also qualify for subsidized student loans. These are for students that demonstrate financial need. During a student’s college years, the federal government will pay the interest on the student loan, saving the student money on their student loan debt.
Never borrow more than the starting annual salary.
Students should never borrow more money than they can realistically pay. A good rule of thumb is to never borrow more than the expected annual salary upon graduation – or more than the parents make annually.
Many students don’t know what they will be making after graduation. What they can do is look at the average starting salary for college graduates to determine their ceiling for student borrowing.
Monster provides a tool for soon-to-be college grads that uses their college major to predict their future salaries.
According to National Association of Colleges and Employers, Class of 2023 college graduates majoring in engineering have an average starting salary of $74,405. Students majoring in math and sciences earn an average of $67,199 at entry-level jobs.
Students can also search for annual expected salaries by field. Perhaps they know that they will be majoring in English or Engineering, looking at the salary for recent graduates in both of those fields will enable students to make smart student loan decisions.
Exhaust all options when paying for college.
To limit the amount of student loan debt taken on to pay for college, students can utilize other options. These include:
Work Study jobs on campus Students must complete their FAFSA via the Department of Education to see if they qualify for the federal work-study program.
Part-time jobs off campus
Work study and part-time jobs can be found once a student arrives on campus. Even if the student didn’t qualify for a work study job through financial aid, there still may be open positions on campus that will open up to all students.
Work-study jobs allow students to get paid while maintaining a flexible working schedule.
Part-time jobs are available off campus and can provide more than just a paycheck. Many part-time jobs come with the added benefit of employer tuition assistance. These provide a great alternative to paying for college.
When it comes to scholarships, many students stop searching after their senior year of high school.
Many students don’t realize there are thousands and thousands of scholarships for college students. By continuing the scholarship search throughout college, students can find more options to help them pay their tuition bills.
Tax credits are another option that students and parents can utilize to pay for school. During tax season, individuals and families can qualify for tax credits by being enrolled in college. These tax credits can be used to pay for student expenses.
When it comes to paying for college, students must get creative in order to limit the amount of student loan debt they have after graduation. It's important to note, student loans are not bad—they can be very helpful. Students just need to ensure that they are making smart borrowing choices and not loading themselves up with student loan debt that is difficult to pay back.
To get started on the student loan journey, check out Fastweb’s Guide to Student Loans.
How do families close that gap?According to Educationdata.org, student loans (tied with college savings plans) are the third way students use to pay for college.
Private student loans are considered the fastest growing component of funds used to finance college. But just what are “private loans?” In the education world, colleges often refer to loans made directly by banks and other lending organizations as “private” or “alternative” loans to distinguish them from federal loans. Private loans can be used alone or to supplement federal loans. Technically, they are consumer loans that can be used for education purposes. As with other consumer loans, borrowers must demonstrate that they meet credit guidelines. For students who often have limited or no credit history, like students, a creditworthy cosigner may be needed. What sets education consumer loans apart from other consumer loans is that collateral is not required to secure the debt, and in many cases, repayment of the loan can be postponed while the student is in college.