Paying for College: Getting a College Loan

College is expensive. If you are looking to attend a college or university, then you may also need to look into your college loan options. A college loan can give you the money you need to pay your tuition, as well as your room and board so you can concentrate on school. College loans often do not have to be paid back until after you graduate, so you can hold off on paying for your education until your education starts paying off with a great job.

What types of college loans are available?

Stafford Loans- Stafford loans are loans that are usually given out by agencies, which work along with the federal government in order to make going to college a possibility for everyone who wants to. Stafford loans are taken out in the name of the person attending school. Stafford Loans will allow dependent undergraduate students to borrow $2,625 their freshman year, $3,500 their sophomore year and $5,500 each year thereafter with their loan amounts subsidized. Independent students (those who can not be claimed as a dependent on anyone's taxes) can borrow on an unsubsidized basis an additional $4,000 their freshman and sophomore years and an additional $5,000 every year after that. Graduate students can borrow up to $18,500 per year, however only $8,500 of that can be subsidized.

PLUS Loans- PLUS loans are given out in conjunction with the federal government, and are taken out by the parents of children who are attending a college or university. A PLUS loan will allow a parent to borrow as much money as they need to cover their child's entire education.

Private Loans- There are hundreds of private agencies that are willing to give out college loans. Some places can offer students loans that can supplement college loans they have already been awarded so they can pay for their entire education.

How do I apply for a college loan?

To apply for a Stafford or PLUS loan the first step is to fill out a FAFSA form. A FAFSA or Federal Application for Student Aid form is a form put out by the federal government for students to use to apply for financial aid. In addition to being an application for loans, it is also an application for a variety of federal grants. When filling out the form there is a possibility that you will receive grants from the government in addition to loans. Grant money is money that will just be given to you; you will not have to pay it back. FAFSA forms are available in high school and college guidance counselor offices, as well as at post offices and public libraries.

Private college loans will have different application procedures. Depending on the loan provider you will more than likely have to fill out several different forms, and the agency will have to do a credit check. If your interested in getting a loan from a particular private agency contact them and ask what their particular procedure is for loan applications.

How is my college loan amount determined?

The amount that an agency is willing to loan you for college depends greatly on where you are applying for your college loan. More state and government agencies determine the amount of the college loan they are willing to give you on what year in school you are, and in some cases how much money you and your parents make.

When getting a college loan from a private agency however they will also take into account your credit rating. Those with better overall credit score will often be offered lower interest rate loans for higher dollar amounts. If you are still in high school private agencies may take into account the credit rating of your parents when deciding whether or not to offer you a loan, and for what dollar amount.

Your college loan amount can also be determined by what school you have decided to go to. If you are going to a school where you will be paying in state tuition, you will often be offered a lower loan amount than those who are attending an out of state or private college where tuition can be much more expensive.

What is the difference between a subsidized and unsubsidized college loan?

When your college loan is subsidized, then you are not responsible for paying the interest on your loan until after you leave school. While you are in school your loan will create interest, but that the government pays interest for you.

An unsubsidized loan is a little different. With an unsubsidized college loan your loan will create interest while you are in school and you are responsible for paying the interest amount each month. You won't be paying down your loan amount, only paying the interest so your loan amount remains at a constant amount. After you graduate or leave school you are then responsible for paying back a portion of your loan amount each month, as well as the interest.

Do I have to take a loan out for the amount they offer me?

No. Once you are offered a certain loan amount you can choose to take the entire loan amount, or just a small portion of it. Remember what you borrow you are going to have to pay back one day, and depending on your loan type you may be paying it back with ten years worth of interest on it, so borrow what you need, but don't borrow so much that it's going to bog you down later in life.

What if my loan is not for enough to cover my full tuition?

There is no limit to the amount of college loans you can take out. If you are awarded one loan, that isn't going to cover your entire tuition, then apply for another. You can only get one subsidized Stafford loan, and one PLUS loan but there is not limit to the amount of college loans you get from private agencies. Keep in mind however; that what you borrow you will have to pay back.

When will I start paying back my college loan?

Typically you won't start paying back your college loans until you graduate college or decide to leave school. College loan agencies will generally give you one year after graduation to get a job, and get settled before your student loans begin to start becoming due. If after a year's time you do not have a steady income, you can often defer or forbear your loans, allowing you a little more leeway in when you have to start paying them back.