Student Loans

Federal loans are often part of a school’s financial aid package and come with benefits like lower interest rates and flexible repayment options. Understanding responsibilities and repayment options are important so students can repay their loans successfully.

The U.S. Department of Education’s federal student loan program has four types of direct loans available:

• Direct Subsidized Loans – for students with a demonstrated financial need
• Direct Unsubsidized Loans – made available to all students regardless of financial need
• Direct PLUS Loans – made available to graduate and professional students as well as parents of dependent undergraduate students
• Direct Consolidation Loans – allow students to combine all their eligible federal student loans into one loan with one loan servicer

Student loans can also be offered by private lenders such as credit unions, banks, and state-based or state-affiliated organizations. Private student loans can be used to cover tuition fees, room and board, textbooks, and other expenses related to education, but they may have higher interest rates and less flexible repayment options than federal student loans. Remember to carefully consider the terms and conditions of any private student loans before deciding to borrow.

A 529 plan is a savings plan that encourages saving for future education costs by offering tax incentives. 529 plans, legally known as “qualified tuition plans,” are named 529 since they are authorized by Section 529 of the Internal Revenue Code. All fifty states and the District of Columbia sponsor at least one type of 529 plan, and they may also be made available by private colleges and universities. There are two types of 529 plans: prepaid tuition plans and education savings plans. Prepaid plans allow a saver or account holder to purchase units or credit at a participating college or university (usually public and in-state) for future tuition and mandatory fees at current prices for the beneficiary. Education savings or investment plans allow a saver to open an investment account to save for the beneficiary’s future qualified higher education expenses, including tuition, mandatory fees, and room and board.

There are thousands of scholarships available to help students pay for college or career schools without having to repay any money. They are generally offered by schools, employers, individuals, private companies, nonprofits, communities, religious groups, and various other sources. There are different criteria that scholarship funders use to determine who will be awarded, such as merit, financial needs, or certain backgrounds. Learning and understanding the different types of scholarships can make a real difference in helping students manage their education expenses. As some deadlines are as early as a year before college starts, students and parents should begin researching and applying for scholarships during the summer between their junior and senior years.

The federal work-study program provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay for education expenses. The program encourages community service work and work related to the student’s course of study, both on and off campus. The total work-study award depends on when the student applies, the student’s level of financial need, and the school’s funding level. Students will earn at least the current federal minimum wage but may earn more depending on the type of work they do, and the skills required for the position. The program is administered by schools participating in the Federal Work-Study Program. Students are encouraged to check with the school's financial aid office to find out if the school participates.

Servicemembers, veterans, and their families have access to special education benefits under the GI Bill. Since 1944, the GI Bill has helped qualifying veterans and their family members get money to cover all or some of the costs for school or training.