Decide on Loans
While loans are not preferable given you will have to pay them off post-graduation, they are an option. We advise applying for multiple scholarships to help minimize loans. You can also consult your eAdviser about writing a financial appeal letter in order to better explain your financial situation and potentially receive more institutional aid.
Common Loan Mistakes
Students often make one of two mistakes when thinking about loans:
Mistake 1: "I don't want to take out any loans at all"
Why this can be a problem:
By not taking any loans, students can really limit their college options-- often to colleges very close to home or to community colleges.
Mistake 2: "Loans are no big deal"
Why this can be a problem:
Loans may not feel like a big deal now, but having more than $30K in loans when you graduate can really limit the types of jobs and careers that you can pursue, and can add a lot of stress to your life.
The Correct Path: Taking out a limited, manageable amount in loans is necessary or helpful for most college students today.
Most financial aid awards include $5,500 in direct loans from the federal government ($3,500 in subsidized loans & $2,000 in unsubsidized loans). If you need to take loans, these are the best loans that you can take out because:
1. You don't have start paying them until 6 months after you leave college.
2. Low interest rates: Rates of between 4-5% are the lowest that you can get.
3. They are safe. The federal government won't take your house or car if you can't pay. There are several options for delaying payment if life happens and you don't have the money after graduation.
4. The amount is manageable. Colleges offer $5,500 in these federal direct loans for your freshman year, $6,500 for the 2nd year, and $7,500 for the 3rd & 4th year. If you take out the full amount each year, you will be $27,000 in debt at graduation. It's a lot, but it is a manageable amount.
Whether you need to take out loans depends on your family's financial situation. Everyone's situation is different, but as a general rule of thumb, we usually recommend not taking out more than $27,000 in Federal Direct Subsidized & Unsubsidized Loans over the course of your college career.
In some cases, students take out additional loans from the university, Parent Plus Loans, or from private sources. However, keep in mind, you need to multiply every loan amount by 4 to get the amount that you will owe after 4 years.
$5,500 in loans per year = $22K after 4 years
$5,500-$6,500-$7,500-$7,500 (full Federal Direct Loans)= $27K after 4 years
$10K in loans per year = $40K after 4 years
$15K in loans per year = $60K after 4 years
While some loans ($20-30K) may be necessary, it's very important to keep your debt amount manageable. Be careful with financial aid offers that include large Parent PLUS loans. We usually advise students against taking these loans--if you need a large Parent Plus Loan to afford a college, there's usually a better college option for you.
(listed in recommended order)
- Direct Subsidized & Unsubsidized Loans
- Private Loans: Many universities use ELMSelect for their private loans.
How to Accept & Take Out Your Loans
Step 1: Compare Awards
Compare your financial aid awards from each college that accepted you.
Notice what kinds & amounts of loans were included on your financial aid award.
Step 2: Decide on Amount
Check your family finances and decide what amount of loans you want to take out.
Remember: you can take out partial amounts and you can change your loan amounts each semester.
Step 3: Accept the Financial Aid Award by May 1
Now that you have made a college decision & decided on an amount, you have until May 1 to tell the college that you are attending and accept their offered financial aid award.
This is usually all done in the college's online portal.
Step 4: Complete Entrance Counseling & sign the Master Promissory Note (MPN)
Once you have accepted your financial aid award in the college's online portal, they will direct you to www.StudentLoans.gov to complete your Loan Entrance Counseling and to sign the Subsidized/Unsubsidized Master Promissory Note (MPN) to formally agree to the loan.
Entrance counseling is simply an online course that teaches you about your loans. It usually takes 1-2 hours to complete.
You will use the student's FSA ID that you used to log-in to FAFSA to also log in to loan counseling and sign the MPN.
Step 5: Paying your college bill
Your college bill usually arrives sometime between June and late July/early August. It will usually arrive by mail or through your online portal. Your financial aid & loans should be automatically indicated on the bill--you may not have to pay anything at all.
If you do have to pay, you have two options:
1) Pay for the entire semester. The bill for the spring semester usually comes in December.
2) Pay monthly via a payment plan. This chops the semester bill into 4-5 smaller monthly payments that can be easier for families to handle.
Step 6: Repeat steps 2, 3, & 5 each year.
You will need to complete the FAFSA and decide on loan amounts each year.
The student and parent FSA ID is vitally important. Write both of them down somewhere safe--you will need them each year throughout college and even later if you decide to go to graduate school.
Step 6: Don't panic if something goes wrong.
Financial situations change and emergencies happen. If you can't pay your college bill, meet with the financial aid office and ask for help. Many colleges now have emergency grants for situations like this and will try to help you.
Loans for Non-US Citizens/DACA/Undocumented Students
Although international students, DACA students and Undocumented students don't qualify for the Federal government loans discussed above, there are some loan options if absolutely necessary. Remember to exhaust your scholarship offers before turning to loans, and to carefully scrutinize interest rates and terms before accepting any loans.