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How to Borrow Money to Pay for College

College can be a large financial undertaking for students and their families, however there are a lot of options out there that will help you pay for college. Borrowing money through student loans can be a great way to get the funds you need to start your education. Student loans are a very popular option: over two-thirds of students who received a bachelor's degree in 2008 graduated with student loan debt. However there are other options that you should look into first.

Before Taking on a Loan Look at the Following Options

  • Fill out a FAFSA

    Fill out the U.S. Department of Education's Free Application for Federal Student Aid (available at Use the FAFSA4caster first to estimate how much aid you'll be eligible for. Look here for step by step tips on completing your FAFSA.

  • Check out Scholarships

    You can save yourself a lot of money by taking a bit of time to research scholarships that you may be eligible for. You can qualify for a scholarship for many different reasons, from the very broad (because of your basic financial need, or having a high GPA, or your race and gender), to the very specific (because you're entering into a certain program like biotechnology, or grew up in a particular town). Many private individuals or companies sponsor scholarships because they're interested in getting aid to a specific set of students. So if you happen to be a Hispanic female applying for aerospace programs whose household income is less than $90,000, there may be a scholarship out there just for you. To find out what kind of scholarships you may qualify for, do some basic internet research, check with your guidance counselor, contact the colleges you're applying to, take a look at your state's department of education website, and even check with your or your parents' employers to find out if they offer scholarships.

    We've found the following scholarship search websites to be trustworthy sources of scholarship info:

    Name Website
    US Department of Education
  • Get a Part-Time Job

    You can lessen the amount of money you'll need to borrow with the income from a part-time job. Some students even pull off working full time while going to school. Be careful to not overextend yourself, you'll need time and energy to devote to classes, homework, and completing your degree successfully. A part time job can be easy to schedule around classes and many employers are willing to work with you to accommodate your school schedule. Many schools also offer work study programs where you can be employed on campus so be sure to ask.

    Only after you've thoroughly looked at these above options should you turn to student loans to pay for college. The odds are you will probably have to borrow at least some money to finance your education.

First Apply for Federal and State Subsidized Loans

Exhaust your options with federal and state subsidized loans first before moving on to private lenders. Federal and state loans have much lower interest rates and fees.

In order to qualify and apply for any of these loans, you'll need to fill out and submit a FAFSA.

Here are the different types of federal loans available:

Loan Type Summary
Perkins This is a low interest (5 percent) loan for graduate and undergraduate students that have the financial need to borrow money for school.
Direct Subsidized Stafford This is a loan that you are not charged interest on while you're in school as long as you're enrolled at least half-time. It is also only for students that demonstrate financial need.
Direct Unsubsidized Stafford Students who do not have financial need can receive this loan; however it does accumulate interest while you're attending school. You can either pay the interest while you're in school, or pay it off after you've graduated, but if you wait to pay it the total amount you'll have to pay back will be much higher.
Direct Student PLUS Graduate and professional students can apply for this loan, which requires a good credit history and will charge you an interest rate of 7.9 percent and a fee of 4 percent.
Direct Parent PLUS This loan is for the parents (biological or adopted, and in some cases step-parents) of a student to help pay educational expenses. The same interest rates and conditions apply to this loan that do for the Direct Student PLUS loan.
Direct Loan Consolidation This is a program that allows borrowers to combine all of their federal student loans into one so that they can make a single monthly payment.

Most states also offer state subsidized and backed student loan options. Check with your state Department of Education for available options.

Additional Tips on How to Borrow Money to Pay for Your Education

  • Only Borrow What you Need

    You don't have to accept the entire amount you're awarded from a loan, and it can be detrimental to do so. Resist the temptation to borrow more than you need for school because even though you may not be paying interest while you're in school, you'll have to pay it once you've graduated.

  • Be Aware of Credit Requirements

    Private loans require that you have a credit check done, and if your credit score isn't high enough or you don't have any credit history, you'll need a cosigner. Your cosigner's credit history will affect the interest rates and terms of your loan, so make sure you get a cosigner with a good credit history if you wind up needing one.

  • Do your Research; Compare Loans and Go with the Ones with the Best Terms

    If you decide to go with a private loan (as opposed to a state or federal loan), make sure that you compare interest rates, fees, and repayment terms before you make a final decision on a loan. You can research and compare private loans here.

  • Read the Fine Print Before you Sign

    Never sign a loan document, or any document for that matter, without reading and understanding the entire thing. Ask questions if there's something you're not clear on, or you could wind up with terms, payments, fees, and interest that you're not prepared to deal with. Also, bankruptcy courts tend to rule that educational debts be paid back in full, unlike what is sometimes the case with credit card debts, where you only have to pay back a portion of what you owe.

  • Don't Forget About Fees

    Most loans have fees in addition to interest payments. Be sure you're also familiar with what the fees are going to be.

  • Pick a Payment Plan that Works for You

    Loans come with a variety of different repayment plans; make sure you select one that will work with your budget and financial situation. Don't settle for something that you won't be able to pay back easily and on time.

  • Check your Deadlines and Follow Instructions

    Make sure your applications are in on time.

  • Make Payments on Subsidized and Unsubsidized Loans While you're in School if you Can

    Subsidized federal student loans do not accrue interest while you're attending school and generally for a grace period of a few months after you graduate. However after that time they start gathering interest, so if you can make payments on these loans while you're attending school, you'll be that much ahead of the game once you graduate. Unsubsidized loans do gain interest while you're in school, so if you can start making payments on those while you're still attending school you'll wind up saving yourself a lot of money.

  • Don't Miss your Payments, and if You Can't Avoid it, Call and Let your Lender Know

    Missing payments will cause your loan to be even more expensive to pay back in the long run, and may add more fees. It can also cause your credit score to drop, making it more difficult and expensive for you to get other loans in the future. In some cases, if you have a legitimate reason for missing a payment and call to let your lender know, they may grant you an extension on your due date that will not cause fees or damage to your credit score.