Everyone knows that study in the United States is not free both for Americans and for foreign citizens. Of course, there are also opportunities to get free higher education. Both those and others can study for free in any educational institution in the United States, subject to receiving sponsorship, scholarship or grant: government, private or allocated by the educational institution itself. But not all applicants can receive such privileges. Nevertheless, it is still necessary to finance the college. In this case, loans come to the rescue.
5 ways to pay for college with no money saved
So, if you have not had time to save money for college, there are several options:
- borrow from parents, relatives, acquaintances – in this case, you will not have to pay interest;
- take a traditional personal loan from a bank;
- take a student loan (specific-purpose loan);
- take a payday loan. These are short-term loans that are easy to access. Typically, you must repay your loan within 1-3 weeks, or close to your next paycheck. Such a loan is suitable for short-term financial problems;
- borrow money from Spotloan. The online lender offers the so-called “spot loans”. Unlike a traditional payday loan, which you would need to pay off the day you get your next paycheck, these are installment loans that can be paid off within 3 to 8 months.
If you do not have relatives and friends who are ready to lend you a large amount, all that remains is to use the loan. But which one: personal (non-purpose) or student?
To answer this question, you need to know the difference between non-purpose (personal) and specific-purpose (student) loans.
Purpose vs non-purpose loans
All consumer loans are divided into two types – purpose and non-purpose. The name comes from their essence: if you take a purpose loan, you must report to the bank about the amount spent; if a loan is non-purpose, then there is no need to inform the bank about the use of borrowed funds. Let’s look at an example. You took out a loan in order to relax and go to the resort.
If you took a non-purpose loan, then the bank does not ask you to provide information about why you need the money and how you spent it (bought a ticket, spent on entertainment, or purchased gifts for loved ones). If you have taken out a purpose loan, it means that you are obliged to provide documents confirming expenses: tickets, hotel booking documents, an agreement with a travel company, etc. If the bank does not receive this information or if the bank finds out that they were spent on other purposes, then they can apply sanctions: impose a fine, increase the percentage, or oblige you to return the funds early. It would seem that it is much easier to get a non-purpose loan. However, it is not (from a financial point of view).
Banks provide more favorable conditions for purpose loans and approve most applications. However, there are some nuances here as well. The list of loan purposes is rather limited, and sometimes situations arise in life for which it is impossible to get a purpose loan. That is why many people are simply forced to take out a non-purpose loan.
Let’s summarize. A non-purpose loan can be taken for any need, you can spend the borrowed money at your discretion. The borrower is not obliged to report to the bank for the funds spent. However, the interest on this loan is higher, and the eligibility criteria are stricter. A purpose loan is approved more willingly, and the terms of lending are more favorable. However, you will be required to fully report to the bank for each credit penny spent. The choice is yours!
How does a student loan work?
Education loans are subsidized by the state. It compensates the bank for a part of the amount issued, thanks to which the bank is able to provide a loan at a reduced interest rate.
The educational loan payment structure differs from a traditional personal loan. With a traditional loan, the monthly payment to the bank always consists of the principal and the interest. Depending on the type of payment, the ratio of these amounts may vary.
In the case of a student loan, you are granted a grace period equal to the duration of your studies plus three months, during which you only pay interest. At the same time, in the first year, no more than 40% of the due payments are paid, in the second year – no more than 60%. In practice, this means that in the first years, while you are studying, the amount of payments will be less and will increase only after the end of the grace period, when you start earning.
If you were unable to find a job quickly, you can contact the bank and they will offer you a loan restructuring program or give you a grace period. Banks are interested in getting their money bank and usually meet the needs of bona fide customers.
If for some reason you stopped studying at the university, the bank will recalculate the loan. You will not have to pay the money for the rest.
How to get a loan for education
- Enter the paid department of a university or a college;
- Obtain parental consent for a loan if you are under 18;
- Conclude an agreement with the educational institution on paid education;
- Come with this agreement to the bank and apply for a loan.
After that, the bank will send a request for a loan to the US Department of Education. There they will study the documents provided by the bank and approve (or not approve) the loan. Depending on this, the bank gives you a positive or negative answer.
What you need to know about a student loan
Educational loans are issued for a period not exceeding 10 years. Usually, the term depends on the duration of the study.
Educational loans are basic and concomitant. The main loan is issued only for education, the accompanying one includes expenses for accommodation, meals, travel and the purchase of scientific and educational literature in the city where the educational institution is located.
The principal loan amount coincides with the payment amount specified in the agreement. The amount of the accompanying loan is calculated using a special formula based on the subsistence minimum in the region where the university of your choice is located.
Important things to remember
- A loan for education is a good way to invest money in your future;
- Features of an educational loan – a low interest rate compared to a personal loan and a grace period (when only interest is paid) allow you to focus on studying, transferring the main loan load to the period when you start working;
- It is worth taking a loan for college if there is no other opportunity to get the chosen specialty.