Congress is working around the clock to get a new tax bill to President Trump’s desk before the year is out. In addition to a host of tax cuts, both the Senate and House GOP tax plans include several proposals that could make saving and paying for higher education more costly for families. Considering Americans hold a collective $1.36 trillion in student loan debt and 11.2 percent of that balance is either delinquent or in default that’s not-so-good news for millions of Americans.
Both plans include proposed ideas that could impact how students and families finance higher education. The House plan, for instance, includes proposed provisions that would affect the benefits parents, students and school employees like graduate students receive, which could ultimately impact the price students pay.
In a Nov. 6 letter to the House Ways and Means Committee opposing the provisions, the American Council on Education and 50 other higher education associations states that “the committee’s summary of the bill showed that its provisions would increase the cost to students attending college by more than $65 billion between 2018 and 2027.” They reaffirmed their opposition in a Nov.15 letter.
The council and other higher education associations weren’t satisfied with the Senate’s version of the Tax Cuts and Jobs Act, either. In a Nov. 14 letter, the council says it’s pleased the Senate bill retains some student benefits eliminated in the House version, but remains concerned about other positions that it says would ultimately make attaining a college education more expensive and “erode the financial stability of public and private, two-year and four-year colleges and universities.”
Where are the bills now?
The House version of the Tax Cuts and Jobs Act passed by a 227-205 vote on Nov. 16, just before the chamber’s Thanksgiving holiday. No Democrats backed the bill.
The Senate’s bill is still in the revision stage before the Senate Committee on Finance. The proposal still has to be finalized and approved by the committee, then passed by the Senate to move on. The two chambers would need to hash out many differences between the proposed tax plans before sending legislation to the president’s desk.
In its plan, the Senate committee says the goal of tax reform in relation to education is to simplify education tax benefits. MagnifyMoney took a look at a few of the major proposed changes to the tax code that would impact college affordability most.
Streamline tax credits
The House tax bill proposes to repeal the Hope Scholarship Credit and Lifetime Learning Credit while slightly expanding the American Opportunity Tax Credit. The new American Opportunity Tax Credit (AOTC) would credit the first $2,000 of higher education expenses (like tuition, fees and course materials) and offer a 25 percent tax credit for the next $2,000 of higher education expenses. That’s the same as it is now, with one addition: The new AOTC also offers a maximum $500 credit for fifth-year students.
The bigger change is the elimination of the other credits. Currently, if students don’t elect the American Opportunity Tax Credit, they can instead claim the Hope Scholarship Credit for expenses up to $1,500 credit applied to tuition and fees during the first two years of education; or, they may choose the Lifetime Learning Credit that awards up to 20 percent of the first $10,000 of qualified education expenses for an unlimited number of years.
Basically, in creating the new American Opportunity Tax Credit, the House bill eliminates the tax benefit for nontraditional, part-time, or graduate students who may spend longer than five years in the pursuit of a higher-ed degree. According to the Joint Committee on Taxation, consolidating the AOTC would increase tax revenue by $17.5 billion from 2018 to 2027, and increase spending by $0.2 billion over the same period.
The Senate bill does not change any of these credits.
Make tuition reductions taxable
The House bill proposes eliminating a tax exclusion for qualified tuition reductions, which allows college and university employees who receive discounted tuition to omit the reduction from their taxable income.
A repeal would generally increase the taxable income for many campus employees. Most notably, eliminating the exclusion would negatively impact graduate students students who, under the House’s proposed tax bill, would have any waived tuition added to their taxable income.
Many graduate students receive a stipend in exchange for work done for the university, like teaching courses or working on research projects. The stipend offsets student’s overall cost of attendance and may be worth tens of thousands of dollars. As part of the package, many students see all or part of their tuition waived.
Students already pay taxes on the stipend. Under the House tax plan, students would have to report the waived tuition as income, too, although they never actually see the funds. Since a year’s worth of a graduate education can cost tens of thousands of dollars, the addition could move the student up into higher tax brackets and significantly increase the amount of income tax they have to pay.
The Senate bill doesn’t alter the exclusion.
Eliminate the student loan interest deduction
Under the House tax bill, students who made payments on their federal or private student loans during the tax year would no longer be able to deduct interest they paid on the loans.
Current tax code allows those repaying student loans to deduct up to $2,500 of student loan interest paid each year. To claim the deduction, a taxpayer cannot earn more than $80,000 ($160,00 for married couples filing jointly). The deduction is reduced based on income for earners above $65,000, up to an $80,000 limit. (The phaseout is between $130,000 and $160,000 who are married and filing joint returns.)
Nearly 12 million Americans were spared paying an average $1,068 when they were credited with the deduction in 2014, according to the Center for American Progress, an independent nonpartisan policy institute. If a student turns to student loans or other expensive borrowing options to make up for the deduction, he or she could experience more financial strain after graduation.
The Senate tax bill retains the student loan interest deduction.
Repeal the tax exclusion for employer-provided educational assistance
Some employers provide workers educational assistance to help deflect the cost of earning a degree or completing continuing education courses at the undergraduate or graduate level. Currently, Americans receiving such assistance are able to exclude up to $5,250 of it from their taxable income.
Under the House tax plan, the education-related funds employees receive would be taxed as income, increasing the amount some would pay in taxes if they enroll in such a program.
A spokesperson for American Student Assistance says if the final tax bill includes the repeal, it may point to a bleak future for the spread of student loan repayment assistance benefits, currently offered by only 4 percent of American companies.
Take care not to confuse education assistance with another, growing employer benefit: student loan repayment assistance. The student loan repayment benefit is new and structured differently from company to company, but generally, it grants some employees money to help repay their student loans.
The Senate plan does not repeal the employer-provided educational assistance exclusion.
According to CollegeBoard, the cost of tuition, fees, and room and board has gone up about 162 percent at private nonprofit four-year colleges since 1971 when adjusted for inflation. Public schools have seen an increase of 142 percent in in-state tuition, fees, and room and board over the same time period.
College is an expensive endeavor, yet we know that those who hold bachelor’s degrees make an average of $1 million more over the course of their lives than those who do not. Higher education is still worth investing in, even if prices have increased astronomically.
Today we’ll look at how to evaluate the costs of college and how to get your education funded.
When you first look at the cost of tuition and fees, room and board, and meal plans, most colleges appear oppressively expensive. Appearances are sometimes deceiving. The first number most people find is the advertised sticker price, and it isn’t what you end up shelling out for your education.
The number you actually end up paying — the net price — is usually lower for most students. Net price is how much the school charges minus the amount of financial aid you are awarded.
Net price vs. sticker price
If you already know how much financial aid you will be receiving, you can subtract that number from your school’s sticker price. The difference will be your net price.
The numbers they produce will be estimates only, and are not guaranteed.
Some calculators base all calculations on in-state tuition. If you’re an out-of-state student, be mindful that your costs may be higher unless explicitly stated otherwise.
Some calculators base their numbers on financial aid opportunities available to first-year students. There is usually more funding for freshmen, so you can expect the subsequent three years to be more expensive.
Nonprofit vs. for-profit schools
Nonprofit schools tend to cost a good deal less than for-profit institutions. And, when you look at the net price of for-profit schools, they can cost even more than private nonprofit schools.
This is because for-profit schools offer less institutional aid — or financial aid through the college itself. Instead, they rely heavily on federal financial aid for the funding of their students’ education.
As a result, students who attend for-profit schools generally wind up with far more student loan debt after graduation. With 59 percent of students enrolled in a certificate or associate’s degree program, average student borrowing per year was at $6,179 for the 2011-12 school year compared to an average of just $953 at comparable public, nonprofit two-year institutions, according to a recent analysis by the Brookings Institution.
Because of this, the bulk of their advertising efforts are focused on low-income students who qualify for maximum federal financial aid. These students should be careful to weigh net prices at nonprofit institutions before agreeing to attend a for-profit school based on the sticker price.
Nonprofit institutions will offer more scholarships and grants, reducing the number of loans — and therefore debt — they have to take on.
Public vs. private school tuition
The sticker price on a public college is undoubtedly lower than that of private institutions. However, many private schools have large endowments providing substantial student aid at the institutional level. This aid is often extended to middle-income families even if they don’t qualify for a large amount of aid through federal programs.
For example, Cornell University offers significant grants to students from families with under $60,000 in annual income as long as their assets are under $100,000. In an example generated by the university, a traditional student from a household with $51,000 in annual income can qualify for over $64,000 in institutional grants — even when they hold personal assets of $3,000.
In this example, the student’s net price is a whopping $3,450 for one year at an Ivy League university.
What college expenses should I be prepared for?
Part II: How to Pay for College
There are several different ways to find money for college expenses. If you stay on top of financial aid application deadlines and have a high GPA and high test scores, you can easily shave tens of thousands of dollars off your cost of attendance.
In this section, we’ll cover the most common sources of college funding.
The Free Application for Federal Student Aid (FAFSA) is the single most important document you will likely fill out as a college student.
Because without the FAFSA, you won’t be able to access the majority of the best financial aid options we are going to cover in this guide. Those include:
Federal student loans
Direct PLUS Loans for parents
Not only will the FAFSA tell you how much aid you are eligible for through the federal government, but it is also a required step to getting institutional financial aid from your college or university.
How to fill out the FAFSA
It’s important to note that you do not have to pay to file the FAFSA. It is entirely free.
Go to https://fafsa.gov/ to create a Federal Student Aid account and start your application.
Important: You must fill out a FAFSA every year that you attend college.
The Expected Family Contribution (EFC) is how much the federal government determines you or your parents should be able to contribute to your education costs. This number is then used to figure out how much aid the government is willing to extend to you.
For example, to qualify for a full Pell Grant in the 2017-18 school year, your family’s expected family contribution can’t be higher than $5,328.
It should be noted that students interested in FSEOG Grants and Perkins Loans should apply as soon as possible, as these funds are doled out on a first-come, first-served basis and actually do run out.
Student Loans: Explained
The final form of aid distributed by the federal government is student loans. You will know which federal student loans you qualify for after you fill out your FAFSA.
Because student loans will have to be repaid with interest, they should only be pursued after you have exhausted all grant, scholarship and work-study options.
Types of federal student loans
As an undergraduate student, there are a variety of federal student loans you may be offered.
Important: You should be absolutely sure that you have maxed out your federal student loan eligibility before turning to private loans. Federal student debt often has better rates than private loans and a range of flexible repayment options.
Private student loans
If federal student loans aren’t enough, you can turn to private student loans as a last resort for college financing. These loans from banks, credit unions and online marketplace lenders do not have the same generous repayment programs, though some may have deferment options in some situations, such as unemployment.
Private loans come with variable or fixed interest rates. At this moment in time, interest rates are low. If you take out a variable interest rate loan, the rate is likely to go up over the course of your loan. Fixed interest rates start higher, but remain stable throughout the course of your repayment.
Should I get a co-signer?
If you haven’t yet established credit, you will likely need a co-signer in order to qualify for private student loans. If you’re a nontraditional student and have a less-than-stellar credit history, you’ll likely also benefit from having a co-signer.
If you have a good credit score, you can skip the co-signer. But if you do need some help, look for loan options with a co-signer release. This lets the co-signer off the hook after a certain period of time — generally once your payment history has allowed you to establish a better credit history yourself.
How much should I borrow?
You don’t want to borrow more than you can reasonably afford to pay back. Certain professions that require extensive education, like doctors and lawyers, will have considerably more student loan debt than other professions.
However, some professions, such as teaching, may require a master’s degree in some regions. Four years of undergrad plus grad school isn’t cheap, but a teacher’s entry salary typically doesn’t make up for all of your education expenses.
In these situations, talk to professionals in the field you want to enter to find a reasonable expectation for entry salary and potential salary growth over the course of a career. While using online sources to find this information is great, it’s not going to replace the regional knowledge of a professional working in the field.
You can then plug that number into CollegeBoard’s Student Loan Calculator, along with how much money you intend to borrow. It will analyze and tell you if your monthly payments will exceed 10 to 15 percent of your monthly income — which is generally considered to be the absolute maximum you should allot to student loan payments.
If you take out federal student loans, you may be able to borrow more as most loan options allow you to pay based on your income level. Just be careful not to bury yourself in debt — you don’t want to be paying student loans into your seventies.
You won’t find scholarships on the FAFSA, but they’re a great alternative to student loans. When you are awarded a scholarship, you receive free money for school that you never have to pay back.
Merit-based vs. need-based scholarships
While the majority of grants are need-based, the majority of scholarships are merit-based. There may be maximum income levels or priority given to those in dire financial straits, but for most scholarships, you’re going to have to do a little bit of work beyond filling out an application.
Most scholarships will require you to maintain a certain GPA, though standards vary wildly. Almost all scholarships will require some type of essay. Traditionally, this is done in written format, but in 2017 some scholarship essays can be done via multimedia such as video.
If your family’s income doesn’t help you establish a strong financial need, don’t lose hope. There are plenty of scholarships out there that have no financial requirements and are completely based on your essay — on rare occasion, they won’t even ask about grades.
Recurring vs. one-time scholarships
Most scholarships only last one semester or one school year. However, there are some you can apply for that will cover your entire tenure as an undergrad. Keep in mind that these options are likely to require you to maintain a certain GPA throughout your studies.
How do I find scholarships?
The first place you can look is your financial aid office. Many schools have endowments not just for grants but for scholarships as well.
After you have exhausted scholarship options at your school, look in places such as:
Professional organizations in the field you want to enter
Professional organizations or unions your parents may belong to
National student organizations related to your major
Potential future employers — especially if they’re a larger company
Within the community you grew up in
Organizations based on your ethnicity or heritage
Organizations related to any extracurricular activities or hobbies
You can look for scholarships on major search engines, like Fastweb, CollegeBoard and Scholarships.com, but you’ll find a ton of competition. If you can look for scholarships focused on what makes you unique, you’re likely to find a dramatically smaller applicant pool, boosting your chances of winning an award.
How soon should I start applying?
Start applying for scholarships as soon as possible. It is possible to fund your education this way in its entirety, though you will have to fill out a lot of applications and write a lot of essays. The sooner you get started, the better.
Each scholarship has a window, which is typically opened annually or once a semester, in which you can file an application. While high school sophomores will be able to apply for some scholarships, opportunities really start opening up in your junior year.
Grants are money you never have to pay back unless you drop out of school or in some other way violate the terms of agreement. In undergraduate studies, they are typically need-based.
In order to qualify for federal grant programs, you must fill out the FAFSA and meet eligibility requirements. There are four types of federal grants:
Federal Pell Grants are distributed based on income-eligibility only. They can be granted to full-time, three-quarter-time, half-time or less-than-half-time students.
For the 2017-18 school year, the maximum Pell Grant awards are:
$5,920 for full-time students
$4,440 for three-quarter-time students
$2,960 for half-time students
$1,480 for less-than-half-time students
These awards are distributed in two parts over two semesters.
During the summer of 2017, Summer Pell Grants were awarded for the first time since 2011. These grants gave you an additional 50 percent of the full award to spend on summer studies — particularly helpful to community college students whose course of study typically runs through the summer.
The 2017 expansion was part of a budget deal passed by Congress in May affecting only one school year. Whether Summer Pell Grants will be available for the 2018-19 school year or any other future years still remains up in the air. Legislation for the permanent reinstatement of Summer Pell Grants was introduced in the Senate in April, but received no vote.
Federal Supplemental Educational Opportunity Grants
The maximum award is between $100 and $4,000, depending on your personal financial situation.
Iraq and Afghanistan Service Grants
If you lost a parent while they were serving in the military in Iraq or Afghanistan post-9/11, you may be able to get a full Pell Grant regardless of your family income through the Iraq and Afghanistan Service Grant.
In order to qualify, you must:
Meet all Pell Grant requirements save EFC requirements.
Have lost your parent before the age of 24 — or while you were enrolled in college at least part time at the time of your parent or guardian’s death.
Over the next couple of years, the maximum award for this grant will be reduced thanks to budget sequestration. If your grant is distributed prior to Oct. 1, 2017, you will receive a maximum award of $5,511.52.
If your grant is distributed between Oct. 1, 2017, and Oct. 1, 2018, you will receive a maximum award of $5,529.28.
If you are planning on becoming a teacher, you may be interested in a Teacher Education Assistance for College and Higher Education (TEACH) Grant. In order to qualify, you must be enrolled in a TEACH-eligible program. Not all schools participate, and the ones that do determine which of their programs qualify for TEACH Grants, so be sure to sit down with your financial aid counselor to determine your potential eligibility.
When you accept a TEACH Grant, you are agreeing to serve four out of your first eight years in the workforce in a high-need specialization in a low-income area. You can also meet this obligation by teaching at a Bureau of Indian Education school.
Your college or university may also issue need-based grants. While your EFC is not likely to be measured in the same way, a FAFSA application is still required in order to be considered.
Some colleges, though typically not Ivy League schools, will offer merit-based grants, as well. Your grades will be a factor here.
Work-study programs are another form of aid that will not be accessible unless you complete your FAFSA.
Many schools participate in federally backed work-study programs for students with a financial need. You are assigned a set amount of hours dependent on your financial need. You may find yourself working for the school, in a community service role, or in a field relevant to your course of study.
Work-study programs pay at least minimum wage and pay at least once per month. You can choose to receive a monthly paycheck or have your pay directly counted against any money you may owe the school.
Your eligibility for work-study will be determined by your FAFSA application.
529 college savings plans
529 accounts are tax-advantaged accounts to help you save for future college expenses. Contributions go in after you’ve paid taxes on your income. That money is invested and grows tax-free — as long as you spend the money on qualified educational expenses.
Types of 529 accounts
Not all 529 accounts are created equal. They are issued by state, and each state has specific rules on how their 529 accounts can be used. However, many states will let you purchase their 529 accounts even if you are not a state resident.
There are two basic kinds of 529 accounts.
College Savings Plans
The College Savings Plan structure allows your money to grow in traditional investments as made available by your state. You can use this money to pay for school at almost any U.S. institution — and even some schools abroad.
When you take money out, it will be based on the real dollar value your investments have grown to. For example, if you have $20,000 in your account, you would be able to take $20,000 out. If school cost $25,000, you would still have to find $5,000 to fund the additional tuition and fees not covered by your 529.
Utah’s 529 plan is a College Savings Plan, and commonly cited as one of the best in the nation.
Prepaid Tuition Plans
Prepaid Tuition Plans allow you to save for tomorrow’s college at today’s rates. There may be different tiers of saving for different types of schools.
One thing to be careful of with Prepaid Tuition Plans is that if you save at the state school level, and your child ends up not wanting to attend a state school when they graduate from high school, you could run into some funding problems. Pennsylvania allows you to change your investment tier at any time, but this is a potential point of friction you should consider at the outset of your 529 decision.
You will also notice that price per credit is quite high for Ivy League schools. As discussed earlier with the example of Cornell, Ivy League schools tend to have extensive grants. If you’re making a median income, saving in this manner may reduce your child’s future institutional aid, costing you more money than you would have had to pay without the dramatic savings.
What can I use my 529 account for?
You can only use the money in your 529 account for qualified educational expenses. If you use the money for anything else, you will have to pay taxes on the withdrawal.
Qualified educational expenses include:
Tuition and fees*
Room and board — though you must be enrolled at least half-time to claim this expense
Technology required for school — including internet access
Required equipment and materials as dictated by your professor
*Some Prepaid Tuition Plans cover tuition and fees only.
How to make a 529 withdrawal
Most programs allow you to make a withdrawal online or via postal mail. Your 529 account issuer will not keep records of how that money was spent. Producing documentation to show that the money was spent on educational expenses falls squarely on your shoulders.
If you have a high enough income level, your child may not qualify for need-based financial aid. Saving in a 529 plan is a generous investment in their future given that they won’t have as many funding opportunities available to them.
Because you are investing, your money is likely to grow — and grow federally tax-free at that. This means you won’t have to save as much in a College Savings Plan in order to meet your goals.
Cons of 529 accounts:
The amount you have saved could reduce institutional aid — especially if you open the account in your child’s name. Open the account in your name and list your child as a beneficiary instead.
When saving in a Prepaid Tuition Plan, do your best to ensure you’re saving at a level your child will actually be able to use. If they don’t end up going to school in state, you could hit a bump in the road if you’ve been saving at state school tuition levels.
Because you are investing, there’s no guarantee of growth. You could conceivably lose money in a 529 account.
Through a combination of federal and private loans, there’s really no set limit on how much you can borrow. You should figure out how much you want to borrow, though, after realistically examining your potential future earnings.
To figure out if your college degree is worth the cost, you need to figure out the net price of your education and your expected salary. A good tool to figure this out is College Reality Check.
Funded by the Bill & Melinda Gates Foundation, College Reality Check helps you estimate the net price of your school based on a number of different factors. Then it shows you how much you can expect to make upon graduation.
Technically, you’re only allowed to spend federal student loans on educational expenses. These can include:
Tuition and fees.
Room and board
Books, supplies and equipment
Transportation while at school
Dependent child care expenses
No one will be monitoring your bank account. However, if you end up having the money to go on shopping sprees after you’ve paid for all of the above expenses, you’re probably borrowing too much. Consider returning the money rather than paying interest on it after you graduate.
Check your loan agreement with non-federal lenders for specific restrictions on private student loans.
Most of the time, no, you do not. However, some colleges and universities require their traditional freshmen to live on campus. Even these stipulations can sometimes be worked around if you are commuting from your parents’ home.
If at all possible, yes. Make an effort to make at least interest-only payments. This will keep interest from accruing while you’re in school and deferment, which costs you more money in the long run.
The only time it doesn’t matter as much is when you have Direct Subsidized Loans — which will not accrue interest while you’re in school. Even then, making principal payments early isn’t a bad thing if you can swing it.
If you miss one payment on your federal student loans, you will have to make it up before 90 days — otherwise you get reported to the credit bureaus.
If you miss several payments on your Direct Loans and don’t make payments for 270 days, you will be in default, which puts you at risk of not only being reported to the credit bureaus but also losing all benefits of federal student loans like income-driven repayment options. You could also end up in court.
Consequences for Perkins Loans and private student loans depend on the agreement you sign prior to disbursement, but they can report you to the credit bureaus as soon as you are 30 days late with a payment.
The American Dental Education Association (ADEA) shares numerous statistics about dental school debt and the profound impact it can make on new dentists’ lives. According to the agency, the average dental school debt for indebted dental school graduates from the class of 2016 reached $262,119. Large debt loads were reported at both public schools and private schools — $238,582 and $291,668, respectively.
Even more startling is the fact that more than 30% of indebted dental graduates from the class of 2016 reported debt loads of more than $300,000.
These statistics show just how expensive dental school can be, but they also make us wonder if dental school is truly worth the cost. This guide was created to show how a dental education can pay off with proper loan and money management. If you’re considering a future in dental school and worrying about the high price tag, keep reading to learn more.
Is dental school worth it?
Before anyone can gauge whether dental school is worth it, it’s crucial to consider the level of income one can expect in this career. According to the U.S. Department of Labor’s Bureau of Labor Statistics, dentists earned an annual mean wage of $173,860 nationally as of May 2016. It is important to note, however, that the bottom 10% of earners brought in only $67,690 that year, while the bottom 25% of earners made an average of $106,180.
The key to deciphering dentist income is figuring out how much you might earn after you gain some experience and the type of dentistry role you might take on. It’s only natural to expect dentists to earn more as they progress through their careers, but the industry they work in can also impact their earnings.
As the BLS reports, some industries paid dentists considerably more in 2016, including residential intellectual and developmental disability, mental health, and substance abuse facilities ($184,620) and offices of dentists ($176,470).
Location matters, too, of course. Some states reported consistently higher incomes for dentists that year, including Delaware ($236,130), North Carolina ($236,020), Alaska ($234,240), New Hampshire ($220,480), and Nevada ($210,690).
With these salaries in mind, it’s easier to see how one might overcome $200,000+ in educational debt compared to workers in other, lower-paying industries.
Still, it’s important to note that dental school debt can still make a big impact on any dentist’s finances after graduation. A dentist with the average debt load of $262,119 at 6% APR would need to fork over a minimum of $2,910.06 per month if they chose standard, 10-year loan repayment after graduation per LendingTree’s loan calculator (Note: LendingTree is the parent company of MagnifyMoney). Because of this, some dentists choose alternative repayment options that allow them to pay smaller monthly payments for a lengthier timeline. How long it takes a dental graduate to repay their debt depends on whether they choose standard, 10-year repayment or opt for an alternative repayment plan instead.
Is dental school right for you?
Part II: How to Pay for Dental School
If you answered “yes” to all or most of the questions above, considering a dental education could be a smart move. Still, it’s important to learn more about the different ways to pay for dental education and the debt repayment options that may be available to you. We’ll cover these concepts and more in this section.
Federal vs. Private Student Loans for Dental School
Federal student loans for dental school
Federal loans can be valuable for students who need to borrow money for dental education. Several different types of student loans are available, each having their own benefits and drawbacks. Federal student loans are often a good option for dental students since they offer relatively low interest rates and help students qualify for federal perks like income-driven repayment and student loan forgiveness programs.
Pros of federal student loans:
Fixed and competitive interest rates
Access to federal loan repayment and student loan forgiveness programs
The government can pay your interest while you’re in college if you qualify for subsidized loans
Flexible repayment plans
Access to student loan forbearance and deferment (if you qualify)
You don’t need a credit check to qualify for most federal student loans
You can defer repayment until you graduate college or drop down to half-time
Cons of federal student loans:
Borrowing caps that limit the amount of federal loans you can take out
You may need to take out more loans to cover the costs of dental school
The government can garnish your wages if you miss many payments
When to consider federal student loans:
You are gearing up for dental school and want a low, fixed-interest rate
You haven’t surpassed borrowing limits on federal loans yet
You want options in terms of deferment, forbearance, and income-driven repayment in the future
Private student loans for dental school
Private loans offer an alternative option for dental students to use instead of, or in addition to, federal student loans. Private student loans are offered through private lenders, which means their rates and repayment terms vary. Many dental students wind up taking out private student loans once they have borrowed as much federal aid as they could receive.
Pros of private student loans:
Rates can be lower than federal loans if you have excellent credit and/or a co-signer
Loan limits can be high enough to cover your entire cost of admission
The application process and loan disbursement may happen faster than federal student loans
Cons of private student loans:
You typically need good or excellent credit to qualify
You may need a co-signer
Interest rates can be fixed or variable
You don’t qualify for federal student loan forgiveness, income-driven repayment, or federally sponsored deferment or forbearance
You may need to make payments or pay interest while still in school
When to consider private loans:
You’ve tapped out your federal student loan limits but still need to borrow money
You qualify for a lower interest rate
You don’t want to take advantage of federal plans or protections on your student loans
This program is offered through the Dr. Anthony Volpe Research Center and is open to 1-2 dental students per year. The goal is to help students apply classroom and lab experiences to real-world scenarios students will find in the field of dentistry.
Award amount: Award varies.
Qualifications: You must be a dental student to qualify.
Deadline to apply in 2017: Application period opens in late December and closes in late January.
This award was created to encourage dental students to conduct important research in their field by creating a financial incentive. The goal of the award is to promote advances in preventative dentistry.
Award amount: A $5,000 grant is awarded to one student each year.
Qualifications: According to the American Dental Association Foundation, dental students pursuing this grant must be in pursuit of one of the following dental degree programs at an eligible institution: D.D.S. or D.M.D., D.D.S./D.M.D. and Ph.D. dual degree, Ph.D. or equivalent, or M.P.H., M.S. or equivalent.
Deadline to apply in 2017: The application period opens the first Friday of each April and closes the last Friday of each June.
This ADA Foundation scholarship helps select students defray the overwhelming costs of dental education and is meant to apply to academically gifted students.
Award amount: Scholarships up to $2,500 are available.
Qualifications: Students must be in their second year of school, must be enrolled full time, must demonstrate financial need, and must have a GPA of at least 3.25. References and minority status are also required.
Deadline to apply in 2017: Applications open the first Friday in September and close the second Friday in November.
This program offers two $5,000 awards to dental students who are nominated by someone else after demonstrating leadership skills in pursuit of their dental education.
Award amount: Two $5,000 awards are granted each year.
Qualifications: Students must be nominated and be in the process of earning a D.D.S. or D.M.D. degree from a dental school accredited by the Commission on Dental Accreditation. Students must also be under the age of 40 and a student, graduate student, or resident in their first five years of residency.
Deadline to apply in 2017: The nomination period begins the first Friday in April and ends the last Friday in June.
This scholarship is open to 27 dental students nominated by the dean of their school.
Award amount: Awards come in the form of $5,000 scholarships.
Qualifications: Students must be nominated by the dean of their school and must be in the class of 2018 or class of 2019 at a dental school accredited by the Commission on Dental Accreditation. Students must also demonstrate financial need.
Deadline to apply in 2017: The deadline to apply for a 2017 scholarship was May 17, 2017. A 2018 deadline will be announced soon.
This scholarship, which was created to commemorate Senator Barry Goldwater, is open to students who pursue research careers in natural sciences, mathematics, and engineering.
Award amount: Scholarships of up to $7,500 per year are available.
Qualifications: You must be a full-time sophomore or junior student pursuing a dental degree or a degree at a four-year or two-year school. Medical research must be a central part of your career goals.
Deadline to apply in 2017: Application period opens the first Tuesday in September and ends the last Friday in January.
Part III: How to Pay Back Dental School Debt
Due to the many federal and private loan programs available, students entering dental school have plenty of options to compare and contrast. Since dental school funds borrowed need to be repaid eventually, however, it’s important for students to educate themselves on their many repayment options as well.
Repayment programs to consider
Here are the repayment programs students can choose as they wrap up their dental degrees.
Income-Driven Repayment Plans
For federal student loan borrowers, there are several different income-driven repayment programs, each with their own stipulations and intended audience. The following table highlights each program and how it works.
Is an income-driven repayment plan right for you?
Income-driven repayment may be a good option for dental students who want to make lower monthly payments than they would with standard, 10-year repayment plans. These plans are also a good option for students who want their loans forgiven after 20-25 years. Keep in mind, however, that forgiven loan amounts are considered taxable income in the year they are forgiven.
The Public Service Loan Forgiveness Plan offers students the opportunity to have their student loans forgiven after 10 years provided they work in an approved public service position during that time. Once a student finds eligible employment and starts working, they can have their loans forgiven after 10 years and 120 months of timely loan payments.
While this program can be advantageous for dental graduates, it’s important to note that changes to this program could be on the way. It still works as promised for the time being, but budget cuts of the future could bring this program to an end or bring on considerable changes to benefits.
Who is eligible?
Dentists who agree to work in government-approved public service positions may be eligible for the Public Service Loan Forgiveness (PSLF) Program. You can learn more about qualifying employment here.
Is this program right for you?
This program can work well for dentists who want to work in public service or in an area with a high need for dentists and other health care workers. After 10 years, your loan balances will be forgiven, and you are free to move on to other employment if you wish.
This program offers tuition assistance up to 100% for individuals who serve in the U.S. Army while working on their degree. The Army will pay your tuition, your required books, and most academic fees while offering a monthly stipend of up to $2,000.
Who is eligible?
Dental students who qualify to serve in the U.S. Army may qualify for this program. You must be 21-42 years of age, be a U.S. citizen, and meet prescribed medical standards.
How to apply
For additional information, contact your local Army recruiter, call 1-800-USA-Army, or visit Healthcare.GoArmy.com.
National Health Service Corps Loan Repayment Program
This program offers tax-free loan repayment assistance for individuals entering qualified health care careers. Licensed health care providers may earn up to $50,000 for a two-year commitment to NHSC-approved employment in a high-need area.
Who is eligible?
Dentists who agree to work in an NHSC-approved career for at least two years can qualify for this assistance.
How to apply
Contact the National Health Service Corps to apply. You can also explore the NHSC website for tips on the application process.
State Loan Repayment Programs for Dentists
5 tips to pay off your student loans faster
While loan repayment programs can help you whittle away your student loans, there are several strategies that can help you reduce the amounts you owe whether you sign up for special programs or not. Here are five tips to pay your loans off faster no matter your situation or how much you owe:
#1: Start paying right away.
According to the U.S. Department of Education’s blog, paying your loans right away – whether you have to or not – can be a smart move. While student loan payments may not be required until you graduate, you can reduce the amount of interest you’ll pay over time by paying any amounts you can toward your loans as you can.
#2: Refinance your loans to a lower rate.
Refinancing student loans into a new loan product with a lower interest rate and better terms can help you save money on interest over the long haul. This is especially true with private student loans since rates tend to be competitive and can change over time. Keep in mind, however, that refinancing federal student loans with a private lender can cause you to miss out on certain federal perks and protections including income-driven repayment, deferment, or forbearance.
Signing up for automatically debited payments can take the stress out of repaying your student loans. By setting up automatic bank drafts, you can rest assured your loan payment is taken care of and you won’t face late fees or penalties. Some lenders also offer an interest rate reduction for enrolling in their automatic payment plan. This is where savings come into play since a lower interest rate means less of your payment goes toward interest over time.
#3: Sign up for automatic payments.
Signing up for automatically debited payments can take the stress out of repaying your student loans. By setting up automatic bank drafts, you can rest assured your loan payment is taken care of and you won’t face late fees or penalties. Some lenders also offer an interest rate reduction for enrolling in their automatic payment plan. This is where savings come into play since a lower interest rate means less of your payment goes toward interest over time.
#4: Pay more than the minimum payment.
This tip might seem obvious, but it’s extremely important. Whether you start paying your loans off right away or wait until you graduate and have to start making payments, paying more than the minimum will let you pay off your loans faster. The more you can pay toward the principal of your loan balance, the more you save on interest and the faster your loans will disappear.
#5: Consider a loan repayment program.
Some of the programs we listed above (such as the PSLF Plan or state loan repayment assistance programs) can help you get out of debt faster while gaining valuable work experience. These programs typically require you to work in a specific shortage area for a predetermined length of time, so they’re not for everyone. If you do qualify and apply, however, you could have your loans forgiven completely or earn tens of thousands of dollars in loan repayment assistance.
Frequently Asked Questions: Paying for Dental School
Determine your current interest rate and compare it to the new rate you could qualify for. If the difference is substantial, refinancing can make a lot of financial sense. With a lower interest rate, you could save money and pay off your debts faster. However, it’s important to remember that you’ll lose federal student loan benefits if you refinance federal loans with a private lender.
One of the best ways to reduce the amount of money you owe for dental school is to spend less on your education to begin with. As you consider dental schools, make sure to compare program details such as the price of tuition, room, and board. How much you pay for school has a direct correlation to how much you’ll need to borrow.
Start by filling out a FAFSA form, or Free Application for Federal Student Aid. This form helps schools determine how much federal aid you might qualify for. You should also contact the financial aid office at your dental school. They can point you toward applicable school-based scholarships and grants you may not even know about.
While the amount of time it takes dental students to find employment varies, the ADEA reports that dental school graduates typically enter the workforce much faster than colleagues in many other health professions.
According to the ADEA, any college major that offers a well-rounded education or fosters a foundation in science is appropriate for future dental students. This goes against the common wisdom that a major in biology or a similar subject is required.
The ADEA reports that both designations mean the same thing – that the dentist graduated from an accredited dental school. Universities determine which degree they award, and it has no bearing on employment opportunity or earnings.
As many as 40 percent of college-bound students never make to campus their freshman year thanks to a phenomenon called “Summer Melt.” The term was coined by researcher Karen Arnold in 2009 to describe what happens when high school seniors get accepted into postsecondary institutions but still fail to enroll.
Students susceptible to summer melt, many of whom are often low-income and first generation college students, may get stuck on one or more of the steps required to complete enrollment. These steps can be as simple as filling out housing applications, taking placement tests and attending summer orientation — but the most common culprit behind summer melt is the financial aid process.
Making a mistake on the Free Application for Federal Student Aid, or FAFSA, or missing important financial aid deadlines could mean little or no scholarship or grant money for at-risk low-income students, who may not be able to attend attend school without the aid.
Here are a few steps students and their families can take to make sure they don’t fall prey to summer melt.
Reach out to school counselors and nonprofits for help
Dejah Morales, 19, could easily have fallen into the summer melt trap. As a first generation college student, the East Boston, Mass. teen told MagnifyMoney she wasn’t sure how to navigate the college matriculation process. But rather than giving up, she sought help from nonprofit organizations with experts on hand to guide her.
“I wanted to go find help because I knew all of the paperwork that is filled out needs to be done correctly because it affects how much [money] you get for financial aid and anything that has to do with you living on campus,” Morales said.
She started by contacting her high school college admissions counselor, who turned her on to a program offered by Bottom Line, a Boston, Mass.-based nonprofit that helps low-income and first-generation students get through the college application process and provides additional support when students are in school. Bottom Line made sure she correctly completed the application process in order to become a student. The nonprofit also has offices in Chicago, New York City, and Worcester, Mass.
When it came to sorting outout the nitty-gritty details of securing financial aid, Dejah turned again to her high school’s resources. All Boston-area high schools are staffed with a counselor from uAspire, a nonprofit that helps college-bound students get the information and resources they need to complete the college admissions and financial aid process.
“Submitting your actual [income verification] paperwork to the school was the hard part. And then having to get my parents tax information was always a struggle especially my dad since he wasn’t living with me,” says Morales. The uAspire counselor assisted her through the entire process.
Even if your school doesn’t have dedicated college counselors on staff, there are many free programs dedicated to helping students navigate the college financial aid process. Check out national non-profits like the College Goal Sunday Program hosted by the National College Action Network, or Reach4Succes. Also, students and families can contact their school counselor’s office for access to local resources.
Know your national AND state FAFSA deadlines — and submit your forms early
What’s more, federal grants and scholarships — ‘free’ money for school that you don’t have to pay back — are typically doled out on a first come, first serve basis. That means the later you wait to submit the FAFSA application, the less likely those funds will be available to you — even if you qualify for the aid.
There are two deadlines to keep in mind: the national FAFSA deadline and your state FAFSA deadlines.
State FAFSA Deadlines:
Your state may have set a different FAFSA submission deadline to qualify for state-specific aid. Check here to find your state’s deadline.
Get your parents on board early
Joe Orsolini, CFP and founder of College Aid Planners, says the majority of financial aid issues he sees occur just weeks before the fall semester begins are a result of parents not getting involved early on. Even small mistakes, like entering an incorrect social security number or miscalculating a parent’s income, could mean delays in receiving aid.
“The parents never really sat down with the kid and asked, ‘Hey. where is the rest of this money coming from?’” says Orsolini.
You’ll need to have important documents like your parent’s taxes and income from the past two years and your social security number on hand to complete the FAFSA form. Those can be difficult to get hold of when you don’t live with one or both your parents or if your parents don’t fully understand what they are being asked to provide.
Easy mistakes that can throw off your FAFSA submission
Incomplete e-signature. The FAFSA can also trip you up on seemingly-easy steps, like providing an e-signature. If you don’t provide the e-signature correctly, or think you hit ‘submit’ but didn’t, you may waste valuable time waiting for an email that won’t come until you sign the form properly.
Missing mistakes on your Student Aid Report. About two weeks after you submit the form, you should receive a Student Aid Report which gives you basic information about your eligibility for federal student aid along with your Expected Family Contribution – what your family is expected to pay. The SAR also includes a four-digit Data Release Number (DRN), which you’ll need to allow your school to change certain information on your FAFSA.The SAR also lists your responses to the questions on your FAFSA, so be sure to review it and correct any mistakes.
Income verification notifications. After you receive your SAR, check to see if you’ve been flagged for ‘income verification’ as about 1/3 of students are required to verify their parent’s income with additional proof to complete the FAFSA process. The government usually follows up on students who are more likely to qualify for the federal Pell grant or other grant-based aid, Page says. If flagged for income verification, you’ll have to submit verification to each school you apply to, and the schools may have different paperwork and processes.
Missing deadlines in e-mail. When you create and submit the FAFSA, you give the Education Department your email address. The Education Department will email you, so you need to check the inbox of the email address you provided for correspondence. Create your FAFSA account using an email account you check regularly. Turn on your email notifications on your devices so you won’t miss any emails reminding you to submit your FAFSA form or letting you know if something went wrong somewhere in the process.
Formally accept your financial aid awards
After submitting your FAFSA, you will receive a student aid award letter from your college. But your work isn’t done there. You’ll have to sign online to officially accept the aid (student loans, grants, work-study programs, etc). Typically, that will be facilitated through your college’s website.
If you applied for federal work-study, this is when you’ll decide if accepting it is best for your circumstances. Work with a financial aid counselor at the college if you need help weighing the pros and cons of accepting or denying any aid you’ve been offered.
Don’t forget to sign your Master Promissory Note. In order to receive federal student loans, you must sign a Master Promissory Note. The MPN is a legal document you must sign saying you promise to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education. If you miss this final step, you won’t actually get any of the federal loans you’ve been assigned.
Log into your school’s student portal ASAP
Income freshman likely have access to a student portal provided by their college or university. There, you’ll likely find a checklist of important steps to complete before you can officially enroll.
The list may include important financial aid actions like accepting grants and scholarships or signing your Master Promissory Note.
Contact your school’s financial aid counselors early
If you’re not sure what your next steps should be in the financial aid process, you should reach out to the school you’re planning to attend. Call or send an email to the financial aid or admissions offices at your school if you are concerned about receiving the aid you need or get stuck completing all of the steps in the process.
The chatbot ‘nudged’ students to remind them of things they needed to do, like signing their MPN, or accepting scholarships, but it could also respond to students’ questions or help them get in contact with a human if asked or if it couldn’t answer the question.
“We saw our melt rate drop from 18% to 14%,” says Scott Burke, the school’s’ Associate Vice President and Director of Undergraduate Admissions. “That was 300 more students in our freshman class in fall 2016 than in fall 2015.”
Don’t forget your high school resources
Like Morales, high school seniors can still ask their high school counselors for help after they’ve graduated. Don’t hesitate to reach out with questions you may have about your transcripts or other parts of the financial aid process.
High school counselors, like Morales’ uAspire counselor, are usually equipped to answer many of the questions you may have about the financial aid process or with the FAFSA, but they may not be able to answer more college-specific questions. For example, your high school counselor could help you navigate your way through Loan Entrance Counseling, but may not be able to explain the process you need to go through to accept any awarded scholarships or grants from the university.
If a high school counselor can’t answer your questions, they generally direct you to the proper entity or person who can.
Michelle Laydon earns $80,000 per year as a senior network engineer in Santa Paula, Calif. She’s been working in the IT field for close to 20 years without a college degree, instead working her way up in the field through a mix of on-the-job training and a number of professional certificates, which she has actively renewed throughout her career.
“I’ll be quite honest, we have folks who come in to interview who may have a college degree and claim to know this stuff, but who’ve honestly never had their hands on it,” says Laydon, 50. “When they sit down in my department, it’s very intimidating because if you don’t know it, you don’t know it. With IT, there’s just so much to be gained by that hands-on experience.”
Workers without a B.A. currently make up about 64% of today’s workforce, spanning across a number of industries that go beyond traditional blue-collar jobs. And, despite popular belief, there are plenty of good jobs to be had that don’t require a bachelor’s degree — about 30 million, to be precise. The news comes from fresh research released Wednesday by Georgetown University and J.P.Morgan Chase & Co., which sought to find out how many workers are in good jobs (defined as those that pay at least $35,000) that don’t require a B.A.
The “New Collar” Job Market
The “Good Jobs That Pay Without a B.A.” report found that while manufacturing jobs on the whole are declining, they’re being more than made up for by good jobs in other skilled-service industries like health services, information technology, and financial services; the report’s lead author Anthony P. Carnevale, director of the Georgetown University Center on Education and the Workforce, refers to these as “new collar” jobs.
“The dominant narrative was that the American economy was hollowing out, that we were losing all the jobs in the middle, that in the end we’re going to end up with an economy that only hired brain surgeons and pool cleaners,” Carnevale told MagnifyMoney.
It turns out there is some truth to that — the abundance of blue-collar manufacturing jobs is indeed decreasing — but we’re simultaneously seeing a spike in these “new collar” jobs that pay well without requiring a B.A. The takeaway?
“The hollowing-out story, in a way, is being oversold,” says Carnevale.
To be certain, college experience does matter in the job market these days.
For the most part, Carnevale says that having some college experience will likely give you a leg up in the job market — professional certificates, some college, associate’s degrees, two-year degrees, etc.
“That’s where the most striking growth has been,” he says. “In a sense, for a lot of these jobs that used to require only high school, there’s been an upward shift in the education requirements for these jobs now.”
How to Get a “Good Job” These Days
Despite suffering major job losses, blue-collar industries continue to represent the greatest source (55%) of good jobs for folks without a B.A., according to the report. And while there has been a slight increase in good jobs that pay without a four-year degree, their overall share of good jobs has actually dropped from 60% down to 45%. According to Carnevale’s findings, this is because B.A.-holders are still scooping up more and more of these gigs.
This may be the case, but as “new collar” jobs grow and evolve, workers without a B.A. can still earn a solid living. In some cases, they can even out-earn their higher-educated colleagues.
“You can get a one-year certificate in heating, ventilation, and air conditioning, and you’ll make more than 30% of the people who get A.A.s, and a fair percentage of the people who get B.A.s, actually,” says Carnevale. “In the old days, it was: go to college, get a B.A., earn more money. It’s more complicated now. It’s more about the field of study.”
He adds that the idea that more education translates to more money is still generally true — but there’s a whole lot of variation.
“If you get a certificate in engineering or computers, for instance, you’ll make more than somebody who gets an A.A. in an academic subject,” he says.
There’s a wide range of good jobs that don’t require a bachelor’s degree, from nurses to police officers; electricians to plumbers; bookkeepers to customer service representatives. The report points to a computer support technician earning $60,000 as a perfect example of this new worker demographic.
College Debt vs. Career Prospects
Matt Eyre, an assistant manager at a Tampa, Fla., restaurant, still carries student loan debt from the associate’s degree in music engineering and production he earned a decade ago. But he has no plans to return to school to complete his four-year degree.
“I switched career tracks and have been in restaurant management for about six years now, earning more than I think I’d get in music production,” says Eyre, 35. “I honestly don’t think having a degree would unlock any new opportunities for me; if anything, it would drive me further into debt.”
Eyre made the career jump in New York City, where his entry salary landed at $50,000. After three years of positive reviews from employers and consistent raises, he was earning $60,000 by the time he moved to Tampa in 2014. Despite taking a pay cut (he now earns $48,000 per year), he is still earning more than the $41,250 average salary of assistant managers in the U.S., according to Glassdoor’s estimate.
“In my field, performance speaks louder than degrees,” says Eyre. “I’ve worked with managers who had bachelor’s degrees in hospitality management, and I actually made more than they did because of my experience.”
When it comes to his career, Eyre has fortunately lived in states ripe with “new collar” job opportunities; according to Carnevale’s team, both Florida and New York are among the top four states that offer the largest number of good jobs that don’t require a B.A. degree. Texas and California take the top spot on the list, which is good news for Laydon, who works in the Golden State.
According to career resource Glassdoor, the average salary for a senior network engineer like Laydon in the U.S. is just over $104,000. Could Laydon hit that number if she had a B.A.? Maybe, but at this point in her career, like Eyre, she has no interest in taking out loans to pursue a higher degree.
The larger your state’s population, the better odds you might have of landing a good job without a B.A. According to the report, California, Texas, Florida, and New York, which happen to be the more populous states, offer up most of these jobs. Illinois and Pennsylvania are right behind.
The Altra Federal Credit Union Student Visa card is made for college students and helps you build credit while also taking advantage of rewards. You’ll earn 1 point per dollar spent, and double points during the 60 days after opening your card. The rewards points can be redeemed for cash back, travel, merchandise, and more. This card is especially beneficial if you plan on taking out an auto loan in the next few years, as you may be eligible to redeem rewards points for a .25% or .50% interest reduction on an Altra auto loan. The various features Altra provides make this card a good option for students starting their credit journey. The Altra Federal Credit Union Student Visa card is featured as one of our recommendations for best student credit cards of 2017.
Altra offers a credit card designed with students in mind to help you build credit. There is no annual fee for this card, though you may have to pay a $5 membership fee; but more on that later. In addition to a low 14.90% APR, Visa Checkout, and fraud alerts, Altra offers a rewards program. You will earn 1 point per dollar spent on all purchases and will earn double points during the 60 days after opening your new account. This allows you to get a rewards boost while you’re in the honeymoon phase of being a cardholder. However, this may not be the largest rewards program compared to other cards, but it is better than no rewards.
The reward points that Altra offers do not have a standard value like most rewards programs. Instead, points can be redeemed for merchandise or cash back at CURewards.com. Note that there is only one cash back option of $50, and you need 8,334 points to redeem. So you would need to spend $8,334 to receive $50 cash back.
Although you earn unlimited rewards points, they expire after five years — but on the last day of the year. For example, if you earned points on June 1, 2017, they would expire in five years but on the last day of the fifth year — December 31, 2022. As a result, think twice about saving all your points for a large reward because you may lose them.
In addition to a rewards program, Altra will give you a $20 cash back reward at the end of your first year as a cardholder. All you need to do to qualify is to maintain your account in an “exceptional” manner by having no late payments, no over-the-limit usage, and 6 out of 12 months’ activity. This should be an easy $20 since your goal is to pay every statement in full each month.
If that isn’t enough, Altra will choose one cardholder at random each quarter and pay their previous month’s purchases, with a minimum of $50 and maximum of $500 paid. To qualify for this “lottery” you need to be in good standing, which means you pay your bill on time and in full every month, and wait for your lucky day!
If you plan on taking out an auto loan in the next few years, Altra has a unique offer that can save you significant money. You are able to redeem 5,000 points for a .25% interest reduction or 10,000 points for a .50% interest reduction on your Altra auto loan.
Keep in mind that your primary goal with a student card is to create a positive credit history with the hopes of having a credit score in the 700s upon graduation. Don’t let the prospect of rewards hinder your credit and lead to overspending. Some best practices to promote a positive credit score include paying each statement in full and on time and using no more than 20% of your credit limit — meaning don’t max out your card.
How to Qualify
Altra designed this card with students in mind, which means they don’t expect you to have a great credit history, or any at all. Though they do expect you to have a stable source of income, so a job is needed to apply for this card. This will prove that you can afford to make your monthly payments on time and are responsible.
Another requirement Altra has that is unique to credit unions is that you need to be a member to become a cardholder. No worries, though, since the application process is simple. You can either qualify for membership via various eligibility options or by joining the credit union for $5. In addition, while you’re actively using the card you will need to keep $5 in a savings account.
What We Like About the Card
Altra offers a relatively low 14.90% APR, compared to other cards that offer APRs as high as 24.74%. The low APR is beneficial if you don’t pay your balance in full one month and as a result are charged interest. It helps that Altra has an APR 10% lower than competing cards; however, you should always pay your bill in full every month to avoid interest charges and damage to your credit score.
Earn rewards points.
Altra provides you the opportunity to build your credit while also earning rewards. With this card you can earn 1 reward point per dollar spent. Even better is that during the first 60 days after opening your account you will earn double rewards points. Don’t let this get to your head and spend more than you can to maximize your double points. Remember that your primary goal is to build good credit, and earning rewards is only an added bonus. It’s important to note that Altra rewards points do not have a standard value like typical rewards programs from other credit cards. Point value varies based on each redeemable item.
$20 cash back for good behavior.
If at the end of your first year as a cardholder you have no late payments, no over-the-limit usage, and used your card for 6 out of 12 months, you will receive a $20 cash back reward. This is an added perk for responsible cardholders that makes Altra’s card more appealing.
Random winner each quarter.
An added level of excitement is Altra’s bill pay “lottery.” Each quarter Altra will choose one random cardholder and pay their previous month’s purchases, anywhere between $50 and $500. Make sure you’re in good standing to qualify.
Redeem points for a lower interest rate on an Altra vehicle loan.
If a car is in your near future, Altra provides a great option that can save you money. You will receive a .25% or .50% point reduction on your loan by redeeming 5,000 and 10,000 points, respectively. This may save you a significant amount of cash in the long run.
What We Don’t Like About the Card
Foreign transaction fee.
Be careful if you travel abroad since this card charges a 1% foreign transaction fee. This isn’t as high as some cards that charge 3%; however, you can find other student cards that don’t charge a fee when you’re traveling out of the country, such as the Discover it® for Students card or the Journey® Student Rewards from Capital One®.
Need to join the Altra Federal Credit Union.
Unlike credit cards from banks, you have to be a member of the Altra FCU. There are two ways to become a member, and the first option — meet their eligibility requirements — is free. Otherwise you will need to pay a one-time $5 membership fee. All members will also need to have a $5 balance in an Altra savings account that must remain in the account while you have the card open.
Who the Card Is Best For
If you’re a student who doesn’t mind joining a credit union and wants to earn rewards while building your credit score, this card may be right for you. We recommend this card for students who plan on taking out an auto loan since you can benefit greatly from the .25% or .50% interest reduction Altra offers. With numerous cardholder benefits, the Altra FCU Student Visa card is a good choice for students starting their credit journey.
If You Frequently Spend on Gas, Groceries, and Restaurants
The Golden 1 Credit Union Platinum Rewards for Students card is a great card if you want to receive a cash rebate for your purchases. With Golden 1 you will earn a cash rebate instead of rewards points that will be deposited into your account at the end of every month. The cash rebate program also boasts a high 3% rebate for gas, grocery, and restaurant purchases, with 1% for all other purchases. If you frequently spend money in these areas, you’ll be able to maximize your cash rebate. You can become a member of Golden 1 by joining the Financial Fitness Association for $8 per year and keeping at least $5 in a savings account.
Not everyone wants to join a credit union, and there are numerous student credit cards offered by banks. The Discover it® for Students card is a great card to help you build credit while earning cash back. With Discover you will earn 5% cash back on quarterly rotating categories and 1% elsewhere — but it doesn’t end there. They also reward students with good grades, match your cash back at the end of the first year, and provide access to your FICO score for free. Overall, Discover is a great card for students who don’t mind tracking rotating categories to maximize cash back.
It’s a smart choice to start building your credit while you’re in college so by the time you graduate you have a healthy credit score in the high 600s to mid 700s. As a result, you’ll be in good standing with financial institutions and will benefit from being able to make larger purchases like a new car. Also, if you want to get an additional credit card that offers cash back or rewards, you will be more likely to get approved with a good credit score. Check out our student credit card guide.
To join the Altra Federal Credit Union you may already meet several eligibility options that come at no cost. If not, there is a one-time $5 membership fee. You will also need to have a $5 balance in an Altra savings account that must remain while you have the card open.
You should work hard to make sure you make payments on time every month. A missed payment will lead to a late fee and interest accruing on the balance. This will ultimately leave a negative mark on your credit report and lower your credit score. Try not to spend more than you are able to and stick to a budget with these helpful budgeting apps.
If a credit card isn’t the right product for you, don’t fret, there are other options available. You can build credit by using a secured card or by becoming an authorized user on your parents’ account. A secured card is where you deposit an amount of money that acts as collateral, and the amount you deposit becomes your credit limit. This is a great way to build credit with less risk than a typical credit card. Compare the best secured cards for your needs. Your second option, becoming an authorized user, allows you to piggyback off of someone else’s good credit. You will receive their good credit behavior on your credit report.
The vast majority of student loan borrowers who default and rehabilitate their loans are set up to fail again because of bad advice, a new government study claims.
The Consumer Financial Protection Bureau says a stunning 9 out of 10 of these high-risk borrowers were not enrolled in affordable repayment plans, such as income-driven repayment — meaning their monthly payments were much higher than they had to be. Predictably, those borrowers were five times more likely to re-default on their loans, racking up $125 million in unnecessary interest charges along the way.
Conversely, students who were enrolled in income-driven repayment plans, which reduce payments based on the borrower’s income, were much less likely to have trouble making on-time payments. Fewer than one in 10 re-defaulted when enrolled in income-derived repayment, the CFPB said.
Loan servicers are responsible for informing borrowers about their options, but the CFPB has alleged previously that they do a poor job of it.
A Government Accountability Office report in 2015 found that while 51% of borrowers were eligible for a repayment program that could lower their payments, only about 15% were enrolled in it. The CFPB complaint database is littered with allegations that servicers make enrollment unnecessarily hard. And earlier this year, the CFPB and the state of Illinois both sued Navient — the nation’s largest servicer — and alleged the firm systematically failed to inform borrowers of their options. (Navient denied the allegation.)
Tuesday’s report focuses on a more narrow group — those who had stopped paying their student loans but had recently restarted payments and “rehabilitated” them. The group, which consists of about 600,000 borrowers, is considered the riskiest of the 43 million Americans who owe student loans.
Their plight shows the system is broken, said CFPB Student Loan Ombudsman Seth Frotman.
“For far too many student loan borrowers, the dream of a fresh start turns into a nightmare of default and deeper debt,” Frotman said. “When student loan companies know that nearly half of their highest-risk customers will quickly fail, it’s time to fix the broken system that makes this possible.”
The Student Loan Servicing Association, a trade group that represents servicers, didn’t immediately respond to requests for comment.
Roughly one in three student loan borrowers are late to some degree on their monthly payments. The Department of Education estimates that more than 8 million federal student loan borrowers have gone at least 12 months without making a required monthly payment and have fallen into default.
At-risk borrowers should know there are multiple programs designed to help them avoid default — income-contingent repayment, income-based repayment, and “pay as you earn” are all designed to keep payments at between 10% and 20% of income. Some offer payments as low as $5 per month, depending on income.
When families think of financing a college education, they usually think about covering tuition costs. It’s easy to home in on tuition — after all, it’s an obvious, in-your-face expense. But tuition and fees don’t make up the largest portion of the average cost of college attendance.
In the College Board’s most recent Trends in College Pricing, researchers found non-tuition-related expenses at public four-year schools account for 61% of a total $24,610 average cost of attendance.
Here are a few hidden college costs for families to consider before the school year starts.
Room and board make up about 42% of the total cost of attendance at four-year public institutions, according to the College Board. After tuition, housing is the second-largest expense students will encounter.
For students who choose (or for whom it is required) to live in on-campus housing, room and board might be a non-negotiable expense. The cost to live in a dorm can vary from as low as $5,326 for the school year to more than $18,000 according to U.S. News Short List rankings. Generally speaking, it’s cheaper to live on campus in areas with higher rent, while off-campus housing is cheaper in areas with lower rental costs.
Other on-campus living requirements such as enrollment in the school’s meal plan, a security deposit, and dorm fees can also add up.
Don’t assume the university’s housing cost estimate is correct, as schools use different factors to calculate costs. A 2015 Trulia analysis found “schools often underestimate the cost of off-campus housing, sometimes by thousands of dollars for the school term.” For example, the University of California, Berkeley, estimates a student would spend $7,184 to live off campus, while Trulia’s data showed it would cost $12,375 for two students to share a two-bedroom apartment for nine months.
Tips to save on off-campus housing:
Compare costs to on-campus housing. Depending on where you attend school, a 9- or 12-month off-campus lease plus utilities and internet might actually be more expensive than room and board in a university dorm.
Look for roommates to help ease the burden of utilities and other bills.
Plan to budget a few hundred bucks for furniture and decor. If you’re lucky, your dorm or apartment might include a few pieces of furniture. Even then, you’ll need bedding, curtains, linens, and other staples. Plan to spend funds on furniture and decorations to make the new space feel like home.
The good news is that any college town where students are constantly moving in and leaving each year are great for the resellers market. Check out Craigslist in your area to save on furniture, or resale sites like AptDeco, Furnishare, or Furnishly. Facebook’s new marketplace feature is a good idea, too.
Pro tip: Consider starting a college registry. Target’s College Registry offers a 15% discount on any items that aren’t purchased. Also, don’t forget your student ID card. Some retailers may offer student discounts.
If you plan to commute or keep a vehicle on campus, set aside money for parking ahead of time. Schools typically offer a range of parking packages for students. For example, student parking permits at Boston University go for as low as $266.40 per school year for evening commuters, to $1,905.50 for those who live on campus and need to park overnight.
You may be required to pay a lump sum for parking at the beginning of each semester. Check if your school prices parking passes by location. If they do, research on-campus transit. You may be able to pay for cheaper parking farther from your classes, then hop on campus transit to class. Consider cheaper parking options like city parking lots or curbside options if there are any nearby.
Study abroad and other travel
College years are prime time for travel. Whether you’re hitting the beach with friends on spring break or considering an extended study abroad program, you could easily spend thousands of dollars on travel over the course of four years.
Study abroad programs, complete with room, board, instruction, and sometimes internships, can get pricey. For example, Northwestern University estimates a year studying abroad in Brazil to costs about $21,000 for students, while a summer abroad in the University of Georgia’s UGA en Buenos Aires program costs $4,294, plus about $3,000 in tuition and fees.
Often, students finance study abroad trips with financial aid. Just think it through before you take on more debt, especially if you’ve taken on a lot of student debt already. Many school study abroad offices offer scholarships for students. Another good source is Cappex.com, which tracks college scholarships.
The average college and university charges about $4,500, or $18.75 per day, for a three-meal-a-day dining contract for a typical 8- or 9-month academic year, according to the Hechinger Report, an independent, nonprofit education news site.
If you want to use the meal plan but the standard campus meal plan is too expensive or wasteful for your budget, you could find savings in a lower-cost plan. Many post-secondary institutions offer lower-cost meal plan packages. Schools may also require first-year students or those living on campus to sign up for a meal plan, but allow upperclassmen and commuters to decide to what extent — if at all — they want to participate.
For example, at New York University, a student can pay $2,800 per semester for an all-access meal plan (28 meals per week) or as little as $1,210 per semester for a so-called “flex” plan (5 meals per week).
Books, fees, and supplies
Textbooks and class fees don’t come cheap. The average full-time student at a four-year public institution will spend $1,298 per year on books and supplies, according to the College Board.
Sometimes, fees come as a surprise. In an ongoing study, Wisconsin HOPE Lab researchers tracked the cost experiences of students at four public universities in Wisconsin. At one school, students on the waiting list for a required English course that was full were told to sign up for the online version. Without a heads up, the students were charged an unexpected $250 online course fee.
A student might also need to purchase special equipment or software essential to a course or course of study. Science and technology courses may tack on lab fees, while art students may shell out cash for studio time or class materials.
If you can get hold of a course syllabus early, you should. Don’t only look for what’s required to pass. Check carefully for any fees or payments needed to take the course before you show up. If you can’t get a copy of the syllabus and are unsure, you can usually reach the professor to ask via email.
Your family’s changing financial picture
You could be surprised by a rise in your cost of attendance if you or your family’s financial picture changes.
The effects of this scenario are demonstrated in the Wisconsin Scholars Longitudinal Study, a six-year-long investigation of how Pell Grant recipients attending public institutions in Wisconsin experienced the price of higher education conducted by the HOPE Lab.
Researchers found the financial burden on students grows over time as tuition rises and families experience financial changes. Twenty percent of students in the study experienced a median $1,215 hike in the Expected Family Contribution — how much of the cost of attendance their household was expected to pay after their first year. When your EFC grows, it means you’re likely to be awarded less financial aid.
Many students, they found, also lost eligibility for the Pell Grant and other aid dependent on Pell eligibility.
Dried-up scholarships and grants
Additionally, students usually receive the most financial aid for their first year of college, but scholarships and grants may not stick around for all four years. They could be allotted for the first year only, or a student may lose academic or financial eligibility. Many universities use “front loading” to attract freshman to the school. They recruit incoming freshman with grants and scholarships and may not continue to fund grants for continuing students. On average this increases the net price from the first to second year of college by about $1,400.
Contact your school’s financial aid office early on if you expect a change in income to affect your EFC, as you may be able to explain your situation in an appeal. If you receive a scholarship or grant, carefully scrutinize the terms to make sure you know how long the money will last and what you’ll need to do to keep the award.
A new laptop
For many courses, having a laptop or access to a personal computer is crucial to success. Be prepared to pay $700 to $1,500 for that success, depending on the specs you need to excel in your major.
Some of the pricing is dependent on the laptop’s operating system. Students can get a Google computer for a couple of hundred dollars or a PC for less than $700, while an Apple Macbook Air starts at about $1,000. Always ask about a student discount. Some retailers like Apple offer discounted education pricing models for students and educators. Others, like Best Buy, periodically send out a newsletter with college student deals. You could save hundreds just by leveraging your student status.
Try using the school’s computers to complete work outside of class if they come with the software you need already loaded. You may also be able to rent laptops, tablets, cameras, and other technology from your school or local retailers. If you need to purchase software, and it can be downloaded on multiple computers, you could share a login with a classmate to share and split the cost.
Club and organization fees
Socializing comes at a price in college. Campus organizations often charge membership dues ($10-$25 at the low end), but it can get much more expensive for students looking to enter a sorority or fraternity. UCLA estimates the average annual cost of room, board, and dues to be about $7,650 for sororities and $8,328 for fraternities. That’s before adding in all of the other membership costs like clothing and fees to attend social functions.
While in an organization, there will likely be multiple occasions when you would need to buy merchandise, gifts, or clothing for events. If you’re into sports, for example, you may want to participate in an intramural sports league. You might need to pay a league fee, then purchase equipment and a team uniform.
Overall, keep your budget top of mind when faced with these opportunities. You might think twice about handing over thousands to your new “brothers” if it means skipping meals later on in the semester.
Internships — especially unpaid ones — can get expensive. Internships present a great opportunity for students to connect with others in their selected field and learn on-the-job skills, but they don’t pay much. For a student financing their education alone, an unpaid or low-paying internship could mean a missed opportunity. You could get offered the internship of your dreams with a large company, then have to turn it down if the pay is too little to cover your living costs.
Let’s say you accept an unpaid part-time summer internship offer (in exchange for course credit) from a firm in an expensive city like Los Angeles. It may be nearly impossible to make ends meet without financial assistance from your family or loans. Yes, you could probably cover some costs with another part-time position, or save money by staying in co-living community like Purehouse, but you’ll be scraping by to eat decent food or do anything outside of work.
The most competitive and best-paying internships are quickly filled. Apply to paid internships early on if an unpaid internship is out of the question. Periodically check for paid spring and summer internships with fall semester deadlines. Look for internships close to campus or your family to offset costs. If the internship is in another city, check to see if you have family or friends you can stay with for the time.
Social events present great opportunities to connect outside of class with others in your major or cohort. However, being a social butterfly is a quick way to deplete any bank account.
For example, student season tickets for the 2016 Ohio State football season ran students $180 to attend all five Big Ten conference games. To attend an additional two conference games, students would need to purchase a $252 package. That’s before you spend money on food, drinks, and an outfit for the pre-game tailgate.
You only have four to six years to make long-lasting relationships in college that could affect the rest of your life, so it’s understandable to feel pressure to attend parties, hang out at bars, go to dinners, and other activities. However, you could go broke or get into debt if you’re not careful.
Look for free or low-cost events to attend, then be selective about which events and activities are worth it for your budget. Keep an eye on your spending and always ask if you can save money on meals, clothes, or events with a student ID discount. You might get teased for seeming “cheap,” but you could avoid putting these expenses on a credit card.
Health insurance and medical costs
If you do not get health coverage through your parents, some schools may require you to sign up for a health plan. For example, New York University automatically enrolls students in its school-sponsored health care plan, but students can waive the plan if they can provide evidence they maintain alternate health insurance coverage that meets the university’s minimum health insurance criteria.
The cost of a basic plan for the spring 2017 semester: $1,654. If you’re an out-of-state student and don’t find alternative insurance coverage in time for classes, you could be stuck paying the bill as “NYU requires that all students registered in degree-granting programs maintain health insurance.”
Shop around to be sure you’re getting the best coverage at the best price possible. That may mean going outside of your school’s designated plan. You might want to consider signing up for coverage in the federal government’s Health Insurance Marketplace or your state’s equivalent insurance marketplace.
An estimated 1.8 million college students will make up the U.S. class of 2017. The first few years — even the first few months — after college can feel like a financial land mine as graduates figure out how to manage their finances independently.
To give this graduating class a leg up, MagnifyMoney asked 1,000 recent college graduates to tell us what they wish they had done differently in those crucial years after graduation.
Among the most popular regrets were not being careful about debt/missing debt payments (48%) and not building their credit score up sooner (40%). One in five graduates also said they wished they had been better about saving money.
Missing a credit card or student loan payment even once can result in lasting credit score damage, and a lower credit score can make it difficult to get approved for new credit down the road.
Looking closely at the results of our survey, we can understand why so many college graduates may be struggling to stay on top of their bills — especially those who graduated with student loan debt.
Student Debt: A gateway to credit card debt
The vast majority of our survey respondents (61%) said they left school with student loan debt. On average, graduates with student loan debt said they carried $35,073.
We found some troubling trends among those with student loan debt. Not only are they more likely to say that they did not feel like they were better off their parents at their age, but they are also more likely to carry large loads of credit card debt.
More than half (58%) of graduates without student loan debt say they believe they are better off now than their parents were at their age. Graduates with student loans were less likely to agree with that statement. Half (52%) of college graduates with student loans say they are better off than their parents were at their age.
According to our survey, college graduates who left school with student loan debt were more likely to wind up in credit card debt down the road, as well.
59% of all college graduates reported having credit card debt.
But 67% of recent grads with student loan debt report having credit card debt, versus 44% of those without student loans.
20% of recent grads with student loans report credit card debt of $10,000 or more, almost twice the rate of those without student loans (11%).
And 24% of recent grads with $50,000 or more in student loans report having $10,000 or more of credit card debt.
2 in 5 will need longer than 10 years to pay off their student loans
A significant percentage of student loan borrowers expect to take longer than the standard 10 year repayment timeframe to pay off their loans.
40% of recent grads with student loans anticipate that they’ll need more than 10 years to repay their student loans. For context, the standard repayment period for federal student loans is 10 years, however, we did not ask survey respondents what type of loans they carried (federal or private).
Among the grads who report more than $50,000 in debt, just 26% say they will pay off loans within 10 years. And 41% believe they will take more than 20 years, or never pay off their student loan debt.
Among all student loan borrowers, 7% said they will “never” be able to pay off all the debt.
Optimism for the future
One thing graduates seem to have in common — whether they carry student debt or not — is a shared sense of optimism for their futures.
65% of grads without student loans feel they will be better off than their parents in the future.
64% of those with student loan debt also feel they will be better off than their parents.
Even among recent graduates with the burden of $50,000 or more in debt, 60% believe they will be better off financially than their parents in the future.
Those with Master’s degrees are most confident, with 68% saying they will be better off than their parents, versus 64% of Associate’s and Bachelor’s degree recipients.
Top 3 tips to manage debt after college
Know your options. If you are struggling to pay down your student loan debt, find out if you qualify for flexible repayment options like income-driven repayment plans. Students with high-interest student loan debt can consider refinancing to lock in a lower interest rate. Here are the top 19 places to refinance student debt in 2017.
Stay on top of your payments. Student loans will be reported on your credit report after you graduate. By making on-time student loan payments, you are already taking one of the most powerful steps toward building a solid credit score. If you fear you will miss a payment, contact your loan servicer right away. Even one missed payment can derail your credit score.
Build your credit score strategically. A 2014 study by MagnifyMoney found that the average college student will face credit card APRs of 21.4%. Carrying a balance with an APR that high can quickly lead down a long road of unmanageable credit debt. A simple way to build credit is to take out a credit card, charge small amounts each month and pay it off in full. To avoid relying on credit card debt, set money aside from your paycheck for emergencies.
MagnifyMoney conducted a national online survey of 1,000 U.S. residents with college degrees who reported completing their most recent degree within the last five years via Pollfish from April 26 to 30, 2017.
After you fill out the Free Application for Federal Student Aid (FAFSA) and apply to colleges, you’ll start getting financial aid award letters from each school that explain the types of aid you’re eligible to receive.
One of the offers you may get is the opportunity to take out subsidized student loans. These loans can be incredibly helpful in the right circumstances, but before making any decision it’s important to understand what they are, how they work, and how they compare to your other options.
What Are Subsidized Student Loans?
Subsidized student loans are federal loans offered to undergraduate students who have demonstrated financial need, meaning that the cost of the school they are applying to exceeds their expected family contribution.
The big benefit of subsidized student loans is that the government pays the interest on the loan while you are in school, for the first six months after you graduate, and during any periods of deferment.
With other student loans, including unsubsidized federal student loans, the interest accumulates while you are in school (assuming you aren’t making payments), which increases the loan balance that you eventually have to pay back.
All of which simply means that subsidized student loans are less expensive and easier to pay back than most other types of student loans.
Who Is Eligible for Subsidized Student Loans?
One of the downsides of subsidized student loans is that not everyone will qualify for them. Generally, you have to meet the following criteria in order to be eligible:
You must be enrolled at least half-time in an undergraduate program participating in the Direct Loan Program that leads to a degree or certificate. Graduate students are not eligible for subsidized student loans.
You must demonstrate the need for financial help in paying for school. This is done by completing the FAFSA and comparing your expected family contribution to the cost of attending school. You might qualify for subsidized student loans at one school and not at another if the cost of attendance is different.
If you are eligible, the school will determine the amount that you qualify for and will let you know how much you’re eligible to borrow as part of your financial aid package.
The Benefits of Subsidized Student Loans
If you’re going to borrow money for school, it generally makes sense to take advantage of any subsidized student loans you’re offered before borrowing elsewhere.
The biggest reason is that you’ll save money by not having interest accrue while you’re in school and for the first six months after you graduate. Depending on interest rates and the amount you borrow, you could save anywhere from a few hundred to a couple of thousand dollars over other types of loans.
Subsidized student loans also offer protection in case you run into financial trouble. They are eligible for income-driven repayment plans where your monthly payment is limited based on your income, and you may even be eligible for forgiveness. Also, the interest is subsidized during periods of deferment, meaning that you won’t be penalized for periods of financial hardship.
Finally, interest rates on subsidized federal loans are currently low and are fixed for the life of the loan, making them a relatively cheap borrowing option.
The Drawbacks of Subsidized Student Loans
Of course, there’s no such thing as a free lunch, and subsidized student loans come with some drawbacks as well.
The biggest is simply that no matter how many attractive features they offer, you’re still taking on debt. And while it’s certainly possible that the benefits of the education you receive will outweigh the costs, taking on debt is always a decision that should be made carefully.
The second is that you’re limited in the amount that you can borrow. Currently, most students are limited to taking out $3,500 in subsidized student loans in their first year of school, $4,500 in their second year, and $5,500 in their third and fourth years. This isn’t a reason to avoid subsidized student loans, but it does limit their usefulness.
Finally, only students who demonstrate financial need will qualify for subsidized student loans. Depending on the results of your FAFSA and the cost of the school you’re applying to, you may not be eligible.
Should You Take Out Subsidized Student Loans?
The decision to take on debt is a big one, and there’s no one-size-fits-all answer. The right move for you will depend on the specifics of your situation, your goals, and the options available to you.
With that said, here’s how you should think about it:
Do your best to pay for school without debt. This could mean a combination of using savings, paying from cash flow, taking advantage of scholarships and grants, and attending a lower-cost college.
Before taking on any debt, evaluate what the potential benefits of going to a higher-cost school might be. Will it lead to a more enjoyable career? Will it lead to increased income? If so, how much more can you expect to earn? Try to imagine a best-case scenario, worst-case scenario, and middle-of-the-road scenario to get a sense of all possible outcomes.
Compare those potential benefits to the cost of taking on debt. How likely is it that the benefits will outweigh the costs?
If you decide that student loans are the right choice, subsidized student loans are a good option. The cost savings and protections against future financial hardship are hard to beat.