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Alabama is home to some of the best colleges in the South, including Samford University, the University of Mobile, and Huntingdon College.
But those great schools come with a high price tag. According to the Institute for College Access and Success, 50% of graduates from four-year public or private schools in Alabama have student loans. The average amount of debt is $31,275.
Researching your loan options can help you save money after graduation. Here’s what you need to know about Alabama student loans and other options available to pay for school.
Alabama student loans and grants
Although many states have their own student loan programs, Alabama doesn’t offer student loans to residents. Instead, the state awards grants to eligible students.
Unlike student loans, which you have to repay with interest, you don’t have to repay grants. They can be a great way to reduce your college expenses and help limit how much you need to borrow in student loans. Here are Alabama’s two state grants.
1. Alabama Student Assistance Program
The Alabama Student Assistance Program is a grant worth between $300 and $5,000 per year. The state government awards the grant to undergraduate Alabama residents with financial need. To be eligible, you must complete the Free Application for Federal Student Aid.
2. Alabama Student Grant Program
If you’re an Alabama resident enrolled in an undergraduate program in the state, you could qualify for up to $1,200 per year with the Alabama Student Grant Program. To apply, contact your school’s financial aid office.
Other student loan options
If you’re not eligible for Alabama’s grants or need more money to pay for school, you can take out federal or private student loans.
Federal student loans
If you need to take out loans, federal loans are a smart starting point. Federal student loans tend to have lower interest rates and more benefits than private student loans. These perks, such as access to income-driven repayment plans, can make repayment less stressful once you graduate.
The federal government operates the Direct Loan program. Within that program, there are four types of student loans:
- Direct Subsidized Loans: With a Direct Subsidized Loan, the government covers the cost of any interest that accrues while you’re in school, for six months after you leave school, and during any deferments. Loans disbursed after July 1, 2017, have an interest rate of 4.45%. These loans are for undergraduate students with a demonstrated financial need.
- Direct Unsubsidized Loans: Direct Unsubsidized Loans have the same interest rate as Direct Subsidized Loans for undergraduate students, but you are responsible for paying all the interest that accrues on your loan. The interest rate for graduate or professional students is 6.00% as of July 1, 2017.
- Direct PLUS Loans: Direct PLUS Loans are for graduate students or parents taking out loans to pay for their child’s education. They have an interest rate of 7.00% as of July 1, 2017.
- Direct Consolidation Loans: If you graduate with many different federal student loans, Direct Consolidation Loans can help simplify your debt into one loan with one monthly payment.
Private student loans
Although federal loans tend to be the most cost-effective option, many federal loan programs have borrowing maximums. If you need more money to finish your degree, applying for private student loans can help fill the gap.
Unlike federal student loans, which are issued by the government, private student loans are offered by individual banks and financial institutions.
When a private lender reviews your loan application, it bases its decision on your credit history and income. As a student, your income might be small and you probably don’t have an established credit history.
To get approved for a loan and qualify for a competitive interest rate, you might need a cosigner to apply for the loan with you.
A cosigner is usually a parent or relative who has better credit and a higher income than you. The cosigner provides a guarantee that you’ll repay the loan.
If you fall behind on your payments, the cosigner has to make them. A cosigner lessens the risk to the lender, so it’s more likely to issue you a loan if you have one.
The interest rate and repayment terms on private student loans can differ from lender to lender, so it’s a good idea to compare offers from private student loan companies to ensure you get the best deal.
Refinancing options for graduates
If you already graduated and are looking for ways to take charge of your debt, consider student loan refinancing.
With refinancing, you take out a loan with a private lender for the amount of some or all of your current student loans. The new loan will have different repayment terms than your old ones, including a new interest rate, monthly payment, and repayment term.
You can refinance both private and federal student loans. But refinancing has some drawbacks if you have federal loans, such as losing out on perks like access to income-driven repayment plans.
However, if your goal is to save money or get out of debt faster, refinancing can be a tool you can use to achieve your goals.
To apply for student loan refinancing, check out this list of the best student loan refinancing lenders.
Managing your student loans
By researching your education financing options, including Alabama student loans, you can choose the most cost-effective loans for your situation. By applying for grants and taking out federal student loans for college, you can reduce how much you need to take out in higher-interest debt later.
If you need help identifying your education loan or refinancing options, sign up for the Student Loan Hero app to get free help.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.82% – 12.82%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|3.88% – 12.88%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.04% – 12.01%9||Undergraduate, Graduate, and Parents||Visit Citizens|