Getting Student Loans for Your Associate Degree

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Considering getting an associate degree from a community college? Or maybe just want to save some money on your first two years towards a bachelor’s? The good news is that student loans are available, just as they are at four-year schools.

The average community college tuition (currently $3,770) is significantly lower than the price for an in-state public university ($10,560, or almost triple) or a private university ($37,650, or almost 10 times more). That’s cheaper, it’s true, but you might still need a student loan.

Fortunately, there are many student loans for associate degrees that you can choose from. To get a fuller picture, let’s go over the following:

How to get student loans for your associate degree

While you have a lot of options, getting a loan for community college or other associate degree program should ideally follow these three steps:

1. Fill out the FAFSA
2. Turn to federal student loans first
3. Shop around for private student loans next

1. Fill out the FAFSA

Your first step in the loan application process should be to fill out the FAFSA for the community college you plan to attend. The FAFSA, or the Free Application for Federal Student Aid, will determine how much assistance you’re eligible to receive from need-based financial aid, including grants, work-study programs and subsidized federal student loans. It will also allow you to qualify for loans that aren’t based on need, like unsubsidized federal student loans.

You should complete the FAFSA and submit it as soon as you have all of the information you need.

2. Turn to federal student loans first

Filling out the FAFSA allows you to qualify for federal student loans, both subsidized and unsubsidized. These loans should be your first choice for community college financial aid before taking on private student loans.

That’s because federal student loans offer a range of benefits, including a fixed interest rate that is often lower than that of private loans, alternative repayment plans like income-driven repayment and the option to pause your payments if you’re experiencing a hardship like a job loss or an illness. Federal student loans also don’t require you to have a cosigner to apply, as many private loans do.

3. Shop around for private student loans for your associate degree next

If the federal student loans for community college that you qualify for aren’t enough to cover the total amount you need to borrow, your next option is to turn to a private lender.

Because there are a wide variety of private lenders — and not all lenders will offer private loans for an associate degree — you’ll need to spend time shopping around and comparing lenders. As you’re looking at private student loans, make sure to compare:

  • Interest rates (and whether they’re fixed or variable) as well as any fees
  • Eligibility requirements and whether you’ll need a cosigner, which you may if you have limited or bad credit
  • Repayment terms and whether you’re required to begin repayment while in school

Depending on the lender, you may not have the loan protections that come with federal loans, like deferment, multiple repayment options and loan forgiveness, so carefully weigh the pros and cons of taking on a private loan before you borrow money.

4 student loans for community college to consider

1. Direct subsidized and unsubsidized loans
2. Sallie Mae
3. College Ave
4. Discover

1. Direct subsidized and unsubsidized loans

Direct subsidized and unsubsidized loans are federal loans that you can qualify for by filling out the FAFSA.

Subsidized loans are available to undergraduate students based on need. The Department of Education pays the interest on the loans when you’re in school at least half time, during a six-month grace period when you graduate and during any periods of loan deferment.

Unsubsidized loans, on the other hand, aren’t based on need. The Department of Education doesn’t cover your interest bill like they do with subsidized loans. If you choose not to pay your interest while in school, it will accumulate and be added to your principal balance.

Borrowing limits:

Year Dependent student loan maximum Independent student loan maximum*
First-year student $5,500 (no more than $3,500 can be subsidized) $9,500 (no more than $3,500 can be subsidized)
Second-year student $6,500 (no more than $4,500 can be subsidized) $10,500 (no more than $4,500 can be subsidized)
*Also includes borrowing limits for dependent students whose parents are unable to get a PLUS loan.

Interest rate: 2.75% fixed interest rate for undergraduate loans disbursed for the 2020-2021 school year

Repayment options: There are multiple repayment options available for federal student loans that can help make repaying the loans easier. Some of these plans include:

  • Standard repayment plan: A 10-year loan repayment plan with fixed monthly payments.
  • Graduated repayment plan: A 10-year repayment plan that starts with lower payments that then increase, usually every two years.
  • Extended repayment plan: A 25-year repayment plan with fixed or graduated payments.
  • Income-based repayment: A plan with monthly payments that are 10% to 15% of your discretionary income; any remaining balance after 20 or 25 years is forgiven.

The repayment period on federal loans begins once you graduate, drop below half time or leave school. You’ll have a six-month grace period from that date until your first loan payment is due.

Federal loans also come with protection to help you if you’re struggling to make your loan payments. They offer loan deferment or forbearance to suspend your monthly payments temporarily. Depending on your profession, you may also qualify for student loan forgiveness.

2. Sallie Mae

Sallie Mae offers the Smart Option Student Loan for undergraduate borrowers. Unlike many other private lenders, loans are available for full-time, half-time and less than half-time students.

Eligibility Requirements:

  • Must be enrolled in a degree-granting school
  • Must be a U.S. citizen or permanent resident, or have a cosigner who is
  • Credit and additional eligibility criteria may apply

Borrowing limits: Up to the cost of attendance for the school, less any financial aid received

Fixed APR: 4.25% – 12.59%
Variable APR: 1.13% – 11.23%

Repayment options: Sallie Mae offers terms of 5, 10, 15, 20 years, with three different repayment options you can choose from:

  • No scheduled loan payments while you’re in school: The interest that accrues while you’re in school will be added to your principal loan amount at the end of the grace period.
  • Monthly $25 payments toward your loan while you’re in school: If there is any additional interest that accrues that hasn’t been paid with the $25 monthly payments, that interest will be added to your principal loan amount.
  • Monthly interest payments while you’re in school: While it might be difficult to find the cash to make payments while going to school, your total loan costs will likely be lower than with the other two options.

To help with loan repayment once you graduate, Sallie Mae offers a graduated repayment plan, where you make interest-only payments for a year after you leave school.

Sallie Mae also offers loan deferment options if you return to school, and forbearance options to temporarily pause payments if you’re facing financial difficulties that make it hard to make your monthly loan payment.

3. College Ave

College Ave is a private student lender started by former Sallie Mae executives. It’s a completely online lender, with flexible repayment options while you’re in school and once you graduate.

Eligibility requirements:

  • Must be attending a degree-granting program and can be enrolled full time, half time or less than half time
  • Must meet underwriting requirements for income and credit, or have a cosigner who does
  • Must be making satisfactory academic progress, as defined by the school, while enrolled

Borrowing limits: Up to the school-certified cost of attendance, less any financial aid received

Fixed APR: 3.24%– 12.99%
Variable APR: 1.04%– 11.98%

Repayment: College Ave loans have repayment terms of 5, 8, 10, 15 years. There are four options you can choose:

  • Principal and interest payments while in school: It may be hard to make these payments but this will save you money overall.
  • Interest-only payments while in school: This will decrease the amount of interest you have accrued by the time you graduate.
  • Monthly $25 monthly interest payments while in school: This is the lowest in-school payment offered, and it allows you to reduce the amount of interest you’ll accrue.
  • No interest or principal payments while you’re in school: This is the easiest to manage while you’re a student but you may end up with higher costs overall.

4. Discover

Another private student loan provider is Discover. It has one repayment term for all undergraduate borrowers (15 years) but offers flexible options for managing repayment while you’re still in school.

Eligibility requirements:

  • Be enrolled at least half-time and making satisfactory academic progress in a Bachelor’s or Associate’s degree program at an eligible school.
  • Be at least 16 years old at the time of loan application. Cosigner required if under 18.
  • Be a US Citizen, permanent resident or international student (International students require a creditworthy cosigner who is a US Citizen or permanent resident).
  • Pass a credit check.

Borrowing limits: Borrow up to 100% of your school -certified cost of attendance (including tuition, housing, books and more) minus other financial aid. Aggregate loan limits apply.

Fixed APR: 4.24% – 11.99%¹
Variable APR: 1.12% – 10.22%¹

Repayment: Borrowers may defer making payments on their loans while in school at least half time. Once the in-school deferment period ends, the loan term is 15, 20 years.

While in school, your repayment options include:

  • In-School Interest-Only Repayment
    Students can elect, during the application process, to make interest-only monthly payments while in school and during the grace period to lower overall loan cost and receive a 0.35% interest rate discount.*
  • In-School Fixed Repayment
    Students can elect, during the application process, to make $25 fixed, monthly payments while in school and during the grace period to lower overall loan cost.
  • Deferred Repayment
    Students can choose to have payments deferred, which means no payments are due until 6 months after graduation for undergraduate loans (9 months for graduate loans) or enrollment drops below half-time.**

*Visit Discover.com/student-loans/help/interest only for terms and conditions.

**Visit Discover.com/student-loans/repayment/customer/deferment to learn about deferment options.

¹ Lowest APRs shown for Discover undergraduate loans are available to the most creditworthy applicants, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.125% as of July 1, 2021. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APRs are only available to applicants with the best credit. The APR will be determined after an application is submitted. It will be based on credit history, the selected repayment option and other factors, including a cosigner’s credit history (if applicable). If a student does not have an established credit history, the student may find it difficult to qualify for a private student loan on their own or receive the lowest advertised rate. Learn more about Discover Student Loans interest rates

FAQs: Getting student loans for your associate degree

Is going to a 2-year college a good idea?

If you’re wondering, “should I go to a community college for two years?” the answer is most likely yes. According to a 2020 report from the Bureau of Labor Statistics, a high school graduate earns an average of $746 per week whereas someone with an associate degree earns $887 per week on average.

If you decide that you’d like to continue on to receive your bachelor’s degree, attending a two-year college first can be a good money move. The average annual tuition cost at a four-year institution is much higher than at a good community college. By attending community college first, you could save money on the overall cost of your tuition.

What’s the average student loan debt for an associate degree?

For the 2017-2018 academic year, the average student loan debt that community college attendees took on was:

  • $4,800 at public, two-year institutions
  • $7,400 at private, nonprofit two-year institutions
  • $7,400 at private, for-profit two-year institutions

These are the loan amounts per year, and these average loans are lower than what attendees at a four-year college or university took out.

Are there student loans for community college if you have bad credit?

If you have bad credit and are attending community college, you can still qualify for loans. Most federal student loans don’t require a credit check when you apply. So even with bad credit, you can still qualify for federal loans. You may also be able to qualify for a private loan if you have a cosigner that has good credit.

Can I get student loans for community college with no cosigner?

Federal student loans are available for community college, and you don’t need a cosigner for these. Private loans may be an option for students without a cosigner, but you’ll need to meet the minimum criteria set by each lender to qualify for a loan. Check out student loans without cosigner requirements for more information.

Andrew Pentis contributed to this report.

Need a student loan?

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