There are many benefits of getting an associate degree instead of a bachelor’s degree, including saving time and money. On average, it costs $3,520 a year to attend a two-year public institution versus $33,480 a year for a four-year private institution.
But that doesn’t mean you have the income or savings to cover all your education costs. Here’s everything you need to know about getting student loans for an associate degree.
Federal student loans for an associate degree
Whether you choose to attend a junior college or community college, you can get student loans for an associate degree. The federal government provides several borrowing options for associate degree students:
- Direct Subsidized Loan: If you’re eligible and prove financial need, the government will pay the interest on this loan while you’re still in school and for the first six months after you leave school. Your school determines how much you can borrow.
- Direct Unsubsidized Loan: While you don’t have to demonstrate financial need to be eligible for this loan, you’re responsible for paying interest immediately after taking out the loan. So, if you don’t pay while you’re in school, interest will accrue on the balance. Your school will determine how much you can borrow based on its cost of attendance and the other aid you’ve received.
- Direct PLUS Loan: This loan is available to eligible parents and allows them to borrow up to the cost of tuition minus any other financial aid. Their credit history is considered for qualification, and interest accrues during any nonpayment period.
To find out if you’re eligible for any or all of these loans, you must fill out the Free Application for Federal Student Aid (FAFSA). The process is easy and can be done online, but be aware of any deadlines your school might have for submitting the application.
Private student loans for an associate degree
You might have received scholarships, grants, and federal financial aid, but that money might not be enough to fund your entire education. That’s where private student loans for an associate degree can help. They can fill gaps in coverage, but you should keep some important factors in mind before applying.
Private student loans vs. federal loans
While federal loans are issued by the government, private student loans are offered through private institutions such as College Ave and banks. These lenders determine their own eligibility qualifications, interest rates, and repayment terms, whereas the government offers a fixed interest rate and a variety of repayment options.
Pros and cons of private student loans for an associate degree
There are a number of pros and cons of private student loans that could significantly impact your finances.
Private loans tend to have higher borrowing limits, so you can get more money to cover your tuition and living expenses if federal aid isn’t enough.
Some private lenders might offer loans with lower interest rates than federal loans have, saving you money over time.
There’s no deadline to apply for private student loans for an associate degree, so you have the flexibility to apply in the middle of the year if you face an unforeseen financial problem.
Your credit history is used to determine whether you’re eligible for a private student loan. So, if you have a low credit score, you might not qualify for a loan.
While you could get a lower interest rate, you also could get a higher rate (over 18% in some cases, according to the Department of Education). The rate is determined by your credit score and other financial factors, such as your income and debt-to-income ratio.
If you aren’t financially eligible for a private loan, you could need a cosigner. That isn’t necessarily a bad thing, but the cosigner’s finances will then determine the interest rate, which could be high.
You don’t have as many repayment options with private student loans compared to federal loans. For example, income-driven repayment plans (which cap your repayment at a certain portion of your income) aren’t available for private student loans.
Even if you get a lower interest rate, you might have to start paying back your loan while you’re school. The amount can vary from interest-only payments to principal and interest payments. Making payments can be tough if you’re not working during school.
Since there are many variables with private student loans for an associate degree, it’s important to shop around to find the best private student loan rates and understand all the terms before accepting a loan offer.
Student loans can help fund your associate degree
Regardless of the type of degree you’re pursuing, it’s best to go after as much free money as possible through scholarships and grants. But private student loans can be a good option to cover any remaining costs. Start with applying for scholarships and federal financial aid, and then bridge any gaps with private student loans. With so many options, paying for your associate degree doesn’t have to be a headache.
Need a student loan?Here are our top student loan lenders of 2018!
1 = Citizens Disclaimer.
2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
* 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.
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|4.12% – 11.85%*3||Undergraduate and Graduate||Visit SallieMae|
|3.69% – 12.07%2||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|4.07% – 12.19%1||Undergraduate, Graduate, and Parents||Visit Citizens|
|3.83% – 12.11%||Undergraduate and Graduate||Visit Ascent|
|4.63% – 9.71%||Undergraduate and Graduate||Visit LendKey|
|3.62% – 9.79%||Undergraduate, Graduate, and Parents||Visit CommonBond|