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Iowa ranks No. 19 in the nation when it comes to student loan debt, with four-year grads ending their college careers with an average $29,801 in debt, according to The Institute for College Access & Success (TICAS), a nonprofit educational advocacy organization.
Iowa student loans are practically a fact of life, with 65% of students carrying education debt, reported TICAS. And with changes underway in Iowa, including a potential 4% increase in tuition at public universities, the need for student loans to pay for school could increase.
If you hope to cover the cost of college, the right Iowa student loans can help. Here’s what you need to know.
Federal student loans for Iowa students
The first move to make when looking for college financial aid is to fill out the Free Application for Federal Student Aid (FAFSA). The information on your FAFSA is used by Iowa colleges and universities to determine your financial aid package, which includes the loans you’re eligible for on top of need-based grants and scholarships.
Direct Subsidized and Unsubsidized Loans
Low-income students can qualify for subsidized federal loans. With these loans, the government pays the interest while you’re in school and during other periods.
For those who don’t meet the eligibility criteria for subsidized loans, the federal government also offers unsubsidized loans. Anyone can get unsubsidized federal loans, regardless of income or credit history. Both subsidized and unsubsidized loans have a fixed interest rate of 4.45% for undergraduate students.
However, there’s an annual limit on how much you can borrow in federal student loans. Depending on the school you attend, federal loans might not be enough to cover your costs.
Parent PLUS Loan
Another option is to get help from your parents. If your parents are willing to borrow on your behalf (and go through a credit check), the federal government offers the Parent PLUS Loan. The interest rate is higher for these loans, though: 7.00%.
If receiving financial assistance from a parent or legal guardian isn’t an option, it’s possible for you to get loans in other ways, including private loans and special programs available only in Iowa.
Private Iowa student loans
If you need a little extra help paying for school, private student loans are a potential solution. Realize, however, that private education loans come with more stringent eligibility criteria. For example, you’ll need to submit to a credit check, and you might need a cosigner.
Here are two specific Iowa student loans that can help you privately fund your education:
The Partnership Loan program is available to both Iowa students attending school in the U.S. and to out-of-state students attending an Iowa college or university.
Interest rates are fixed or variable and start as low as 5.15%, as of April 2018. Your rate depends on your or your cosigner’s credit score, among other factors.
Additionally, the Partnership Loan program comes with repayment benefits, such as an interest rate reduction of 0.25% for automatic payments and cosigner release. There’s also a death or disability forgiveness option. It protects cosigners and the borrower’s estate in case of death or permanent disability.
College Family Loan
The College Family Loan is another Iowa-specific private option. It allows family members to help you pay for college, even if they aren’t your parents. There’s also the Parent Partnership Loan, which has the same criteria and terms as the College Family Loan.
For creditworthy family members, these loans can be a viable alternative to federal Parent PLUS Loans. Fixed rates start at 5.50%. Borrowers willing to enter repayment while the student is in school can get the best terms.
Additionally, there’s a death and disability forgiveness benefit for borrowers and cosigners.
Other private education loans for Iowa students
While private Iowa student loans can be a good choice for borrowers, it’s important to shop around for the best terms, especially if you have solid credit.
Some of the best private student loans come with flexible underwriting criteria and other benefits. Additionally, some lenders offer rates starting below 4.00%.
With private education loans, you won’t have access to federal repayment programs, such as income-driven repayment (IDR). So, carefully consider hardship programs when evaluating private student loans. It might make sense to go ahead and get federal loans so you have more repayment options later. Then, you can turn to private student loans to bridge any college funding gap.
Refinancing Iowa student loans
After you finish school and are ready to begin repayment, it can make sense to look into refinancing your student loans.
If you’re having difficulty making your federal student loan payments, consider getting on an IDR plan. Your monthly obligation can be capped at 10% of your income, making your payments more manageable.
For students who meet income and credit requirements (or who can get a cosigner who does), refinancing with a private lender can be the way to go. There are a number of lenders that refinance federal and private student loans in a way that saves you money.
For example, say you have $30,000 in student loan debt on a 10-year repayment plan with an average 5.00% interest rate. You can save $2,585 in interest with a lower rate of 3.50%, according to our student loan refinancing calculator.
Iowa Reset Refinance Loan
In addition to having its own private student loan programs, Iowa also offers a refinancing program, the Reset Refinance Loan. Rates start as low as 3.75%, based on your credit information, Iowa residency, and loan term.
Understand, though, that if you refinance federal loans, you lose the protections that come with them. Plus, you’ll be ineligible for federal loan forgiveness programs and IDR plans.
If you’re worried about maintaining federal protections, consolidate your federal loans separately and refinance only your private loans to a lower rate.
Know your Iowa student loan options
As you strategize about how to pay for college, consider your student loan options. For some students, securing both federal and private funds is the ideal approach. Be sure to explore your options, especially before asking a parent or other family member to cosign a loan.
Don’t forget about student loan refinancing, either. Getting student loans is the first step. After you graduate, refinancing your Iowa student loans can help you save money over time and make your education more cost-efficient.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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