Tuitions Loans From Schools (Not Banks) Could Help You Cover College

 August 25, 2020
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Note that the government has paused all repayment on federally held student loans through the end of 2022, with no interest to be charged during that period and no loans to be held delinquent or in default.

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With the cost of college at a public four-year university nearing $10,000 per year for tuition and fees alone, students can use all the help they can get. In addition to more traditional student loans, tuition loans might also be an option for some families.

Tuition loans are generally sourced directly from your school and could help you cover anything from, well, tuition to secondary costs like books and technology.

To get a more detailed look at what a tuition loan is, and whether it could be a smart way to help afford college, let’s try to answer the following questions:

What are tuition loans?

If you’re wondering what exactly a tuition loan is, you have good reason to be confused — the term “tuition loan” can often refer to a few different things. It’s sometimes used interchangeably with “student loans,” or other forms of educational debt. Tuition loans for course fees and other costs can also be a financing tool that parents can use to pay for tuition at a K-12 private school.

But some colleges do offer small loans directly to students that they also call tuition loans. These tuition loans for university fees are typically a form of institutional aid. They can be short-term loans that are repaid immediately, or long-term loans that resemble federal student loans.

Generally, you apply for tuition fee loans with your school, unless it appears automatically on your financial aid award letter before the start of each term.

How does a tuition fee loan work?

These loans aren’t a widespread offering at schools nationally, but some colleges or specific departments will offer them to provide an additional source of financial aid.

If you’re curious about this type of loan, you can check with your college’s financial aid office to see what forms of aid it offers.

If they do have a tuition loan, make sure to carefully review its terms and conditions, as these are set at the college’s discretion and can vary widely. Some schools might offer a loan for university fees, for instance, while others might only offer a loan for course fees, like books or equipment.

Before you apply for tuition fee loans, ensure you meet their criteria. Your year in school, academic performance, income level and credit history could also factor into your eligibility.

Here are two examples of how tuition fee loans work in practice:

The University of Texas at Austin ● The cash loan is a type of emergency student loan, allowing a student in a tight spot to borrow up to $500.
● Students can also apply for a tuition loan for university fees that cost more.
● Both of these UT student loans had an APR of 4%, as of Aug. 4, 2020.
The University of Utah ● The book loan provides up to $450 per school year toward books and other class materials and equipment.
● The tuition loan can cover academic fees, up to the current outstanding charges on a student’s account.
● Interested students can submit an application and pay a $15 processing fee. They will also need a good credit rating to qualify for these tuition loans and must be otherwise eligible for federal student aid.

If you haven’t yet enrolled in a particular school, you might seek out so-called no-loan colleges that promise to fill your financial aid package with anything but student debt.

Should you get a tuition loan for your university?

Of course, you should always be cautious when borrowing money for college — and tuition loans are no exception.

Here’s what you should consider first, before taking on tuition loans for university fees:

1. Max out your gift aid first
2. Ask about a payment plan
3. Compare tuition loans to other student loans

1. Max out your gift aid first

If you can avoid or limit educational debt, that’s almost always the best move. Since you’ll need to check with your financial aid office to see if your college offers tuition loans, ask about other funding options as well.

See if you can get additional gift aid, such as grants and scholarships, as these won’t need to be repaid. Ask about work-study programs that allow you to earn money to cover school costs.

The campus financial aid office is a great place to start seeking out gift aid, but you can also spend some time searching for college scholarships and grants on your own, too.

2. Ask about a payment plan

If you simply don’t have the funds to pay for college right now, but you will by the end of the semester, consider asking for an extension or a payment plan. If you just need a few more days or weeks to get the funds together to pay your tuition, ask and see if your financial aid office is willing to work with you.

Tuition payment plans are also a common solution offered to college students and their parents. These allow you to pay your tuition in installments over the semester, rather than the whole amount upfront.

Best of all, a payment plan is not a loan — you might pay a small fee to sign up for the payment method, but you won’t be charged interest.

3. Compare tuition loans to other student loans

If you still have costs you need to cover, it might be time to consider borrowing for college. Compare loan costs — such as interest rates and loan fees — to those for federal and private financing.

Here’s an overview of your federal student loan options beyond tuition loans:

Federal Student Loan Who can use it? Interest rate (2020-21) One-time loan fee Interest is paid in deferment Annual loan limit
Direct subsidized Undergraduate students with a demonstrated financial need 2.75% 1.059% Yes Up to $5,500 per school year
Direct unsubsidized Undergraduate and graduate students 2.75% (undergrad), 4.30% (grad) 1.059% No Up to $7,500 per school year for dependent students
Up to $12,500 per school year for independent students
PLUS Graduate students and parents of undergraduate students 5.30% 4.236% No Cost of attendance, after all other student aid is applied
All information current as of Aug. 4, 2020.

Federal student loans are generally preferable to school-based tuition loans. That’s because the Department of Education, more than any other public or private lender, offers significant safeguards during loan repayment, including:

  • Income-driven repayment (IDR) plans
  • Expansive postponement options like deferment and forbearance
  • Federal loan forgiveness programs

If you opt for a tuition loan, ensure it also at least mimics federal loan protections like IDR. Also run the numbers to compare the rates and projected payments of tuition loans and federal loans.

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For other gaps in funding, you might also want to check out private student loans, especially if you need to take out more than the borrowing limits on federal student loans or tuition loans.

Be aware, however, that private loans lent by banks, credit unions and online companies don’t come with as many protections. You might be able to pause your repayment via an economic hardship forbearance, but don’t expect your lender to offer IDR or a pathway toward forgiveness.

Unlike some tuition loans and all federal loans, private loans are tagged with interest rates and terms unique to your application. If you (or your cosigner) are especially creditworthy, you could score low, advertised rates. To make sure you find your best deal overall, consult our list of private lenders.

Andrew Pentis contributed to this report.

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