After you've gotten all the free money for which you qualify and looked into a tuition payment plan, you may need to finance some portion of your education with student loans, and there are still lots of student loans available, including some that don’t require an income or credit history.
Federal student loans
Federal student loans offer the security of fixed interest rates that are set by the government, and on subsidized federal loans, interest doesn’t build up while the student in school. Some loans allow the student to borrow in his or her own name; some let the parents borrow on their child’s behalf. Some are specifically created to help those who have demonstrated financial need, and some are available to you regardless of your income or investments.
To apply for most federal student loans, you must submit the Free Application for Federal Student Aid.
Do your homework: Learn about the different types of federal loans available, both for undergrads and for their parents.
More about federal loans for students
Federal Stafford loans are available to most students with a high school diploma and a Social Security number. Even better, for the 2009–2010 academic year, students with demonstrated financial need who qualify for a subsidized Stafford loan can take advantage of the new, lower fixed interest rate of 5.6%. Unsubsidized Stafford loans are available regardless of financial need and feature a fixed interest rate of 6.8%. To help cover more of the cost of education, Congress recently increased the total amount that undergraduates can borrow each year.
Federal Perkins loans — loans that are offered by the higher education institution to students with the most financial need — have a fixed interest rate of 5%.
To apply for any of these loans, be sure to submit the FAFSA.
More about federal loans for parents
Statistics show that 4 out of 10 parents aren’t aware that federal PLUS loans are available to help them cover tuition for their undergraduate. Unlike other consumer loans, which are priced based on your income or credit, PLUS loans offer the same rates and terms, regardless of your personal situation.
And now Congress has stepped in to make it even easier for parents to use PLUS loans to help their children achieve their higher education goals. Now, parents may defer payments on their PLUS loan until after graduation. Although this option may help a parent manage cash flow while the child is in school, it will result in a higher amount paid over the life of the loan. Sallie Mae encourages parents to make — at least interest-only — loan payments, if they are able while their children are in school to keep costs down.
Further, Congress has relaxed the credit requirements for new PLUS loans. This means that you can still get a PLUS loan even if you're as many as 180 days delinquent on your home mortgage payments or your medical bills and as many as 89 days delinquent on repayment of any other debt.
If your credit isn't what it used to be, you may be worried that you won’t qualify for a Parent PLUS loan. If you apply for a PLUS loan and are denied, Sallie Mae offers a free, confidential credit counseling service that can help you become PLUS-eligible.
If you still come up short
Once you have tapped your free money sources and explored federal loans, you may consider filling any remaining gap with private student loans. Securing a creditworthy cosigner may help you qualify and/or reduce your interest rate.
Take the time to know your options
Just like you did for your scholarships, taking a little time to research these options now can help you better understand what’s expected down the line, so there are no surprises.
It’s always a good idea to know what you’re getting into. Let Sallie Mae’s Education Investment Planner help you build a plan to pay for the full cost of college. And, if borrowing is part of that equation, the Planner can estimate what your student loan payments will be after you finish school. Even more, you can also see whether those payments will be manageable, given your expected income after graduation.