A loan is a form of financial aid that you will have to repay even if you don’t finish your schooling. You (or your parents) can build up a large amount of debt if you pay for college with loans.
How much debt can you afford?
When it comes to consumer debt such as student loans, credit card debt, and car payments, we recommend that your total debt adds up to 15 percent or less of your net anticipated future take-home income. So if you expect to make $30,000 a year after you graduate ($23,400 after taxes), you should aim for debt payments of $292 or less each month. For example, if you plan to buy a car and make a $200 payment on it each month, that leaves only $92 a month to put toward your student loan debt. At that rate, it would take you about 10 years to pay off $10,000 in student loans. (Remember, just because loans are available to you doesn’t mean you should borrow the maximum.)
Find national averages for seniors with student loan debt from the Project on Student Debt.Learn strategies for financial success Read more about loans
What kind of loans can you apply for?
You can apply for two types of loans: federal and private.
- Federal student loans come from the U.S. Department of Education. They usually offer the best loan terms and repayment options.
- Private student loans come from banks and other financial institutions. They often have higher overall costs and fewer repayment options.
Are you an undergraduate or graduate student? You can apply for Federal Direct Loans.
Are you a graduate student? If so, you’re eligible to apply for a Federal Direct Graduate PLUS Loan.
Are you a parent or stepparent of a dependent undergraduate student? You can apply for a Federal Direct Parent PLUS Loan.
Anyone can apply for a private student loan, as long as you meet the lender’s requirements.