College students should consider loans among options

STEVE MARK

Loans are one option for college students.

Mike Collins, director of nancial aid at Case Western Reserve University in Cleveland, said federal direct loans are regarded as the best initial option for students.

“ ey are guaranteed, based on the information from the FAFSA (Free Application for Federal Student Aid), and generally provide the most bene ts and protections,” Collins said. “For many students, the interest rates are also lower than what they could nd on their own.

“ ere are three types: direct subsidized loans are available to students in undergraduate programs and the U.S. Department of Education typically pays the interest while the student is in school and for six months afterward.

“ e direct unsubsidized loan is available to students in both undergraduate and graduate programs, however, the U.S. Department of Education does not pay the interest on that loan. e Direct PLUS is available to either a graduate student or the parent of an undergraduate student and requires a separate credit check.”

Collins o ered tips regarding best ways to cross check information:

“A great way students can make sure they’re getting the best rate is to check with their school,” he said. “Many schools will have their own private lender list that includes either a historical record of lenders students have previously used or a list of lenders the school prefers. You’re not required to use a lender on that list, but it provides a great starting point.

“Most students don’t realize that if you submit more than one application in a short time frame for the same thing, such as a student loan, it may only count as a single inquiry on your credit score. TransUnion recommends keeping this rate shopping to within 14 days. Additionally, the Direct PLUS has one interest rate (regardless of credit) and uses a di erent (publicly available) standard than most private loans.

If you’re considering a private loan, it may be worth comparing your interest rate to the Direct PLUS to see which is lower. If you’re not sure what’s on your credit, you can get a free copy of your credit report from annualcreditreport.com. Some credit cards and banks also o er a similar credit reporting service.”

Many students and parents have worried about a potential shrinking of the pool of loans available. Collins said the options are as many as ever.

“Too many to keep a handle on it all,” Collins said. “Rule No. 1 is students should never pay upfront to have applications submitted and processed. Once the federal subsidized and unsubsidized loans have been used, consider the names you know such as your bank or lenders you already have a relationship with. Don’t be afraid to ask them about any specials or perks. Remember that if you qualify for a private loan, you’ll probably qualify for a Direct PLUS and can use those terms as a baseline.”

As referenced, there is a limit on the maximum students can borrow.

“Depending on the year in school, federal direct subsidized and unsubsidized loans for undergraduates can range from up to $5,500 to up to $7,500 yearly,” Collins said. “Independent students are eligible for increased yearly amounts, up to totals of $12,500 (undergraduate) and $20,500 (graduate) respectively.

“Private loans and Direct PLUS are available for whatever amount is still needed to cover tuition, fees, and other costs such as living allowances. e school deter-mines the actual amount, based on costs and other aid a student is already receiving. at other aid can help students attending schools that cost a little more to pay the same or less than students attending schools that cost a little less.”

For parents who are planning for their child’s education down the road, Ohio’s 529 Plan, CollegeAdvantage, is one of the top-rated college savings plans in the country, and has been lauded for investment performance.

CollegeAdvantage claims that, as of September 2019, the plan oversees 638,372 accounts. Steve Mark is a freelance journalist.

Ryan Louis Alexander Vincent

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