Virginia Student Loans
Paying for college is no small task. Even with grants, scholarships, and work-study programs that allow you to exchange your time spent working for college tuition credit, students still end up coming up short sometimes. In-state tuition reached an average of $9,919 in 2013, compared to the national average at the time of $8,655, according to the Virginian Pilot Newspaper. Out-of-state tuition can be as much as $30,000 at some schools in Virginia.
Student Loans 101
While undergraduates can often benefit from grants and scholarships, both are less common among graduate students who rely a great deal on loans to get them through the extra years in school. Of course, grad school comes with a higher price tag, and as such, graduate loans generally carry a higher interest rate in exchange for the ability to borrow a lot more money.
Applying for student loans in Virginia is pretty simple, and it starts with completing your FAFSA — a process that can be completed entirely online and is done so by 98 percent of applicants, per the U.S. Department of Education.
The most popularly used choice is the federal Direct Loan. The Direct Loan boasts some of the lowest interest rates you’ll get your hands on when it comes to educational loans. Currently, the rate is 3.76%. This applies to both unsubsidized and subsidized loans, but keep in mind that rate increases to 5.31% for unsubsidized loans for graduate students.
The perk of subsidized loans is that you won’t accrue or pay any interest on them while you’re in school; rather, the government will pay it for you. Thus, the unsubsidized variant does not carry this added benefit. Borrowers don’t need to worry about credit for either loan — it doesn’t apply — you can be granted a Direct Loan regardless of bad or no credit. When you’re done with school in the Old Dominion State, you’ll have to start paying your dues. Direct Loans allow you six months to get on your feet post-graduation, or after you’ve dropped to below half-time status, before you have to starting paying.
Generally, the next loan on the totem pole is the Direct PLUS Loan, which comes with a variant for your parents to borrow for your education. Interest rates currently are 6.31%. Credit matters when it comes to these loans, and repayment is expected from graduates as soon as the final payment has been delivered to you, and for parents, no later than six months after the student graduates. The Chronicle for Higher Education states nearly a million families received $10.6 billion in Parent PLUS Loans in 2014.
Another popular federal loan is the Perkins Loan, recognized for its low 5% interest rate and extended nine-month grace period. Regardless of gaining an extra few months until you have to start making payments, you can only borrow up to $5,500 as an undergraduate each year, and $8,000 as a graduate student. To be eligible, your school must deem you financially in need, and they will actually be the lender on your loan. Funding works differently for these loans, being distributed directly to the learning institution and giving the school discretion over who receives the funds. Perkins Loans aren’t as widely available as other loan options; they aren’t offered by all schools.
Private loans are best saved as a last resort. The reason being that the terms of these loans definitely are not in the borrower’s favor. Interest rates are high, and repayment terms can be difficult.
What if You Can’t Pay?
Initially, you’ll be placed on the Standard Repayment Plan, which consists of your loan debt plus interest stretched out over 10 years of monthly payments. The Graduated Plan allows for the same, but payments start out lower and increase over time within the same decade timeframe. Other plans exist that take into account which loan you have and how much debt, in addition to some considering your income as a factor. They include the Extended Plan, Income-Based Plan, Income-Contingent Plan, Income-Sensitive Plan, and the Pay-as-You-Earn Plan.
Consolidation loans are another great option for federal loan borrowers who want to lower their monthly payments and/or condense the number of lenders they have to pay. Some borrowers can easily leave graduate school with as many as seven or more lenders to pay, and it just simplifies matters to combine these. The Washington Post reports 13.7% of student loan debt holders being in default as of September 2014. Many could avoided this if they’d acted sooner and applied for one of the available repayment plans.
Private lenders generally do not offer any sort of repayment plans aside from standard repayment stretched out over a several year period of time, usually 10 years. In some circumstances, the bank or lending institution you borrowed from may offer consolidation loans, but their rates are typically higher than if you went with a separate third-party company. Another deterrent of private loans is that they cannot be consolidated with federal loans — a drawback for many because most who borrow these loans have already exhausted federal loans, and thus, have debt for both. Those who don’t use all other options first generally regret it. The Project on Student Debt attests that 47 percent of 2011-2012 school year borrowers of private student loans had borrowed less than they could have in Stafford Loans before accepting private funding.
Are You Ready to Apply?
Understandably, the application process can be murky for first-timers, and you don’t want to make a mistake and hold up processing. Before you begin to complete your FAFSA, you should have a few things on hand, including your social security number, school codes and any relevant income information. Moving forward, know that all federal loans require the following in addition to a completed FAFSA:
- You must be a U.S. citizen, U.S. national, or ineligible citizen
- You have to enroll in the Selective Service if you are a male aged 18 to 25
- You must have your high school diploma or GED
- You have to be enrolled at a college or university that accepts federal funding
- You’ll need to maintain a GPA that your school’s academic requirements deem as satisfactory