Understanding Online Loans and Lending Options for College Students

Students face increasing pressures due to the rising costs of college. In the United States, recent graduates have an average of over $37,000 of debt. Due to this financial burden, this generation of college graduates could see their retirement age pushed back until they are 75 years old.

Students often find themselves caught in a catch-22. They need money to survive and often don’t have the time or experience to work a full-time job. They have to pay for housing, entertainment, and a car to get back and forth to classes. At the same time, they don’t want to leave school in crippling debt.

To meet these demands, many students turn to online loans to help them pay for school.

Let’s look at some of the options college students have.

FAFSA Federal Loans

There are four types of federal loans that students can apply for through the FAFSA form.

The Federal Perkins Loan is a need-based program. Students that face financial hardships can take out these low-interest loans, up to $27,500, and don’t have to pay them back until they graduate.

Federal Direct Subsidized Loans are low-interest loans that go to students in need. During your freshman year, you can borrow up to $3,5000. The limit increases to $4,500 your sophomore year and $5,500 for your junior and senior year. The government pays your interest while you are in school.

Federal Direct Unsubsidized Loans allow you to borrow more money, but the interest isn’t paid for by the government. These loans allow you to borrow more money, but you’ll pay back a higher amount over time.

Federal Direct PLUS Loans allow you to borrow the amount that it cost to attend school minus other aid received. These loans have a 6.84% interest rate and aren’t need-based.

Problems With Federal Loans

There are some problems associated with loans that you get through FAFSA.

First, most of them loan money based on financial need. The requirements to get these loans changes over time and leave out vulnerable students if the government decides that their families make too much money.

Second, these loans are only for costs associated with school. Students are only supposed to use them for the cost of attendance, books, and equipment they need for classes, like laptops and paper supplies.

Third, the limits often don’t cover the full cost of attending college. Some private institutions charge upwards of $20,000 a semester. For a four year degree, that adds up to over $160,000 a semester when you include fees.

Private Online Loans

These loans provide the money students need without restrictions. Students can use this money for living expenses, college tuition, books, food, and any other expense.

Sometimes, these online student loans have higher interest rates and require a better credit score than federal loans. It’s important for students to compare their online options before committing to an offer.

Having a parent co-sign for a loan often lowers the interest rate, though. Many parents prefer these loans over federal loans because of their flexibility.

Where Can You Find Online Loans?

At Bonsai Financial, we have relationships with many of the top online lenders. Our goal is simple: we want to connect you with companies that can provide you with the best offer.

The best part about our service is that it’s free to use. We never take money from those looking for online loans; instead, partner institutions pay us to connect them with you. They offer their services, competing with each other for your business. Often, that means lower rates and better terms for you.

If you’d like to evaluate your options, fill out this form and we’ll get to work finding you the best offers available.