How to Borrow Money for Education

Millions of college students have facilitated their educational efforts through loans. A combination of federal loans, state education programs and school-specific lending makes education possible for committed students. Borrow money for education with an eye toward repayment, instead of semester-to-semester needs.

Instructions

Difficulty: Moderately Easy

1. Learn the difference between subsidized and unsubsidized loans before you borrow money for an education. Subsidized federal loans have interest that is paid for by the federal government while the borrower is in school. The unsubsidized loans offered by the federal loans feature higher lending limits but interest accrues during enrollment.
2. Head down a traditional lending route using Federal Perkins Loans for your education. These loans require repayment within 10 years of graduation and carry a fixed interest rate that is designed to help you pay down debt quickly.
3. Ease the immediate burden of repayment after education with a FFEL Stafford Loan. This federal lending tool has a higher interest rate than Perkins Loans but can be repaid over 25 years. Learn as much as possible about the lender contracted to handle your repayment.
4. Help your children pursue undergraduate degrees using the PLUS Loans available through the federal government. This type of loan allows parents to receive a loan that bridges the gap between the cost of attending college and other financial aid your child receives.
5. Calculate the annual limits for state and federal loans to determine your financial burden for each semester. Federal undergraduate loans add on a significant amount to the limit between the first and fourth year of a student's college education. Graduate students must take on a combination of subsidized and unsubsidized loans if they reach the financial limit.
6. Consult with your state's education department in order to borrow money for public colleges and universities in your community. Many states are offering special savings accounts and loans targeted at specific courses of study to students with financial needs.
7. Search for tax credits that can help you defray the costs of getting an education. The Hope Tax Credit and the Lifetime Learning Tax Credit are a few tax exemptions that allow you to decrease your income tax burden while in college.

Tips & Warnings

• Avoid lenders that promise high lending limits and generous grace periods following graduation for repayment. These organizations often provide large loans to students, because they know they will receive a large return due to interest rates. Long grace periods may sound ideal following graduation, but interest may accrue during this period on thousands of borrowed dollars.