Student Loans for Community College

Margaret Wack
A student smiles into the camera while holding books while her community college colleagues study in the background.
Reading Time: 4 minutes

Community colleges are an excellent alternative to standard colleges, and can save you money in the long run. Many community college degrees are two-year programs that offer associate degrees, allowing students to enter a variety of professional fields in half the time (and with half of the number of bills) that a four-year degree would require. Depending on what field you’re interested in studying, a community college degree can be a worthwhile investment that boosts your professional earnings and skills.

Furthermore, the yearly tuition and fees of community colleges are usually significantly lower than their four-year counterparts, allowing students to save tens of thousands of dollars per year in some cases. Even students who go on to obtain a bachelor’s degree from a standard college often will save money by spending their first two years at a community college before transferring to a four-year school.

Can You Get a Loan for Community College?

Even if the costs are dramatically lower than those of a four-year school, when a student decides to attend a community college they will often still have tuition and fees to pay. Luckily, you don’t have to rely entirely on college savings, as the federal government and a variety of private lenders offer just as many options for community college student loans as they do for four-year institutions.

Types of Student Loans for Community College

There are a variety of different types of loans available for community college students, including Direct Subsidized Loans, Direct Unsubsidized Loans, PLUS Loans, and private student loans. Students should borrow wisely and avoid taking on more debt than they have to.

Direct Subsidized Loans for Community College

Direct Subsidized Loans

 are offered by the federal government and are based on the financial needs of the applicant. An advantage of Direct Subsidized Loans is that the Department of Education pays the interest accrued on the loan throughout the applicant’s time at school — provided they maintain at least half-time enrollment — as well as for a six-month grace period after graduation.

Direct Unsubsidized Loans for Community College

Direct Unsubsidized Loans are also offered through the federal government. Unlike Direct Subsidized student loans, however, the amount a student can borrow is not based on need. Instead, the school determines how much the applicant can borrow based on the cost of attendance, taking into account other sources of financial aid that may bring that cost down, such as scholarships or other loans.

Direct unsubsidized loans differ from subsidized loans in that the government won’t be paying your interest on these loans. Students have the option of making interest-only payments during school, or of forgoing payment altogether until the end of the same six-month grace period after their schoolwork ends. If students choose to not make any payments, the interest that has been accrued will be added directly onto their loan’s principal.

Direct PLUS Loans

Direct PLUS Loans are a third option provided by the federal government, usually for when students need to borrow more than the federal limit from subsidized and unsubsidized loans. The borrowing limit of the PLUS loan is also limited to the cost of attendance, as decided by the school, but typically requires the payment of fees in addition to accruing interest.

Direct PLUS Loans are available not just to a student directly, but also to the students’ parents, provided the student is their dependent. These loans require a credit check on the borrower to be approved. Students who have not had time to build up a credit history may fail a credit check and be unable to receive a PLUS loan, so it’s a good idea whenever possible to have a parent sign or cosign for the loan.

Private Student Loans

Private student loans are borrowed from private entities other than the government, such as banks or credit unions. Private loans don’t have an application deadline like federal loans, and can usually be borrowed at any time during the school year. The borrowing limit for private loans can also exceed the federal loan limit, though it is often based on the cost of attendance and the amount of aid you’re already receiving from the federal government and other sources.

Your eligibility for private loans, as well as their interest rates, can vary from lender to lender, and is usually dependent on your credit score. If you have a good credit score, interest rates might end up significantly lower than those offered by the federal government. Like the PLUS Loan, a student can add a cosigner to avoid being rejected for a loan, or to obtain better terms. Private student loans typically also involve fees and the immediate payment of interest.

How to Take Out Student Loans for Community College

When it comes time to apply for loans for your community college program, it’s a good idea to apply for sources of federal financial aid first. The process of applying for federal aid is a fairly straightforward one, revolving around a form called the Free Application for Federal Student Aid, or FAFSA. This form allows you to apply for all three types of Federal Aid discussed above: both types of Direct loans as well as PLUS Loans.

Released yearly every October for the following school year, the FAFSA requires detailed financial information such as bank statements and tax returns from the applicant and, if the applicant is a dependent, their parents.

The FAFSA also requires that you create and record a Federal Student Aid ID, as well as provide your driver’s license and Social Security numbers. The FAFSA asks the applicant to list up to ten schools that they are applying to by identifying the Federal School Code for each institution. Each school listed will receive a copy of your FAFSA and use it to determine how much financial aid to provide.

Private loans are also an option for students, typically for those who don’t meet certain eligibility criteria of federal loans or who need to borrow more than their limit. In order to apply for private loans, you should contact banks and lenders directly. Since different lenders have different criteria for eligibility, as well as terms and interest rates, it’s a good idea to apply to several different lenders to find the best result for you.

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