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Other Loans Available To Pay For Your Education 

Alternative Funding Sources

There are numerous ways to ask for college education money. It may occur to you that there are routes to borrowing beyond typical student loans. Are there easier alternatives? Can you pay for your education without having to wait for an answer? Let us examine a few of these other loan options. 

Personal Bank Loans

If you or your parents have a decent history with a bank or credit union, personal loans are often easily obtainable. Why not just stick with the lending institution that already knows you, rather than fill out all that paperwork to see what type of student loan for which you qualify? Depending on the total amount of money you will need to pay for college, there are a number of good reasons to choose the traditional educational loan options first. 

Pros and Cons of a Personal Bank Loan 

• A personal bank loan is probably not going to have a period of deferment. You will need to find a way to begin paying back the loan, while you are trying to complete your education.
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• Personal bank loans are often set at higher interest rates, so by exploring your traditional school-loan options first, you may be able to save a significant amount of money in the long run.
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• The limit for unsecured bank loans, if you have nothing to provide for collateral, may be too low to be of much assistance in paying for your college education.
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• A personal bank loan is still going to require at least some amount of paperwork. And, remember that by filling out the FAFSA, you will not only find out if you qualify for federal money (federal grants, such as the Federal Pell Grant, and federal loans, such as the Federal Perkins Loan), but your school may have merit scholarships or additional funding available for you as well. 

Credit Card Loans

Credit cards are famous for offering loans or cash advances, even when your credit history or financial position does not quite support your ability to pay them back. You must consider long and hard before assuming any debt for your college education, including daily-living expenses, on a credit card.

Pros and Cons of Credit-Card Debt

• Credit cards tend to have extremely high interest rates that will cause you to spend extraordinary amounts of money, long-term, as you work to pay your debt back. If a credit card is offering you a low-interest (or no interest!) loan, read the fine print carefully. These “good offers” are usually limited by time constraints. Your rate might be low for a few months, or even a year, but then the interest rates usually changes to an amount that is double, triple, or even quadruple the rates that you can achieve elsewhere.
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• Young people without a substantial credit history are unlikely to qualify for high enough credit amounts to pay college tuition or other significant, college-related expenses.
• Remember that whatever debts you incur, before, during, and after college, are going to reflect on your credit history for years to come. Be cautious about making financial decisions that will make it more difficult for you to buy that house, car, or move across the country for that dream job, once you graduate from college. 

“Rich Uncle Joe”

If you have a wealthy relative who might be in a position to help you fund your college education, by all means, have a talk with them. However, we do not recommend this procedure, if this is the first time you have talked with them. Check with your parents, to see if you can get a parent loan.  If not, many students do have family members outside of Mom and Dad, who are able to assist in paying for college. Be it gifts or loans, make certain that you understand the terms and are properly thankful and respectful to the lender(s).

Pros and Cons of Borrowing Funds From Family

• Money for college from family, in the form of gifts or loans, may come with strings attached. Even if they are not directly stated, it may become apparent that “Uncle Joe” was counting on you graduating from a specific university, with a specific major, or with the idea that you would follow him into the family business when you graduate. If the strings are going to be more trouble than they are worth, you should opt for a more traditional loan route, stress-free.
• Keep the larger family picture in mind and consider what sort of obligations and expectations you might be setting up for a family member who agrees to loan you money for college. Are there a dozen other nieces and nephews who are also going to expect assistance? What are the repercussions going to be if you have trouble paying your relative back, or if your school experience does not work out as you had planned? 

Financial, Tax and Legal Disclosures

NextStudent does not offer tax, legal or investment advice.  Nothing contained herein is intended to serve as tax, legal or investment advice.  We urge you to consult with experts in these fields before taking any action based on the information contained on our site.