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Using Student Loans to Help Finance Your College Education

Citi Personal Wealth Management

Whether you are an aspiring college or grad school student, or the parent of one, understanding the ins and outs of student loans is critical as you consider how to fund the cost of higher education.

As their name implies, student loans are designed specifically for education funding. There are two broad categories of college loans: subsidized and unsubsidized. Please keep in mind that if you're offered an aid package by a college that includes loans, you need to consider whether repaying those loans will create an excessive financial strain for you or your family, depending on who will do the borrowing.

Subsidized loans: For those with financial need

Families who can demonstrate financial need may be eligible for subsidized student loans, which typically offer a lower interest rate than other college loans. The FAFSA (Free Application for Federal Student Aid) form is used to assess need; and that application may also help you qualify for other types of financial aid, such as grants and on-campus student work.

Been awarded a subsidized loan? Consider accepting it first because it offers more benefits: Students don't have to make principal payments until they leave school, and the government pays the interest while students are in college, offsetting some of the cost.

Subsidized Stafford loans. These government-sponsored loans charge a relatively low interest rate. Qualified students can borrow up to $3,500 their freshman year in subsidized loans. That limit increases as they go through school.
Financial aid resources. Visit finaid.org for essential savings calculators and valuable info on the FAFSA, subsidized loans and more.

Unsubsidized loans: Available to all students

If you need help paying for college and your family doesn't qualify for subsidized loans, here are some valuable alternatives.

Unsubsidized Stafford loans. These loans are also government sponsored, but borrowers incur interest charges during their time at school. Those interest charges may be added to the principal owed, although that will increase the loan's total cost. Undergrads can borrow up to $5,500 for their freshman year, minus a subsidized Stafford loan. The loan limit increases each year that a student is in school, though you don't have to borrow the full amount.
PLUS loans. These federal loans are obtained by a parent, guardian or grad student and entail a credit check. If parents qualify, they can borrow the full cost of college minus any federal aid — and the interest may be tax-deductible.
Private student loans. A number of institutions offer private loans to students and parents. Colleges, for example, may offer loan products, and the interest rates may be lower than those on federal loan programs. Private organizations and foundations also offer private student loans with favorable terms. Ways to qualify include living in a particular state; having a religious or ethnic affiliation; or being the child of an active or retired member of the military.

INVESTMENT AND INSURANCE PRODUCTS: NOT INSURED BY THE FDIC • NOT INSURED BY THE FEDERAL GOVERNMENT OR ANY OTHER FEDERAL GOVERNMENT AGENCY, BY THE BANK, OR BY ANY AFFILIATE OF THE BANK • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, THE BANK OR AN AFFILIATE OF THE BANK • SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED

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Citi Personal Wealth Management is committed to helping you work toward your financial objectives and a more secure future. To learn more about strategies that may help you reach your goals, speak to a Citi Personal Wealth Management Financial Advisor.

Further Resources

College Financial Aid: What is it and How Do You Get More?

To improve financial aid eligibility for your child, consider these four points.

529 Plan for Education- 4 Steps to Help Maximize Savings

Get a better understanding of how a 529 plan works and consider four steps to help make the most of them.

What About an Emergency Fund?

Get ideas on how much you should set aside for a financial emergency and sources of funds to tap into.

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Using Student Loans to Help Finance Your College Education

Subsidized loans: For those with financial need

Unsubsidized loans: Available to all students

To Get Started

Further Resources

College Financial Aid: What is it and How Do You Get More?

529 Plan for Education- 4 Steps to Help Maximize Savings

What About an Emergency Fund?

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