When you fill out the FAFSA, it will also determine your eligibility for federal student loans
Federal Student Loans
- Direct subsidized loans: These loans are offered based on financial need, and interest is subsidized while you are in school or during deferment or grace periods.
- Direct unsubsidized loans: These loans are not need-based, and interest is not subsidized.
- Direct PLUS loans: These loans can only be taken out by your parents or you if you are a graduate student.
The maximum annual amount of Direct subsidized and unsubsidized loans ranges from $5,500 to $12,500 per year. Direct PLUS loans have higher borrowing limits and can be used to fund the remainder of your school if needed.
Federal student loans should always be your first choice when borrowing for school. This is because not only are the interest rates on these loans generally lower, but also the repayment options are much more flexible, and there is a multitude of programs in place to help you out during times of financial hardship.
Private Student Loans
There are many reputable private student loan lenders out there. If you are unable to secure any or enough federal funding to cover the cost of your certificate program, or if your program is not eligible for federal aid, then a private loan might be the way to go.
Many lenders even have specific loan options for certificate programs, such as Sallie Mae’s Career Training Smart Option Student Loan, which is for professional training and trade certificate courses at nondegree-granting schools. This loan can even cover expenses such as housing, meals, travel, and school supplies.
Personal Loans and Secured Loans
If you are unable to secure a student loan from the federal government or a private lender, another option is to obtain a personal loan or a secured loan.
A personal loan is a loan you obtain from a bank or another lender that you pay back over time, just like a student loan. Often, these loans are unsecured (meaning you don’t need to provide collateral), and the amount you can borrow and the interest rate you can get are often very much dependent on your credit history. You can usually expect interest rates to be higher on these types of loans than on student loans and repayment terms to be more strict.
A secured loan is a loan that has collateral tied to it. If you take out a second mortgage, for example, this is a secured loan. You are essentially giving the bank claim on some type of property they can repossess if you fail to pay off the loan. In addition to property, vehicles, valuables, and investments can be used as collateral.
Because a secured loan is tied to collateral, it is often possible to borrow a larger amount and even obtain a lower interest rate. But make sure you are careful with your finances, and make payments on such loans in a timely manner to avoid the risk of losing your collateral.
Other Ways to Fund Certificate Programs
If you want to avoid loans or cannot obtain enough funding from borrowing, you via a payment plan. Many schools offer this as an option, allowing you to pay in increments over time instead of all at once.
Another option that has come into play recently is called an income sharing agreement. This is where you agree to pay a certain percentage of your income for a set number of years after you graduate instead of paying tuition. The idea behind these agreements is that the program you attend has the incentive to give you marketable skills that will help you earn money because how much they get from you depends on how much you make after you leave.
