March 30, 2023

Community College Is Free in Some States. Here’s How to Pay Where It Is Not

Enrolling in community college can be a great way to get an education at a relatively affordable price. The average in-state student attending a public four-year institution spends more than $25,700 for one academic year, while the average annual cost to attend any two-year institution is $10,300, according to the Education Data Initiative.

However, that doesn’t mean community college is cheap. Many students turn to a mix of federal and private student loans, grants, and scholarships to afford an education.

While student loans can be a big help to students, they are also major obligations.

For this reason, students should “only borrow what they absolutely need,” says Michael Sullivan, personal financial consultant at the nonprofit financial counseling agency Take Charge America. “Too many students borrow the maximum, even though they don’t need it all. Student loan payments can be onerous, and payments last for years.”

Before you take a student loan, make sure you know your options and their pros and cons. 

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How to Pay for Community College

If you can’t rely on only savings and financial aid, you will need loans to cover the cost of community college.

Federal student loans

Consider your federal student loan options first because of their built-in benefits, recommends the Consumer Financial Protection Bureau. Federal student loans typically are less expensive than private loans and easier to repay.

“If you run into a hardship such as loss of income or employment, federal student loans have a lot more options to help the borrower avoid falling behind than private student loans do,” says Trent Graham, program performance and quality assurance specialist at GreenPath Financial Wellness, a nonprofit credit-counseling agency.

Also known as direct loans, federal student loans include these three types: 

  • Direct subsidized. These loans for undergraduates are based on financial need and don’t accrue interest while you’re in school, during a grace period after you leave school or during a deferment. 
  • Direct unsubsidized. If you are an undergraduate or graduate student, you can borrow based on your school’s cost of attendance and other financial aid you receive. You are responsible for interest from the time the loan is disbursed. 
  • Direct PLUS. Graduate or professional students and parents of dependent undergraduates can take these loans, but a credit check is required. 

Federal loans have a limit on how much you can borrow each academic year and in total. Your borrowing limit depends on factors such as your year in school and your dependency status.

Private student loans

Private student loans are an option if your borrowing needs exceed federal student loan limits or if federal loans are not an option for some other reason.

“Private loans often allow higher borrowing limits,” Graham says. Borrowers “could cover the total cost of attendance or help bridge the difference that is not covered by federal student loans,” he adds. 

The best candidates for a private school loan have a strong credit history, the CFPB says. International students also can be good candidates for private loans.

“The U.S. Department of Education does not offer federal financial aid to most international students,” Graham says. “Some private lenders might lend to non-U.S. citizens who meet specific criteria.” 

Eligibility requirements for private loans vary by lender, and you can shop around for the best loan rates. You may be able to find private student loans with lower rates than some federal loans.

However, many private loans can be more expensive than federal loans, the CFPB warns, and you may have little payment flexibility.

How to Get Student Loans for Community College

For each year you plan to attend community college, you must complete the Free Application for Federal Student Aid, more commonly known as FAFSA. The FAFSA helps the Department of Education understand your finances and determine whether you qualify for federal loans, grants or work-study programs.

Check the FAFSA filing deadline for your state and your school, and aim to file as soon as possible. You can begin to apply Oct. 1, and the federal deadline is June 30.

Once you have submitted this form, the community college you plan to attend will send a financial aid offer to you. It could include a combination of federal loans, scholarships and grants. 

After you have exhausted federal student loan options, you may decide to look at private loans. To apply for a private student loan, you will need to contact a bank, credit union or a specialty lender such as Sallie Mae

Unlike federal loans, private loans have no application deadline. That means you can apply for one of these loans at any point, even in the middle of a semester. 

Reach out to at least a few lenders to compare options and terms, and make sure you are getting the right loan for your needs. 

If you are deemed creditworthy, the lender will approve the loan, the loan amount, and the interest rate and repayment terms. With private loans, a strong credit score will significantly increase your odds of landing a good rate. If your credit is weaker, you may not qualify for a private loan – and even if you do, you will likely pay a higher interest rate. 

A private lender may require a co-signer, which you don’t need for a federal student loan. A co-signer agrees to pay your loan if you do not. If you need a co-signer, look for a release option for your co-signer after you’ve made a certain number of payments.

Lenders With Perks for Community College Students 

Private lenders may offer special perks for borrowers. A few examples include: 

  • Sallie Mae. Borrowers get four months of free Chegg Study tutoring services. 
  • Discover. Borrowers who earn at least a 3.0 GPA may receive a one-time cash reward of 1% of their loan amount.
  • Citizens Bank. Borrowers get a free 12-month subscription to the Perlego library of e-books, including more than 1 million textbooks. 

When comparing lenders, evaluate perks in addition to key factors such as loan terms and customer service options.

Can You Attend Community College for Free? 

Roughly half of states have made community college free in some form. Typically, states use one of two approaches to provide tuition-free community college: first-dollar or last-dollar programs. 

The first-dollar approach covers the full cost of tuition, regardless of any financial aid students receive. With tuition paid for, students can use aid to pay for other educational expenses, such as room and board. In the last-dollar approach, the state accounts for financial aid and covers the gap between aid and tuition.

Even if your state offers free community college, it may come with a host of other conditions. Eligibility may be restricted to state residents or to people earning certain types of degrees.

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