A recent study found that 42% of students who recently dropped out cited financial reasons as the primary reason for dropping out. (iStock)
Having a college degree can provide many opportunities, but it can also come with a hefty price tag. College education costs have skyrocketed in recent decades, outpacing inflation and making it difficult for Americans to access higher education.
Money is the main reason why students leave school, according to a recent study by the Professional University and Continuing Education Association (UPCEA). About two in five college dropouts (42%) cited financial reasons for leaving school, surpassing the percentage of students who left for other reasons such as family commitments (32%) and health reasons ( 15%).
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Financial issues are an even bigger problem for low-income students, according to Dr. Amy Smith, head of learning at online education company StraighterLine. The study showed that about two-thirds (65%) of those who stopped attending college had household incomes of $50,000 or less, compared to less than 2% with incomes above $100,000.
“Another key takeaway is that the majority of disengaged learners are working adults making $50,000 or less, so they’re working on pretty tight budgets,” Smith said. “This is an important factor for colleges and universities to consider when re-engaging students.”
If you’re considering dropping out for financial reasons, keep reading to learn more about how you can pay for college and complete your education. Visit Credible to compare private student loan rates between multiple lenders, so you can find the best possible deal for your financial situation.
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Bridge funding can help students who cannot afford to pay for their education
The federal government provides loans, scholarships, and grants through the Free Application for Federal Student Aid (FAFSA). But federal student loans may not cover the full cost of going to college due to annual borrowing limits, potentially leaving students responsible for expenses like room and board.
Here are the current federal borrowing limits on direct loans:
- Dependent undergraduate students: $5,500 for the first year of registration, $6,500 for the second year and $7,500 for the third year and beyond. The total borrowing limit for the entire undergraduate term is $31,000.
- Independent undergraduate students: $9,500 for the first year of registration, $10,500 for the second year and $12,500 for the third year and beyond. The total borrowing limit for the entire undergraduate term is $57,500.
- Graduate Students and Professionals: $20,500 per year. The total borrowing limit (including undergraduate loans) is $138,500.
Students who have exhausted their federal financial aid awards may have considered dropping out, but it is not the only option. If you can’t afford the tuition, you can consider filling the funding gap with federal PLUS loans or private student loans.
If you’re considering borrowing a private student loan to help pay for college, visit Credible to compare interest rates for free without affecting your credit score. Seeing your offers can help you decide if this financing option is right for you.
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Private Student Loans vs Direct PLUS Loans
Federal PLUS loans are held by the federal government, while private student loans are issued by private financial institutions like banks and online lenders.
The Office of Federal Student Aid (FSA) offers two types of loans for students who need more money to pursue their studies: Parent PLUS loans and graduate PLUS loans. Parent PLUS loans are available to parents of undergraduate students, while graduate PLUS loans are available to students enrolled in graduate school or another professional program.
Unlike Parent PLUS loans, private student loans can be borrowed directly by undergraduate students. This can allow students to fill the college funding gap without relying on their parents to borrow additional loans. Here are some other notable differences between federal PLUS loans and private student loans:
- Eligibility for private student loans is based on the borrower’s creditworthiness, such as credit score and debt-to-income ratio. Students may consider using a co-signer for better terms, such as a lower interest rate.
- The stream federal PLUS loan interest rate is 6.28% for loans taken out before July 1, 2022. The average private student loan rate is 5.89% for a 10-year fixed rate loan and 3.26% for a variable rate loan over 5 years, according to Credible.
- Private student loans are not eligible for certain government benefits such as income-contingent repayment (IDR) plans, administrative forbearance periods, or federal student loan forgiveness programs.
If you’re still unsure whether you should borrow a private student loan, visit Credible to see your estimated offers. Next, use a student loan calculator to determine your monthly payment.
WHAT IS THE FREE FEDERAL STUDENT AID APPLICATION?
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