Financial Aid for Adults: How to finance a return to college
Attending college as an adult can be exciting and rewarding. Yet, it can also bring about some financial challenges. This video explains how you can potentially cover your education through scholarships, grants and adult student loans (also known as “back-to-school” loans).
[Visual of a banner “How to finance a return to college”]
Returning to school can be one of the best decisions you will make for your future. A degree could help you find new career opportunities and higher pay. One of the biggest challenges is figuring out how to cover the cost, which can be difficult if you’re taking time out from working a job to study, or if you’re already paying back student loans.
But there are many forms of financial aid for adults to help you finance your education expenses. There are scholarships, grants, and work study programs you may be eligible for, and some employers offer tuition assistance programs. If you need additional funding after looking into these options, there are also a variety of federal and private loans to consider.
The first step to finding out what funding options are out there for you is to fill out the FAFSA, or the Free Application for Federal Student Aid. You can find the application online at FAFSA.ed.gov.
After you’ve filed your FAFSA, the school you’re planning to attend will send you an award letter that will include your federal financial aid package, as long as you listed that school on your FAFSA. This will likely include a mix of different ways to fund your educational expenses. It can include grants, federal work study programs, and, more commonly, several kinds of federal loans.
Now, you may be wondering, how does your school figure out how much you can receive? Well, this is based on a number of factors. The school estimates the cost of attendance; basically, the cost of tuition and living expenses. And using the information on your FAFSA, they figure out the amount they expect you or your family can pay toward your education. By subtracting your expected contribution from the cost of attendance, they figure out your financial need.
[Visual showing the formula: Cost of Attendance minus Expected Family Contribution equals Financial Need.]
Your financial need helps determine how much you can receive via certain types of federal loans. So, let’s take a look at those loans now. The most common federal loans are direct subsidized and unsubsidized loans, and PLUS loans. Later, we'll also look at private loans, which are offered by private lenders like a bank or other financial institution.
[Visual of a bar chart showing interest of a subsidized loan increasing over time. The first four years of interest are removed and transported into an illustration of a government building.]
Direct loans come in two types, subsidized and unsubsidized. Subsidized loans are offered only to undergraduate students and are based on financial need. Typically, these loans have lower interest rates than unsubsidized loans, and because the loan is subsidized by the government, the government will pay your interest while you’re in school and potentially at other times throughout the life of your loan.
Unsubsidized direct loans are available to undergraduate and graduate students and aren’t based on financial need. However, these loans usually have higher interest rates than subsidized loans, and you’ll be responsible for paying the interest that accrues on the loan from the moment you take out the loan, including the time you’re in school.
[Visual of a bar chart showing interest of an unsubsidized loan accruing from the moment you take out the loan.]
There are also PLUS loans, which have fewer limits on the amount you can receive. You can borrow as much as the cost of attending your school minus other financial aid you might be getting. PLUS loans often carry higher interest rates, and have more restrictive credit requirements than direct subsidized and unsubsidized loans. And interest on these loans begins to accrue right from the time you take out the loan.
[Visual of a bar chart showing interest of a PLUS loan accruing from the moment you take out the loan.]
You may qualify for a few of these loans in your financial aid package. When added together, they could provide enough money to cover your costs. However, if you find you need more financial help, there are also private student loans to think about.
Private student loans are offered by private lenders—that is, not the federal government. The amount you can qualify for and the terms of the loan, your interest rate, and the time you have to repay, will be determined by things like your credit score, and your ability or the ability of a cosigner to repay the loan, rather than your FAFSA information.
With private loans, you may pay a higher interest rate than you would with federal loans, and you may not get as many repayment options as you can with a federal loan, like income-based repayment, for instance.
Keep in mind, you may be offered more money in your financial aid award package than you actually need for the bare essentials.
[Visual of a scale. One side has money and a tablet screen showing FAFSA.ed.gov , the other side has books, a dining hall tray, a laptop and dorm room furniture.]
This could be helpful if you have financial responsibilities you need to cover in order to return to school. But loans aren’t free money.
[Visual of a student in a graduation gown hauling an oversized box labeled “DEBT”]
You’ll have to pay interest on what you borrow, and, in most cases, you’ll need to start repaying your loans shortly after you graduate. It can be hard to anticipate what kind of impact the amount of money you take out in loans will have on your finances later on,
[Visual of an example of a Rapayment Estimator with multiple text fields: Loan amount, with “$63,000” entered; Repayment period, with “10 yrs” entered; Interest rate, with “6%” entered; Monthly payment, with an open text field.]
so you may want to look at what your monthly repayment plan will be after you graduate.
You can use the loan repayment calculators at studentaid.ed.gov, or ask someone in your school’s financial aid office to help you.
[Visual of a stack of bills. A top portion is labeled “$700 Monthly student loan;” the bottom portion is labeled “$4,166 Monthly income (Before taxes).”]
For instance, if your monthly loan repayment comes out to $700, and you expect to make around $50,000 a year before taxes when you leave school, you might be putting too much of a strain on your future budget. If you’re returning to get your graduate degree, and you’re already paying back loans from your undergraduate degree, you would need to factor those payments in, as well.
Going back to school can be one of the best investments you can make. Knowing your options for covering your costs can help you make the best decisions for your finances, now and after you graduate.
Better Money Habits®
Powered by Bank of America®
The material provided in this video is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates assume no liability for any loss or damages resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. © 2019 Bank of America Corporation.