VSAC Offers Tips and Resources to Reduce Student Loan Borrowing Costs

For many students (and their parents), attending college this fall likely involves taking out an education loan to help cover the tuition bill and other expenses. Nearly 7 out of 10 Vermont families need to borrow to help pay education costs. So, if you’re among that group, you’re not alone.

With the bills coming due soon for the fall 2022 semester, parents and students need to decide how much to borrow, what type of loan to get, and what lender to use. It’s a lot to consider, and—let’s be honest—it can be overwhelming. We want to make it easier for you.

At VSAC, we understand that each family needs to look at their unique situation when choosing a loan. It’s a personal decision. Our goal is to help students and parents better understand their choices, so they borrow only what they need and reduce their cost of borrowing.

Here are some loan tips to get you started:

Apply for “free” money first.

Before you even consider a loan, access all the “gift” money that you are eligible for by filling out the FAFSA (the Free Application for Federal Student Aid) and the Vermont grant application. This is the first step to opening up all the free aid (money that does not need to be paid back) available to you. Learn more at vsac.org/fafsafirst and vsac.org/grants. 

Not all loans are created equal.

Learn about the differences between federal student loans, federal parent and graduate student loans, and the many variations of nonfederal (also called “private” or “alternative”) loans from your school, state agencies such as VSAC, and commercial lenders. Compare all your options carefully.

• Start with federal student loans: Borrow federal Direct student loans first, because they offer income-based repayment and other repayment options and benefits.
• Compare all other loans, including federal Direct parent loans (known as “PLUS” loans), for the lowest rates and best repayment terms. Understand the total amount you’ll need to pay back. 

Borrow only what you need.

It’s tempting to borrow the full amount of loans you may be given in a financial aid offer, but keep in mind that all loans are borrowed money that must be paid back with interest. This means that the amount you repay will always be more than the amount you borrow. Your goal should be to minimize loans as much as possible.

Remember, all loans are borrowed money that needs to be repaid with interest. It’s important to compare all your loan options and understand the costs and terms. You get to decide whether to accept some or all (or none) of the loan amounts offered in the student’s financial aid offer. Think carefully about how much you really need before you borrow.

Consider interest rates, fees, and repayment.

Fixed interest rates stay the same over the life of the loan. Variable interest rates change with the financial markets (the rate can go up!). Variable rates may seem great at first but can end up costing a lot more over the life of a loan. Beware of “teaser” interest rates for which few people qualify. Never sign/approve a loan without knowing what you might ultimately pay and determining all possible interest rates, costs, and fees and how they impact what you must repay. Also consider when you’ll need to start repaying the loan, what the monthly payments will be, and any options for reduced or suspended payments.

VSAC offers fixed-rate education loans with local VT service.

Vermont students and families, as well as out-of-state students studying at a Vermont school, have access to VSAC’s student and parent loans for undergraduate and graduate education. 

For the 2022-2023 academic year, VSAC offers loans with fixed rates from 4.99%–8.03% APR. VSAC education loans can be used by Vermont residents going to programs anywhere in the U.S. or internationally OR for any students attending a Vermont school. If you’ve already maximized available federal Direct student loans, a VSAC loan may be your lowest-cost option.

Have questions or need more information? Call us at 800-226-1029, 8 a.m. to 4:30 p.m., Monday through Friday, and reach us via email at info@vsac.org. 

This story is produced by Vermont Student Assistance Corp., created by the Vermont Legislature in 1965 as a public nonprofit agency, to advocate for Vermont students and their families to ensure that they achieve their education goals. Our vision is to create opportunities for all Vermont students, but particularly for those—of any age—who believe that the doors to higher education are closed to them. We begin by helping families save for education with Vermont’s state-sponsored 529 savings program. To help Vermonters plan and pay for college or career training, our counselors work with students in nearly every Vermont middle school and high school, and again as adults. Our grant and scholarship programs attract national recognition, and our loan programs and loan forgiveness programs are saving Vermont families thousands of dollars in interest.