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If you’re headed to college in Big Sky Country, you might need to borrow some Montana student loans. According to the Institute for College Access & Success, an estimated 57% of undergraduates in the state leave school with student loans, and the average debt among those earning bachelor’s degrees is $28,032.
Whether you’re currently studying in Montana or have already graduated with debt, it’s important to understand your student loan options. This guide explains different sources of funding so you can afford school or manage your current loans — specifically:
Getting Montana student loans: Start with federal loans
As a Montana student, your first stop for borrowing should be Federal Student Aid. As long as you’re attending an accredited college, you should be able to apply for federal student loans. Federal loan options include:
- Direct subsidized loans: Undergraduate students with demonstrated financial need might be eligible for Direct subsidized loans. These loans come with a low fixed interest rate: 2.75% for loans disbursed between July 1, 2020, and July 1, 2021. There’s also a 1.062% origination fee. The government covers the interest on subsidized loans while a student is in school and during deferment. There are annual and aggregate limits on the amount students can borrow.
- Direct unsubsidized loans: Both undergraduate and graduate students in Montana can obtain Direct unsubsidized loans, and there’s no requirement to demonstrate financial need. The loan origination fee is the same for Direct unsubsidized loans as for Direct subsidized loans. Undergraduates also pay 2.75% interest for loans disbursed between July 1, 2020, and July 1, 2021. But graduate students pay 4.3% interest. There are also annual and aggregate limits on Direct unsubsidized loans, but limits are higher for graduate students.
- PLUS loans: Graduate students and parents of undergraduate students might be eligible for PLUS loans. You can borrow up to the cost of attendance minus other aid received. Creditworthiness matters when applying for PLUS loans. Those with an adverse credit history might be denied. The loan origination fee for PLUS loans is 4.236%. These loans also come with a fixed interest rate of 5.3% for loans disbursed between July 1, 2020, and July 1, 2021.
Federal loans have significant advantages over private student loans, including flexible repayment options, such as income-driven repayment (IDR). An IDR plan can reduce your monthly loan payments to a small percentage of your income. Students who fund their education with federal loans might also be eligible for Public Service Loan Forgiveness if they work in qualifying jobs and follow program requirements.
Need help understanding your federal student loan options? Reach Higher Montana is an in-state organization that provides assistance for federal student loan borrowers, as well as college and career planning.
Montana student loans
While you won’t find a Montana student loan program for all students, you can access specialized loans if you’re attending a certain school or program in the state.
For example, nursing loans are available to Montana State University students who have demonstrated financial need and are enrolled in the school’s nursing program. There’s no fee for these nursing loans. Further, students aren’t obligated to make payments during school or for nine months after graduation. Loans must be repaid within 10 years and are charged at a fixed interest rate of 5.00% (as of June 23, 2020).
The University of Montana also provides some institutional loans funded through foundations and private donors. There are short-term loans for temporary financial hardship that must be repaid within 90 days, as well as long-term loans through the Henry Strong Educational Foundation.
The interest rate on Henry Strong Loans is 5.00% (also as of June 23, 2020). The debt must be repaid within five years. Both undergraduate and graduate or professional students are eligible for this loan, but students must be enrolled in a “practical, literary, scientific, mechanical, or business” major, according to the school website.
Students are eligible if they have an unmet financial need and have maxed out federal loan options. Contact your school’s financial aid office for more information about institutional or state-based aid that might be available to you.
Private student loans
Though federal student loans often offer more benefits to borrowers, private student loans can be a useful tool to cover gaps in school funding. Most private lenders allow students or parents to borrow up to the school-certified cost of attendance.
Students have many options for private student loans, and parents can borrow in their own names. Finding the right lender is important, so start with our list of the best private lenders for student loans.
Compare repayment terms, interest rates, and loan requirements to find your best deal. Students who can’t get a loan on their own could qualify with a cosigner.
Student loan refinancing
Unlike certain other states, Montana doesn’t offer its own student loan refinancing program for residents. But students can refinance with top private lenders. When you refinance, you get a new loan to repay your existing student debt. The new loan should ideally have a lower interest rate and better repayment terms.
You can also consolidate certain federal loans, combining them into one large loan. However, federal consolidation doesn’t lower your interest rate. If your goal is to save money over the life of your loan by lowering your interest rate, refinancing with a private lender is your best bet.
Consider the decision carefully. Although refinancing can reduce your costs and make it easier to manage loans by consolidating your debt, it does have its faults. For instance, you could lose borrower benefits, such as access to IDR plans, by refinancing federal loans.
Which student loans are right for you?
As with any debt, the less you borrow for school, the better.
Explore other options to fund your schooling without loans, such as grants and scholarships. Some schools in Montana also offer additional help for students. For example, Montana State University offers a Matched Education Savings Account to help qualifying low-income students afford an education.
By comparing all available options for Montana student loans, you can find the financing solutions that are right for your situation.
Rebecca Safier contributed to this article.
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