Special to California Business Journal.
If you need a way to pay for college, a loan is a good option because it allows you to get your degree now instead of working for several years. You might think that your parents need to help you borrow money. But if your parents are unable to help you, there is no rule that says both of you need to be involved, especially for federal educational loans. You want enough money for a good college, and your parents want you to go to college, but without having their names on debt.
Look for Free Money First
Before going into debt, it’s a good idea to look for free options for financial aid. This includes scholarships, tuition waivers, and grants. Consider an installment plan for tuition, where you use monthly installments to pay for school. With this approach, you are already paying for tuition in small amounts, reducing the amount of money you must borrow. If you have enough money saved, you’ll gain some extra time with payments.
You can also consider a “parentless” educational loan. It’s not as hard as you think, as long as you focus on public instead of private ones. Most students can get the Federal Direct Stafford Loan. This doesn’t depend on your credit score and you don’t need a cosigner. You will need to fill out the Free Application for Federal Student Aid (FAFSA), which requires information about your parents if you are a dependent. But it does not require your mom or dad to borrow anything.
Independents vs. Dependents
You should always fill out the FAFSA form. This is the one step in a loan that requires mom or dad to be involved. If you’re a dependent, your parent’s information must be on the form. Unfortunately, there are few ways to declare yourself independent before you are 24, even if you support and live by yourself. There are a few options, including:
- Getting married
- Having legal dependents, such as children
- Enrolling in graduate or medical school
- Being on active duty with the United States Armed Forces
- Turning 24
If you are independent, you can often qualify for higher amounts of student debt. The limits on the Federal Direct Stafford Loan are higher – you’ll get an extra $4,000 each year for your first and second years. During your third and subsequent years, you’ll get an additional $5,000 annually. The total limit for an undergraduate independent is $57,500. For dependents, the limit is only $31,000. A graduate student can get up to $138,500.
Borrowing Money Without Your Parents
After completing the FAFSA form, you will receive a Student Aid Report (SAR) within a few weeks. This has all the information you and your parents put on the FAFSA. Check this to ensure it’s accurate. This information will be used to determine how much financial aid you can get. If this isn’t enough to cover college, you can apply for a federal student loan without mom or dad. The amount will need to be under the loan maximum cap.