Like nearly every aspect of society working its way through COVID-19, higher education is swimming in uncharted waters. According to the Chronicle of Higher Education, roughly one quarter of U.S. colleges plan to have in-person classes in the fall. Another 25% will offer online courses and 16% of schools will offer a mixture of both.
Millions of college students face an unprecedented level of uncertainty. So how will this affect student loans? Don Kerr, Senior Manager of Student Lending, spoke to us about some of the issues families may encounter this school year and how to best address them.
Students Taking Out Loans for the First Time
The economic ramifications of the pandemic have left countless families in a financial bind. This has forced many students who have previously been able to pay for college on their own to turn to loans to cover their tuition for the first time.
Those searching for student loans for the first time should keep a few things in mind. First, always apply for financial aid first. “Fill out your forms, such as the FAFSA form,” Kerr recommends. “This is going to give you access to very low-interest rate loans from the federal government.” These loans generally do not cover all the costs a student requires, but they are a good place to start.
Kerr also reminds loan shoppers to do their research. “Look at the different benefits each individual lender may offer. Look at interest rates.” Researching different private student loans will ultimately lead you to the one that best suits your situation.
Applying for and Canceling Student Loans
Colleges may not have sent out tuition bills as early as they normally do. This gives people a much shorter window to get everything done and finalized. Kerr says parents and students shouldn’t worry too much about the timing. If you’ve been waiting until the last minute to apply for student loans, you still have time as this can usually be completed quickly.
You can get a credit decision in just a minute or two when applying for student loans. Additionally, the school will get a notice within a few days that you’ve been approved for a loan. “Most schools are pretty reasonable that once they get that notice from the bank, they know the money is coming and they’re going to let you attend your classes even if the money hasn’t actually shown up yet.”
Conversely, canceling a student loan can usually be completed just as quickly. “As long as the money has not been sent out to the school, you can very easily cancel the loan yourself,” Kerr says.
The school itself can also cancel the loan. “They have to do a certification on all student loans where they have to approve and indicate the dates they want the money sent to them…If something changes, that school can also cancel the loan for you. To make sure you’re not stuck.”
It’s also important to remember that a good portion of student loans are spread out throughout the school year, meaning the bank will hold on to some of the money until the school requests it. This gives student an added cushion of time to cancel their loans. Should something occur mid-year where they no longer need the loan, they can simply contact the bank. Since the money has not been sent to the school, the loan can easily be canceled.
If you’ve never taken out or looked into tuition insurance, this is the year to consider it as this product will help protect your tuition investment. If something should happen to you during the school year and you need to withdraw, you can recoup some of those funds. For a couple hundred dollars you can protect thousands of dollars.
Kerr says it’s extremely important to pay attention to the fine print of these policies. This is the only way to know precisely what is and is not covered. “A policy may say you’re not covered if the school has to close for COVID-19. However, if your student gets sick, you could be covered.”
Learn more about insurance for college students.
In all, the right way to move forward with planning for college is up to you, but know that AAA is here to guide you through the student lending process and answer all your questions. Learn more at AAA.com/FinancialAid.