Most families hear about federal student loans and loans from private lenders, but your student should also explore state student loans from state agencies as another source of money to borrow for college.
What Are State Student Loans?
Many families may not know about state student loans, but they are a viable option for students who don’t want to take out high-interest loans from private lenders. State loans are offered by state agencies or state-chartered nonprofit organizations.
Unlike private student loans, state loan programs often offer lower interest rates, sometimes with in-school deferments, flexible repayment options after graduation based on income, loan forgiveness for public service, and deferment for financial hardship.
In addition, some state programs offer the same interest rate to all borrowers, regardless of their credit score, and offer fixed interest rates.
These state student loan programs vary from state to state. If your child is interested in information about these loans, they should consult their state department of post-secondary education.
Each state will provide information on their specific requirements, but the fundamental requirement is residency—either a resident of the state or an out-of-state student enrolled in a college within that state.
In most states, student loan application protocol requires each candidate to file the FAFSA (Free Application for Federal Student Aid). Each state’s filing deadline varies, and it’s often earlier than the federal deadline, so it’s important to be acquainted with your state’s requirements.
The following are a few examples of state-funded loans and their requirements:
The Massachusetts Educational Financing Authority
The Massachusetts Educational Financing Authority (MEFA), offers student loan refinancing and private student loans for undergraduate and graduate students. The MEFA Loan is a non-need-based family education loan.
The fixed rate Undergraduate MEFA Loan allows students and their families to borrow up to the full cost of education less financial aid. Although they are based in Massachusetts, borrowers need not live nor attend schools in Massachusetts to qualify.
To be eligible, borrowers must be enrolled at least half time in an accredited degree-granting undergraduate program at an eligible non-profit college or university in the United States.
Florida Department of Education
The Florida Department of Education is a great resource for those wanting more information on student loans for the state and its unique initiative programs like the Bright Futures Scholarship Program and the Florida Public Postsecondary Career Education Student Assistance Grant Program.
You can access the contact information and pinpoint the resources you need for all financial aid and college loan programs, both public and private, in the state of Florida.
Pennsylvania Higher Education Assistance Agency
The Pennsylvania Higher Education Assistance Agency (PHEAA) is one of the most well recognized agencies providing Pennsylvania State Loans and state financial aid and lending options in the country. Monthly fixed interest rates are based on loan repayment and creditworthy borrowers earn the lowest interest rates.
Their loans have no origination fee and there is no fee to apply. Students can borrow up to 100 percent of the full school-certified cost of attendance and can choose from multiple repayment options.
To be eligible for a loan with PHEAA, borrowers must either be a PA resident attending an approved school within or out of PA, or be a resident of DE, MD, NJ, NY, OH, VA, or WV and attend an approved school in PA.
Texas Higher Education Coordinating Board
The Texas Higher Education Coordinating Board (THECB) extends alternative loans. Since 1965, Texas has loaned money to students who are residents in the State of Texas and are qualified to pay in-state tuition.
The THECB provides consistent, low-interest college financing opportunities for state students. The loan programs are designed to assist state students who qualify to pay in-state tuition rates. Borrowers must be credit-worthy.
Of special interest is the BOT (Be-On-Time) state loan that offers loan forgiveness after graduation based on academic success of at least a B average and no more than four years of courses while in college.
California State Aid Commission
The state of California supports higher education with a far-reaching state financial aid program. A large majority of California’s students receive some form of state aid for college. Their flagship program, CalGrants, provides educational funding in three specific sub-chapters:
- CalGrant A for the majority of students
- CalGrant B for the neediest applicants
- CalGrant C for technical, vocational, and occupational students
This program is for two- and four-year students as well as those who transfer into the California university system.
Additional initiatives target specific students like the Chafee grant for foster youth and the California National Guard Educational Assistance Award Program for state resident Guard members. There are also other state loans available which you can research on their state educational website.
State-By-State Student Loan Programs
For information about your specific state, parents and students can search the list of state higher education agencies using the contact information on the U.S. Department of Education website.
Also helpful is a list compiled by College Scholarships providing specific information about state loans available and direct links to each state’s program.
For parents and students who need financing for college, state loan programs can offer additional options. These programs are accessible to all resident students and designed to promote higher education within the state by providing funding for college.
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