Education Loans for Low-Income Families: 4 Viable Options

If you come from a low-income background, take advantage of education loans designed to help make college more affordable. There are few scenarios when your low income will help qualify for a specific loan, but this is one of them. The Department of Education aims to make college affordable for every American through a number of financing programs exclusively offered to those from disadvantaged or low income backgrounds.

HOPE Tax Credit

The HOPE tax credit is just what it sounds like; it is a tax deduction and not a loan. The credit is available to a wide array of students and families who have a great need of assistance to pay for college. Starting in 2009, they can deduct up to 100 percent of the first $1,000 dollars of their education expenses and 50 percent of the next $2,500. Education expenses do not just apply to tuition in this case. Unlike other federal loan programs, the HOPE tax credit can be used to make the purchase of textbooks and other supplies less costly.

Pell Grant

The Pell Grant program provides free money to college students each year. The amount of funding available depends on the student's status, with more funding being allotted for junior and senior students. The loan limits are set each year, and determining the limit you can receive can be tricky. However, the limit hovered around $5,000 for most students throughout most of the first decade of the twenty-first century. Even though this is a small amount, it never needs to be repaid. It can cover the first $5,000 of education each year, bringing down your overall loan limits, and decreasing the amount you will owe back in interest payments. The Pell Grant program is limited each year, so applying early will give you the best chance of receiving the funding.

PLUS Loan

The PLUS loan is unique because it is the only federal parent-sponsored loan program. This loan, like others, goes straight to the university to pay the cost of tuition. However, this loan is unique because it is issued in the name of the parent instead of the student. The parents will continue to carry the burden of repaying the debt, and they will receive many of the benefits of a low-interest, fixed-rate federal loan. Parents can even consolidate loans across years and across students without a penalty in the future.

Subsidized Stafford Loan

The Stafford loan program is among the most comprehensive offered by the Department of Education. It is a standard installment loan, issued each term or year in the total remaining cost of tuition. The loan is funded directly to the university in the name of the student. The subsidized option is only available to low income students. They receive a grace period on the loan lasting the entire length of their college education. During this period, no interest accumulates on the loan since the interest is "subsidized" by the federal government. The students will resume payment upon graduation, at which point interest will start accumulating. 


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