AARP Hearing Center
![woman seated in library taking notes with laptop and stack of books in view woman seated in library taking notes with laptop and stack of books in view](https://cdn.aarp.net/content/dam/aarpe/en/home/money/credit-loans-debt/info-2021/guide-to-student-loans/_jcr_content/root/container_main/container_body_main/container_body1/container_body_cf/container_image/articlecontentfragment/cfimage.coreimg.50.932.jpeg/content/dam/aarp/money/credit_loans_debt/2021/03/1140-library-student-taking-notes.jpg)
You've decided that returning to school is the best way to enhance your value to your current employer, or to find a new job or even a new career. To finance this move, you'll simply take out a student loan.
Nadine Burns wants to talk you out of it. The certified financial planner (CFP) at A New Path Financial Services in Ann Arbor, Michigan, agrees these loans may be the easy way to finance additional education, but you should think of other ways as well. “A prime reason not to take out a student loan is they cannot be [easily] bankrupted. Instead, look for grants, scholarships or even a second job to cash-flow the degree before reentering school."
![member card Image Alt Attribute](https://cdn.aarp.net/content/dam/experience-fragments/uxdia-folder-structure/en/features/membership/inline-membership-promo/default/master5/_jcr_content/root/responsivegrid/container_copy/container/articleimage.coreimg.75.1140.png/content/dam/uxdia/membership-card-d-and-t.png)
LIMITED TIME OFFER: Labor Day Sale!
Join AARP for just $9 per year with a 5-year membership and get a FREE Gift!
She's right. In fact, you must fill out the Free Application for Federal Student Aid (FAFSA) to be notified about eligibility for grants and work-study — in addition to student loans. If a loan is part of your financial aid package at your school, then you can apply for one from the government or from a private financial institution or organization — though federal loans tend to offer more flexibility and benefits.
A. Borrowing from Uncle Sam
Each year, the office of Federal Student Aid, part of the U.S. Department of Education, provides more than $120 billion in financial aid to help Americans pay for college or career school. The agency developed the FAFSA, and it processes some 20 million submissions, while disbursing, reconciling and accounting for all federal aid that is delivered to students through more than 6,000 colleges and career schools.
The William D. Ford Federal Direct Loan Program offers four types of loans, with the government as the lender. For undergraduates who can demonstrate financial need, a Direct Subsidized Loan may help cover costs. There is no interest while you are in school at least half time, during a six-month grace period after you finish the program or leave school, or during any authorized payment deferment period. Eligible undergraduate, graduate and professional students can take out a Direct Unsubsidized Loan, which is not based on financial need. The applicants pay the interest while they're in school or during grace periods or deferments.
For graduate or professional students, a Direct PLUS Loan may help pay for educational expenses not covered by other financial aid. Parents of dependent undergraduate students may use Direct PLUS Loans as well. Eligibility is not based on financial need, but a credit check is required. Interest, which is charged during all periods and will be added to the loan principal, increases the total cost of this loan. For students with other loans, a Direct Consolidation Loan combines all of their eligible federal student loans into a single loan, with a single loan servicer.
More From AARP
Student Loan Debt Crisis for Americans 50 Plus
Best options if you're struggling to repay
Can My Student Loan be Forgiven?
Sometimes, but it's a long and complex processShould Seniors Take Out Student Loans?
Which new job skills are worth the debt