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Non-Degree-Seeking Student Loans: When You’re Not Pursuing a Degree
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You might find it difficult to take out federal student loans when you’re not currently pursuing a degree. That’s because the U.S. Department of Education’s eligibility rules for non-degree-seeking student loans are relatively restrictive.
But there are numerous other ways to pay for trade, vocational or non-degree programs. And in fact, student loans might not even be your best bet. Here’s what you need to know about paying for a program that doesn’t lead to a degree.
A non-degree-seeking student might be pursuing a certificate, professional training or licensing or a career-driven education that doesn’t end with a diploma. The federal government typically doesn’t provide financial aid to non-degree students, except in the following circumstances:
- You’re completing courses that are required to enter a degree or certificate program.
- You’re completing courses for teacher certification or recertification.
- You’re attending a certificate program that prepares you for a specific career (like cosmetology).
Certificate programs come in all shapes and sizes. You might have found yours via a traditional university, a small trade or career school or through a local community college.
You can find out if your certificate program is eligible for federal aid by ensuring that it’s accredited — ideally, before you enroll. To do so, take these steps:
- Find an eligible program: Search for certificate-awarding programs using the NCES’ College Navigator.
- Confirm a program’s accreditation: Search the Department Of Education’s database of accredited schools.
- Complete the FAFSA: Find the school codes of federally approved programs on the Department Of Education’s iLibrary.
Check in with your school’s financial aid office about whether you have access to federal loans. If you’re eligible for them, prioritize federal loans over private loans. Federal loans generally have lower interest rates, more repayment options and greater protections if you encounter a financial hardship. Federal direct subsidized and unsubsidized loans disbursed after July 1, 2019, for example, have an interest rate of 4.53%; private loan interest rates, meanwhile, can reach 12% or higher.
A $5,000 federal loan would cost $6,227, including interest, over a 10-year term. Borrowing the same amount from a private lender at a 12% interest rate would cost you $8,608.
If you’ve exhausted federal financial aid options, consider private non-degree loans. When shopping around, ask lenders what types of educational programs are eligible for funding.
For example, Sallie Mae’s Career Training Smart Option Student Loan caters to students who are pursuing professional training or licensing or a trade certificate. It offers loans with a minimum balance of $1,000.
Once you have identified lenders that offer non-degree-seeking student loans, you’ll want to employ the same strategies as degree-seeking students. This includes applying with lenders within a short time — ideally 14 days, but potentially as many as 45 — to limit your credit hit when comparing rates and repayment options.
Just because you’re a non-degree-seeking student looking to further your education doesn’t mean you have to take out loans.
Before borrowing money, compare programs based on cost. For example, to become a chef without going into debt from culinary school, you might explore community colleges and trade schools before committing to a big-name culinary institution.
If you’re not set on a specific profession, you might also compare potential career paths. Among booming trade careers that don’t require student loans, for example, electricians are paid during their apprenticeships. Industrial machinery mechanics are another example of a career where workers receive on-the-job training.
Don’t forget about gift aid that doesn’t need to be repaid. For example, prioritize professional development scholarships — money given to those who are completing courses or a related program to further their career — over any loan. Search for scholarships provided by professional organizations related to your career path; for instance, if you’re a project manager, explore options from the Project Management Institute Educational Foundation.
Your employer might also offer tuition reimbursement if you continue to work while attending school, and your certificate program is related to your current career path.
Plus, if you’re leaning toward taking out a loan, know that refinancing loans for career schools could prove to be difficult. Most lenders require applicants to have an associate’s or bachelor’s degree under their belt to refinance, which can provide a lower interest rate if you qualify.
When deciding where to pursue your education, make sure to consider your eligibility for federal student loans and whether you’ll need to take on private loans to cover all or part of the cost.
Choosing a lower-cost program that would require a private loan, for example, might turn out to be more expensive than attending a higher-cost program that is approved for federal loans.
Pick the right way for you to pay for your schooling and you could save thousands of dollars down the road. You can also put more income toward the goals you choose and the things you love, rather than student loans.