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Kentucky students leave school with typical debt levels ($28,435 in 2018 vs. a national average of $29,200, according to the Institute for College Access & Success). But typical or not, paying down a five-figure student loan in Kentucky is no easy feat.
Whether you’re beginning your educational journey in the Bluegrass State or you’ve already graduated, here are some strategies for handling Kentucky student loans.
For current students:
For borrowers no longer in school:
Federal student loans in Kentucky
The first step to take if you need student loans is to fill out the Free Application for Federal Student Aid (FAFSA). When you complete this application, you’ll send your financial information to your schools of choice. Each school will then use this data to assemble a federal financial aid package for you. This package could include grants, work-study eligibility and federal student loans.
When you apply for federal student aid, you may be eligible to receive direct loans, which can be subsidized or unsubsidized. Graduate students and parents of college students may also apply for federal funds.
How much you can borrow depends on your financial situation. For example, first-year dependent undergraduates may borrow up to $5,500 in direct loans. Independent students can borrow up to $9,500 as a freshman.
Private student loans in Kentucky
Federal student loans are many borrowers’ first choice, thanks to their flexible repayment plans and forgiveness options. But if you’ve received your federal financial aid package and need to fill a funding gap, consider private student loans.
When you apply for a Kentucky student loan from a private lender, you’ll have to meet the specific credit and income requirements of the lender. This might be challenging if you haven’t established a credit history or if you have poor credit. Otherwise, you’ll have to find a cosigner to improve your application. For example, College Ave encourages applying with a cosigner for undergraduate private student loans.
Whether you go with a local or national lender will depend, in part, on your desire for in-person customer service. You might compare College Ave, for example, with a brick-and-mortar branch of a bank or credit union located in your community.
There are a few other key aspects to consider when evaluating private student loans. Look at the interest rates you’re quoted, the terms of the loan and the fees you could be charged. Some lenders advertise no fees while others charge for loan origination, late payments or early repayment.
Institutional student loans in Kentucky
Your best alternative student loan could be sourced directly from your college or university. Schools are known to offer short-term emergency student loans as well as loans with traditional, longer-term repayment terms.
At the University of Kentucky, for example, full-time students who are current on their tuition and fees could request a last-minute loan for secondary expenses like room and board. Additionally, students enrolled in specific programs within the university may have access to a greater amount of funds. In these cases, the school acts as the lender and loan servicer for the entirety of your repayment.
If you’re not sure about your Kentucky student loan programs on campus, contact your financial aid office for information.
Kentucky student loans via the state government
The Kentucky Higher Education Student Loan Corporation (KHESLC) is a nonprofit government entity that also makes education loans available to students and parents.
A sister agency of the Kentucky Higher Education Assistance Authority (KHEAA), KHESLC promises low fixed rates and no fees, making its products at least worth comparing to what you could borrow from banks, credit unions, online lenders and your school.
These loans come with 10-year repayment terms, an autopay discount and forbearance options. In particular, KHESLC’s parent loan compares favorably to federal parent PLUS loans, although you would need good credit (or a creditworthy cosigner) to access the state loan’s lower interest rates.
As always, student loans — whether they’re from the government, a lender or your school — should be your last resort. If you haven’t already examined KHEAA’s other financial aid programs, circle back:
Kentucky student loan consolidation and refinancing
If you’ve already graduated and are researching strategies for repaying your Kentucky student loans, you might have considered refinancing. Student loan refinancing could help lower your interest rate, reduce your monthly payments and get you out of debt faster.
However, if you refinance your federal student loans with a private lender, you’ll lose your federal loan protections, such as the ability to pursue income-driven repayment or Public Service Loan Forgiveness.
Before you refinance your Kentucky student loans, do the math to make sure this route is best for you. Our refinancing calculator (below) could help you see how much money you could save. If you decide to refinance, this list of the best refinancing lenders can kick-start your search.
Student Loan Refinancing Calculator
Keep in mind that many of the best refinancing companies lend nationally, although Earnest is an example of one top-rated lender that doesn’t operate in Kentucky. You might also compare some of your national options with local banks and credit unions that deliver more personable customer service.
Don’t forget about the nonprofit KHESLC either. The state-run refinancing lender makes Advantage Refinance Loans available to borrowers (who are residents of Kentucky or other states) with at least good credit. You could refinance any school-certified student loans and, ideally, lower your interest rate.
Andrew Pentis contributed to this report.
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