Best Student Loans in California of 2023

As the cost of higher education in California continues to soar, many students are left grappling with how to finance their dreams. But don't let this financial challenge deter you from pursuing your educational goals. With MoneyGeek's guide, you can navigate this landscape and find the best student loans in California to fund your studies.

Overall, College Ave offers the best student loans in the Golden State. Earnest is ideal for the lowest interest rates, while Ascent is an excellent option for those with bad credit. MPower Financing is preferable for international students, whereas Discover provides the best deals for students who need a co-signer.

Student loans serve as a form of financial aid designed to help students pay for post-secondary education and the associated fees, such as tuition, books and living expenses. They play a crucial role in financing higher education, especially in states like California, where education costs are often high.

The basic mechanics of a student loan involve borrowing a certain amount of money from a lender to pay for college expenses. This borrowed amount, or principal, accrues interest over time. The borrower is responsible for repaying the principal and the accrued interest to the lender. Repayment typically begins after the student graduates, leaves school or drops below half-time enrollment. However, terms can vary based on the type of loan.

There are two main types of student loans:

• Federal student loans: Federal student loans often have low interest rates and flexible repayment options. They also offer benefits such as deferment options and access to income-driven repayment plans.

• Private student loans: Private student loans often have higher interest rates and less flexible repayment options than federal loans. They can be a good option for students who have exhausted all other forms of financial aid.

Keep in mind that the federal government funds federal student loans, while private student loans are funded by private entities such as banks, credit unions and other financial institutions.

When federal aid isn't enough to cover all the costs associated with your education, private student loans can help bridge the gap. These loans are often used to cover tuition, room and board, books and other education-related expenses.

Before getting a private student loan, it's crucial to weigh its pros and cons to determine if it's best for your situation. On the positive side, private student loans can offer higher loan limits than federal loans, which can be beneficial if your education costs are high. But the downside is that they come with higher interest rates, meaning you could end up paying significantly more in interest over the life of the loan.

Federal student loans are a form of financial aid provided by the U.S. government to help students pay for their education. These loans are available to both undergraduate and graduate students. Here are some of their key benefits:

There are several types of federal student loans available to students in California. These include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans.

• Direct Subsidized Loans: With this type of federal student loan, interest does not accrue while you're in school or during the six-month grace period after graduation. Additionally, eligibility is based on financial need, not credit history.

• Direct Unsubsidized Loans: These loans accrue interest immediately upon disbursement. While you can defer interest payments, any unpaid interest will be capitalized, increasing your overall loan balance.

• Direct PLUS Loans: These loans are available to graduate or professional students and parents of dependent undergraduate students. Eligibility is not based on financial need; a credit check is part of the application process.

• Direct Consolidation Loans: These loans allow you to combine all your loans into one, simplifying your repayment process. The interest rate is fixed and is based on the weighted average of the interest rates on your original loans.

Student loan forgiveness is a program that cancels a portion or all of a borrower's student loan debt, meaning the borrower is no longer required to repay some or all of their loan. These programs are often offered to individuals working in certain professions or sectors, such as education or public service.

Several student loan forgiveness programs are available in California, particularly for teachers and public service workers.

The California State Loan Repayment Program (SLRP) is designed to help health professionals working in shortage areas. Eligible applicants can receive up to $50,000 in loan repayment in exchange for a two-year service commitment.

The California State Loan Assumption Program for Education (APLE) is a state-funded program that encourages outstanding students, district interns and out-of-state teachers to become credentialed and teach in specified California public schools. Participants can receive up to $19,000 in loan assumption benefits.

While not specific to California, the Public Service Loan Forgiveness (PSLF) program is available to public service workers across the country. This program cancels the remaining balance on your student debt after you have made 120 qualifying payments while working in public service.

It’s worth noting that these programs' eligibility requirements and application processes vary. For the SLRP, you must be a licensed health professional working in a health professional shortage area. You can apply for this program through the California Student Aid Commission's website.

Similarly, you can apply for the APLE on the California Student Aid Commission's website. However, you must be a teacher serving in a low-performing school to qualify for this program.

For the PSLF, you must be a public service worker who has made 120 qualifying payments on your Direct Loans. You can submit your PSLF application to the U.S. Department of Education.

Effectively managing your student loans is key to sustaining financial wellness throughout your college journey and beyond. Here are some strategies you can employ to navigate this process:

When you take out a student loan, it's reported to the three major credit bureaus — Experian, Equifax and TransUnion. This loan becomes part of your credit history, which makes up a significant portion of your credit score. Student loans can help you build a strong credit history and improve your credit score if managed well. This is because a history of on-time payments demonstrates to lenders that you're a responsible borrower.

If you default on your student loan, your entire balance becomes due immediately, and you lose eligibility for deferment, forbearance and other repayment plans. A default will also be reported to the credit bureaus, leading to a significant drop in your credit score. This can make it more difficult to qualify for credit cards, mortgages or even rental applications in the future.

Whether you're a first-time borrower or looking to better understand your existing loans, here are answers to some frequently asked questions about student loans in California.