Best Student Loans in Texas of 2024

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ByChristopher Boston
Edited byMegan Hull

Updated: December 28, 2023

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The cost of higher education in Texas is soaring, leaving many students and their families grappling with how to foot the bill. Fortunately, finding the best student loans in Texas can be a game-changer, offering you a lifeline to achieve your academic dreams.

MoneyGeek found that Risla provides the best overall student loans in the Lone Star State. College Ave is excellent for those who want the lowest interest rates, whereas Funding U is ideal for students with bad credit. Discover is preferable for international students, while PNC offers the best deal for students who need a co-signer. However, keep in mind that the best lender for you may differ depending on your particular needs and situation.

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Understanding Student Loans

Student loans are financial instruments designed to help individuals pay for higher education. They serve as a bridge, filling the gap between what you can afford to pay out of pocket and the actual cost of tuition, books and living expenses. In essence, student loans make it possible for you to pursue your academic goals.

When you take out a student loan, you're essentially borrowing money that you'll need to pay back over time, usually with interest. The loan will accrue interest from the moment you receive the funds, and you'll be expected to start making repayments after a certain period — often following your graduation.

There are two types of student loans:

  • Federal student loans: Federal student loans are funded by the federal government and often come with lower interest rates and more flexible repayment options. Eligibility is often based on financial need.

  • Private student loans: Private student loans are offered by private lenders like banks or credit unions. They usually have higher interest rates and less flexible repayment terms. Creditworthiness is a significant factor in determining eligibility.

Understanding the differences between federal and private student loans is crucial because each type comes with its own set of rules, benefits and drawbacks. For example, federal loans often offer income-driven repayment plans, while private loans do not. Knowing these differences can help you make an informed decision that aligns with your financial situation and long-term goals.

Best Private Student Loans in Texas

Private student loans are financial products offered by private lenders like banks, credit unions and other financial institutions. These loans can fill the gap if you've exhausted all federal aid options and still need more funds. They can also be useful for covering costs that federal loans don't, such as study abroad programs or specialized equipment for your courses.

However, private student loans come with their own set of pros and cons. On the positive side, they can offer larger loan amounts and may disburse funds more quickly. On the downside, they often have higher interest rates and less flexible repayment options. It's crucial to read and understand the terms of the loan to prevent financial difficulties down the line.

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Federal Student Loans in Texas

Federal student loans are financial aid options funded by the U.S. government to help students pay for higher education. They are often based on financial need and come with terms that are generally more favorable than those of private loans. These loans are a popular choice for students due to their various benefits, such as:

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How to Apply for Federal Student Loans in Texas

Applying for federal student loans is a critical step for many students in financing their higher education. The process involves several stages, from gathering the required documents to finalizing the loan agreement. Below, we break down how to apply for federal student loans.

1

Gather necessary documents

Before you start the application process, gather all the necessary documents, such as your Social Security number, tax records and information about your income and assets. These documents will be used to determine your eligibility and the amount you can borrow. Having them ready in advance will make the application process smoother.

2

Complete the Free Application for Federal Student Aid

The first official step in applying for federal student loans is completing the Free Application for Federal Student Aid (FAFSA). This form is available online and is used to assess your financial need. Make sure to fill it out accurately and completely to avoid any delays or issues.

3

Review your Student Aid Report

After submitting the FAFSA, you'll receive a Student Aid Report that summarizes the information you provided. Review this carefully to ensure all the details are correct. If there are any errors, you'll have the opportunity to make corrections.

4

Examine your financial aid offer

Once your FAFSA is processed, you'll receive financial aid offers from the schools you've been accepted to. These offers will detail the types and amounts of federal student loans you're eligible for. Take the time to review these offers and understand their terms before making a decision.

5

Accept the loan

After reviewing your financial aid offers, you'll need to formally accept the federal student loan you want. This usually involves signing a Master Promissory Note (MPN), which is a legally binding document outlining the terms of the loan. Make sure to read this carefully before signing.

6

Complete entrance counseling

Before receiving federal student loan funds, you'll be required to complete entrance counseling. This is an informational session that explains your rights and responsibilities as a borrower. It's crucial to pay attention during this session to understand the terms and conditions of your loan.

The Types of Federal Student Loans Available in Texas

When it comes to financing your education, federal student loans offer a variety of options. Each type of federal loan comes with its own set of terms, eligibility criteria and benefits. Here's a breakdown of the four main types of federal student loans to help you make an informed decision.

  • Direct Subsidized Loans: These loans are designed for undergraduate students who demonstrate financial need. The government covers the interest while you're in school and during deferment periods, making this a cost-effective option. However, there are limits on how much you can borrow, which are determined by your school and your year in the program.
  • Direct Unsubsidized Loans: Unlike subsidized loans, these are available to both undergraduate and graduate students regardless of financial need. Interest starts accruing as soon as the loan is disbursed, and you're responsible for paying it. The borrowing limits are generally higher than for subsidized loans but still depend on your level of education and dependency status.
  • Direct PLUS Loans: These loans are intended for graduate students and parents of dependent undergraduate students. They require a credit check and offer higher borrowing limits but also come with higher interest rates. It's important to note that you're responsible for all the interest that accrues, even while you're in school.
  • Direct Consolidation Loans: If you have multiple federal student loans, you can consolidate them into a single loan with a fixed interest rate. This can simplify your payments and offer more flexible repayment options, but it may extend your repayment period. It might also cause you to lose certain benefits, like interest rate discounts.

Student Loan Forgiveness in Texas

Student loan forgiveness is a financial relief program that allows borrowers to have some or all of their federal student loans forgiven, meaning they are no longer required to make payments on the forgiven amount. These programs are often designed to encourage individuals to work in specific professions or sectors that are considered to be of public interest or in high demand. In Texas, there are specific programs that offer loan forgiveness for certain fields, such as health care.

1

Loan Repayment Program for Mental Health Professionals

The Loan Repayment Program for Mental Health Professionals in Texas is a significant initiative aimed at addressing the shortage of mental health professionals in underserved or rural areas. Depending on the practice specialty, qualified professionals can receive up to $160,000 over a five-year period for providing service in a Mental Health Professional Shortage Area (MHPSA)

To qualify, you must be a fully licensed mental health professional in Texas. Eligible roles include psychologists, licensed professional counselors, licensed clinical social workers and licensed marriage and family therapists. You must also be willing to work in a designated MHPSA in the state for five consecutive years to receive this benefit. Those interested must submit an application form to the Texas Higher Education Coordinating Board.

2

Texas Physician Education Loan Repayment Program

The Texas Physician Education Loan Repayment Program is a significant initiative aimed at encouraging qualified physicians to practice in medically underserved areas of the state. Qualified participants can receive up to $180,000 in loan repayment over a four-year period.

To be eligible, you must be a licensed physician in the state of Texas practicing in primary care fields such as family medicine, pediatrics and geriatrics. You must also commit to practicing in a Health Professional Shortage Area (HPSA) or a Medically Underserved Area (MUA) within the state. The application process involves submitting a completed application form to the Texas Higher Education Coordinating Board.

Tips for Managing Student Loans

Navigating student loans can feel overwhelming, but effective loan management is crucial for long-term financial health. Knowing how to manage your student loans can save you from unnecessary stress and financial strain down the line. Here are some actionable tips to help you manage your student loans wisely.

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Scholarships and Grants as Alternatives to Loans

Scholarships and grants are financial awards designed to help students cover the cost of their education. Unlike loans, which are borrowed sums that accrue interest and must be repaid, scholarships and grants provide what is essentially “free money” that doesn't require repayment.

The benefits of scholarships and grants extend far beyond the immediate relief of not having to worry about tuition fees. They offer a sense of financial liberation that allows you to focus more intently on your studies, extracurricular activities or even part-time work experiences that can enrich your resume. For students in Texas looking to fund their higher education, consider taking the following steps to secure scholarships and grants:

1

Start with the Texas Higher Education Coordinating Board

The Texas Higher Education Coordinating Board (THECB) is a treasure trove of information on state-funded scholarships and grants. Visit their website to explore various financial aid programs like the TEXAS Grant and the Tuition Equalization Grant. This should be your first stop to understand what state resources are available to you.

2

Consult your school’s financial aid office

Your educational institution is a vital resource for localized financial aid opportunities. Schedule a meeting with a financial aid advisor to discuss scholarships and grants specific to your school or program. They can provide insider tips on awards that have less competition or are tailored to your field of study.

3

Prepare a stellar application

Once you've identified potential scholarships and grants, focus on crafting an exceptional application. Tailor each application to highlight how you meet the specific criteria of the award. Use compelling narratives, strong references and any required documentation to make your application stand out.

4

Meet all deadlines

Texas scholarships and grants have strict application deadlines, often differing from one award to another. Use a calendar or organizational app to track these dates. Missing a deadline can mean missing out on a valuable financial aid opportunity, so be vigilant about submitting all required materials on time.

5

Follow up

After you've submitted your applications, it's advisable to follow up with the awarding organizations. A simple email or phone call can ensure that your application is under consideration and can provide an opportunity for you to reiterate your enthusiasm for the award. This proactive approach can make you more memorable to the selection committee.

The Impact of Student Loans on Credit

When you take out a student loan, it becomes part of your credit history, and how you manage it plays a crucial role in shaping your credit profile. Your payment behavior, including the punctuality of your loan repayments, is reported to credit bureaus and influences your credit score.

Making your student loan payments on time is not just a financial obligation; it's an investment in your financial future. Timely payments positively affect your credit score, making it easier for you to qualify for other types of credit, like car loans, mortgages or even future educational loans. On the flip side, late payments can have a detrimental effect, lowering your credit score and making future borrowing more expensive or even unattainable.

Defaulting on your student loan has severe repercussions that extend beyond just a low credit score. A loan default can lead to wage garnishment, where a portion of your salary is withheld to pay back the loan. Additionally, defaulting can make you ineligible for future federal financial aid and can even lead to legal action. A default can remain on your credit report for up to seven years.

Frequently Asked Questions (FAQs)

MoneyGeek compiled a list of frequently asked questions to help you navigate the landscape of student loans in Texas.

For federal student loans in Texas, you'll generally need to meet the following criteria: be a U.S. citizen or an eligible non-citizen, be enrolled at least half-time in an accredited college or university and maintain satisfactory academic progress. For private student loans, the criteria can vary by lender but often include credit checks and may require a co-signer if you don't have an established credit history.

To apply for a federal student loan in Texas, you'll start by completing the FAFSA. This form is your gateway to all federal financial aid, including loans. After submitting the FAFSA, you'll receive a financial aid offer from your school, which you can accept or decline.

For private loans, the application process is different and is usually done directly through the lender's website. You'll need to provide personal and financial information and may need a co-signer to qualify.

Subsidized and unsubsidized federal loans differ mainly in who pays the interest while you're in school. With subsidized loans, the federal government covers the interest costs while you're enrolled at least half-time, during the grace period and during any deferment periods. Unsubsidized loans, on the other hand, accrue interest from the day the loan is disbursed, and you're responsible for all the interest that accumulates.

For federal student loans, the interest rate is usually fixed and set by the government. For private or state loans, the interest rate can be either fixed or variable. The interest accrues on the principal amount, and if you choose not to pay the interest while you're in school, the unpaid interest may be capitalized, meaning it's added to the principal, thereby increasing the total amount you owe.

Federal student loans offer a variety of repayment plans, including Standard, Graduated and Income-Driven Repayment Plans. Private loans are less flexible, with repayment terms set by the lender.

If you're unable to make payments on your student loan, it's crucial to contact your loan servicer as soon as possible to discuss your options. Federal loans offer deferment and forbearance options, as well as income-driven repayment plans that can lower your monthly payment. Private loans may have less flexible options, but some lenders offer temporary hardship deferment.

Student loan forgiveness programs discharge a portion or all of your student loan debt under specific conditions. Each has its own set of qualifications, including the type of loan, employment criteria and length of service commitment required.

About Christopher Boston


Christopher Boston headshot

Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.

Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.


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