Trade school—also referred to as a technical school, a vocational school, or a vocational college—prepares students for a specific occupation. Common trade school programs include nursing, dental hygiene, locksmithing, culinary arts, automotive technician training, cosmetologist, and information technology. Depending on the program, you can earn a trade certificate or an associate degree.
If you’re headed to trade school, student loans might be able to help cover the cost of your post-secondary education. It all depends on what program you’re enrolling in.
Federal Student Loans for Trade School
Not all trade schools are eligible for federal financial aid. Only students enrolling in an accredited trade school program can apply for federal financial aid, which includes loans from the Federal Direct Loan Program. Reach out to the Financial Aid Office at the trade schools you’re interested in to see if they are eligible.
Federal Loans for Students
There are two types of Federal Direct Loans that students can borrow. Rates for both are set at 2.75%, which is fixed for the entire loan term. Students can borrow from $5,500 to $12,500 per year. How much is dependent on dependency status and school year.
Students must also pay a loan fee for borrowing, which is around 1.057%, depending on when you take out the loan. The loan fee is deducted from the disbursement sent to the school, so you’re receiving less money to put toward college costs than you’re actually borrowing.
Federal Direct Subsidized Loans
Subsidized loans are offered to students demonstrating financial need, as determined by their federal student aid application. With this type, the government pays the interest while you’re enrolled, and during your six-month grace period.
Federal Direct Unsubsidized Loans:
The Direct Unsubsidized Loan offers students another way to borrow from the federal government, regardless of financial need. With unsubsidized loans, the government doesn’t pay interest while you’re in school or the grace period. Instead, interest accrues and then compounds. When you graduate college, your loan amount will be higher than it was when you took it out.
If you go this route, consider making at least interest-only payments while you’re in school to keep the balance as low as possible.
Federal Loans for Parents
Direct PLUS Loans (called Parent PLUS Loans when borrowed by parents) give parents a way to borrow from the federal government to help cover their child’s education expenses. Eligibility is not based on financial need, but it is dependent on a credit check. Parents with a poor credit history need to meet extra requirements.
Parent Plus loans can cover the remainder of a student’s college costs that aren’t covered by financial aid. Current interest rates are 5.30% for money disbursed on or after July 1, 2020, and before July 1, 2021. Parents must also pay a loan fee when borrowing of around 4.228%.
How to Apply for Federal Student Loans for Trade School
- File the FAFSA
File the Free Application for Student Aid (FAFSA) to see what financial aid you qualify for. Visit StudentAid.gov to file. Using the website, send your application to every school you’re interested in attending.
- Review Your Financial Aid Award Letters
Each prospective school will provide you with a financial aid package based on the information you provided. Review each financial aid award to see how much you’re eligible to borrow in Direct subsidized and unsubsidized educational loans.
- Accept the Financial Aid Award
You don’t have to accept the entire financial aid award; what you accept is up to you. We recommend only accepting federal student loans if you’re unable to cover costs with grants, scholarships, work study, and savings.
- Complete Loan Counseling & Sign the Promissory Note
If you decide to borrow, you will need to complete loan entrance counseling and sign a Master Promissory Note. The first is a tool that ensures you understand your obligation to repay the debt. The latter is an official document stating you agree to the terms of the loan.
Benefits of Borrowing Federal Student Loans for Trade School
If you can avoid borrowing student loans, you should. But, if you need to borrow, federal student loans provide students with the best benefits. The federal government offers borrower protections like income-based repayment plans, forbearance, academic deferment, a grace period, student loan forgiveness, death and disability discharge, and more.
Plus, students who borrow federally have access to the Public Service Loan Forgiveness program, which forgives your eligible federal student debt after 10 years of on-time payments for anyone employed by the government or a qualifying non-profit.
Private Student Loans for Trade School
If your trade school isn’t eligible for federal financial aid, you can still borrow money to pay for school. You’ll just need a private lender. Private educational loans help fill the gap when what you’re able to pay and what you’re able to borrow federally doesn’t cover the full cost of college.
Not all private lenders supply private student loans to trade school students, especially if you’re not enrolled in a degree-seeking program. Private loans are also competitive. You’ll need to meet the minimum credit score and income requirements to qualify.
Here are a few trusted lenders that help trade school students borrow to pay for school:
LendKey: LendKey is a student loan marketplace that connects degree-seeking students with student loan products from credit unions and banks. Only students enrolled at least half-time in a degree-granting program (like an associate degree program) from an approved school can apply.
CollegeAve: CollegeAve’s Career Loan with Success Rewards covers up to 100% of the cost of attendance for associates-degree students. Select from several in-school repayment options and repayment terms to make the loan fit your budget. CollegeAve requires cosigners but releases them after 24 months of on-time payments.
Wells Fargo: Wells Fargo offers private loans for career and community colleges. Students attending a two-year school, a non-traditional school, or a career-training program can apply. Student borrowers won’t have to make any payments until six months after leaving school.
Sallie Mae: The Sallie Mae Career Training Smart Option Student Loan funds professional training and trade certificate courses at non-degree-granting schools. Borrow up to the cost of attendance. While you’re still a student, you’ll need to either pay $25 per month or pay monthly interest.
What to Watch For Before Applying for a Private Student Loan for Trade School
Applying for private educational loans for trade school isn’t always straight forward. Before applying, make sure you’re aware of a few things:
- Eligibility Criteria: Many private providers only lend to students pursuing a four-year degree. Make sure the lender you’re applying to loans money to trade school students.
- Repayment: Ask about the repayment policy. Does repayment for trade school students start immediately, or is it deferred until graduation?
- Cosigner Obligation: Cosigners help you qualify for private student loans, but you should find out what the cosigner obligation is before asking someone to cosign with you. Look for a lender that offers cosigner release.
How Much Can I Borrow for Trade School?
When borrowing for trade school, the amount you borrow cannot exceed the cost of attendance. The cost of attendance, outlined on the financial package from each prospective trade school, accounts for tuition and living costs during your time in school.
With federal student loans, the loan amount cannot exceed the limits set in place by the Federal Direct loan program. With private lenders, the loan amount cannot exceed the total cost of attendance minus any financial aid.
Are Student Loans a Good Way to Pay for Trade School?
Educational loans can help you pay for trade school, but, as always, they should be a last resort.
If you must borrow, minimize what you borrow to minimize how much you’ll owe. A simple concept, sure, but when finding a way to pay for school, it’s easy to forget that you will actually have to pay the money you borrow back.
Instead of educational loans, consider some cheaper alternatives like grants, scholarships, paying in installments, and paying as you go.
How Else Can I Pay for Trade School?
Grants
Federal, state, local, and non-profit grants help trade school students pay for college. Students enrolled in an accredited trade school automatically apply for the federal Pell Grant when filing the FAFSA. Some states and third-party organizations offer higher education grants too. Grants are usually awarded based on financial need.
Scholarships
Scholarships are another form of free money that you can use to pay for college. High schools, trade schools, local community organizations and businesses, professional organizations, religious institutions, for-profit companies, and more provide students with scholarships. Talk to your high school guidance counselor or a trade school representative for more information. And, be sure to check out our coverage on scholarships.
Payment Plans
Find out if your school offers an installment plan. This would mean smaller payments throughout the year instead of one payment in full upfront. If you’re still working, an installment plan might make it so you can avoid student loans entirely.
Paying As You Go
Even if your school doesn’t offer installment plans, you use a partial pay-as-you-go strategy to cover your trade school costs. Find a part-time job on or off-campus. Paying as you go works well for non-tuition expenses like books, supplies, groceries, student fees, or even housing. As a student, you can take out a loan to cover those expenses, but it’s a lot cheaper in the long run not to.
Personal Loans
If your trade school program or certificate program isn’t eligible for federal or private student loans, consider a personal loan. Some personal loan comes with strict use requirements, so make sure you’re allowed to use the money to cover your education costs.
Personal loans should be a last resort since they’re not designed for students and don’t come with grace periods or other perks you might find with a traditional student loan.
