If you took out student loans to pay for trade school and are nearing graduation or have already entered the working world, you may be wondering about ways to make your debt more manageable.
Perhaps you are a recent grad renting your own home for the first time, and you have a lot of new expenses (electricity, WiFi, etc.). Or maybe you are finding that the job you will soon be starting doesn’t pay quite as much as you had hoped. Whatever the scenario, whether you have one loan or more, if money is tight, you might want to explore refinancing.
Here, you’ll learn what you need to know about refinancing your trade school loans, so you can make the best decision for your situation.
What Is Trade School?
College isn’t for everyone, and yet many people still want to train for a profession that will be fulfilling and pay well.
Many opt to go to a trade school, which is a vocational or technical institution that provides training and technical skills. These skills prepare people for jobs as mechanics, health technicians, cosmetologists, plumbers, electricians, truck drivers, and more.
Trade school programs often last one to two years, depending on the program. You may also hear them referred to as vocational schools. The curriculum is usually a mix of coursework and hands-on requirements. Again, depending on the program you take and the school you attend, you may be a part- or full-time student.
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Trade School Student Loan Options
Just like with colleges and universities, trade schools cost money, and when students can’t afford to pay out of pocket, they often take out student loans to help with the cost of trade school. One study recently found that the average trade school student takes on $10,000 in debt.
Let’s look at two options for trade school loans.
Federal Student Loans
Student loans for trade schools may be federal loans, though not all trade school programs qualify for these loans offered by the US Department of Education.
If your school is accredited and you qualify for federal loans, take time to understand the different types of federal student loans before you fill out the FAFSA (Free Application for Federal Student Aid) to see how much you can borrow.
Recommended: Important FAFSA Deadlines to Know
Private Student Loans
If your trade school isn’t accredited and you can’t get a federal loan, or you simply decide that a private student loan suits your needs better, there are private trade school student loan options. It’s important to understand how private student loans work because they are different from federal loans.
The interest on private loans may be higher than with federal loans, and unlike federal loans, you may be required to start paying back your loan immediately. Federal loans typically give you a grace period to finish your studies before beginning to pay back the loan. Federal loans also offer certain benefits and protections, unlike private student loans.
It may also be more difficult to qualify for a private loan, since you will need to prove you are creditworthy, and you may need a cosigner to get one.
Average Trade School Cost in the U.S.
Before you can look at trade school loans, you need to understand how much trade schools cost to attend.
On average, the net cost for a trade school is $17,600. This is the cost after receiving scholarships or grants.
The range of net costs is $12,000 to $20,000 depending on the field of study and where the school is located.
For example, the average net cost to become an auto technician is $17,000 to $22,000. The cost to become a veterinary technician is about $5,000 to $13,000.
5 Tips for Staying on Top of Your Trade School Loan Payments
When it comes to managing your financial wellbeing, paying off your debt, including trade school loans, should be among your top priorities. If you fall behind in your payments, you risk having a negative mark on your credit report, which could make it difficult for you to take out other loans or open credit cards later.
Here are a few tips to ensure you stay on top of paying for trade school loans.
1. Build It Into Your Budget
Your daily Starbucks fix isn’t a necessity; paying your trade school loan is. Make sure that loan payment is part of your monthly budget so that you always have enough to cover it.
2. Pay More Than the Minimum Payment
If you can afford even an extra $5 a month, pay the extra toward your loan. This will help reduce the time you spend paying it off. It can also lower the amount of interest you pay since you can pay the loan off early.
3. Automate Payments
You never have to worry about making your payment on time if you automate your finances. With your student loans, you can likely either do so through the lender’s website or as a bill pay from your bank. Some lenders even give you a reduction in interest if you sign up for automatic payments.
4. Choose the Date You Pay
Another thing many lenders do is allow you to select the day each month you’ll pay your bill. If you know you get paid on the fifth of each month, it makes sense to choose a date after that, like the eighth, so you are always sure you have enough in your account to cover the payment.
5. Refinance to Have a Single Payment
If you have multiple loans with different amounts due and different interest rates and payment dates, it may take you longer to pay them all off, not to mention increase your money stress. Refinancing your trade school student loan allows you to pay off the different loans and gives you another one with a single payment and interest rate.
However, it’s important to note that if you refinance for an extended term, you may pay more interest over the life of the loan. Also, when you refinance federal loans via a private loan, you forfeit federal benefits and protections.
Refinancing Loans for Trade School
If you’re considering refinancing student loans for trade school, there are many benefits to consider.
• First, as mentioned, if you took out multiple loans for trade school, refinancing can be convenient. It can replace them all with a single new loan. You’ll now make just one payment each month, and you’ll have one interest rate.
• Speaking of interest, depending on what the interest rate was when you took out your loans, refinancing them could help you get a lower interest rate.
• If you’ve been struggling to make a high payment on your loan each month, refinancing for a longer period of time could help you lower your student loan payments (though you may pay more interest over the life of the loan).
If refinancing makes sense, explore lenders who offer refinance loans. Be sure to shop around, because interest rates and terms can vary considerably from one lender to another.
And before you apply, check your credit. The higher your credit score, the better the rates and terms you’ll qualify for. If your credit isn’t great, you might consider paying down some of your debt and waiting for your score to rise before applying for a loan so you can get a lower interest rate.
The Takeaway
Trade school can be a valuable way to train for a variety of career paths. But paying off trade school loans shouldn’t be a long-term struggle. In some situations, refinancing your trade school student debt can be a helpful option, as can adopting habits (like automating your finances) that help you prioritize your debt repayment.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Does FAFSA cover trade school?
The FAFSA (Free Application for Federal Student Aid) does cover trade schools, but only if they are accredited institutions.
How do you get trade school paid for?
If you don’t have the funds to pay for trade school out of pocket, there may be both federal and private student loans for trade school available. You can also research scholarships for trade schools.
Can you use student loans for trade school?
Yes. Student loans can be used to pay for trade school. Look into whether a trade school is accredited or not to determine what options may be available.
Photo credit: iStock/frantic00
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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