How long does it take to pay back student loans? Typically 10 years, if you borrow under the Federal Stafford loan program.
But are student loans worth it? The answer to this second question requires more thought.
If, for example, your goal is to work as an executive chef, start your own restaurant, or find your dream job in the culinary industry…
…And if you believe that going to culinary school could make your dream a reality…
The right question to ask yourself might be:
What’s The Cost of Not Pursuing Your Dream?
Obviously, if you can go to culinary school without taking on loans, you should. Auguste Escoffier School of Culinary Arts financial aid advisors can assist you in understanding all of the scholarships, grants, and other federal aid that you may qualify for before getting to loans.
But if the question comes down to going to school with student loans or not going to school at all, what would that cost you?
What’s the cost of working in a job you don’t enjoy? What’s the cost of delaying your life goals?
If you’ve never borrowed money before—or if you already have debt and don’t want to take on more—thinking about loans can be scary. But it doesn’t have to be.
Once you understand how much you’ll need to borrow, and how your life could change in terms of career opportunity and earning power, it becomes much easier to evaluate student loans.
If you decide that your dreams shouldn’t be delayed any longer, and you’re finally ready to take the next step, let’s see what borrowing for culinary school might look like for you.
What Aid and Loans Do You Qualify For?
Since Federal Aid includes grants and scholarships that don’t need to be repaid, it makes sense to explore those options before considering a loan. That’s why the first step in the financial aid process is always completing the Free Application for Federal Student Aid form (FAFSA) for culinary school.
The main purpose of completing the FAFSA is to determine your Expected Family Contribution (EFC). You’ll need your (and if you’re a dependent, your parents’) tax information to complete the FAFSA.
What do you do if you’re a dependent student, and you’re having difficulty gathering tax information from either or both parents? The best course of action is to coordinate a conference call with an Escoffier Financial Advisor and your parents to help clear up any confusion.
Student Loan Information for Parents of Dependent Students
Federal law requires that dependent students submit both parents’ tax information on the Free Application for Federal Student Aid (FAFSA) form. Failure to do so can delay an applicant’s entry into school, as well as disqualify them from certain forms of financial aid. It’s important to understand that submitting information on a FAFSA form is not making any kind of financial commitment. It’s not a loan application and has zero impact on credit scores because no credit inquiry is made.
For parents who wish to support their students financially in school, ask an Escoffier Financial Aid Advisor to see if you qualify for a low-interest PLUS loan, which currently offers a 5.3% interest rate for the 2020-2021 academic year. These loans do require a credit check, but it typically has a minor effect. If you have more questions, a short call to a Financial Advisor can help clear up any confusion and answer all of your questions.
It’s important to understand that providing information for a FAFSA doesn’t commit either parent to any kind of loan in and of itself. However, low-interest loans are available to those who qualify, and everyone’s financial circumstances are different. So a call with an Escoffier representative can help you understand the various options that may be available to you and your family.
With a completed FAFSA in hand, your financial aid advisor can then help you determine your financial need, and it’s that number that mostly determines which aid and loans you qualify for.
Student Loan Information for Independent Students
Independent students have access to the same types of loans as dependent students and their parents, but instead of reporting their parents’ information on the FAFSA, they report their own (and their spouse’s, if they are married). Your answers to the questions on the FAFSA itself determine whether or not you are dependent or independent, so simply completing that form is the best step if you are unsure. You can also refer to this article on the StudentAid.gov website for more information about independent versus dependent status.
Why Stafford Loans Make Sense
More than 89% of Escoffier’s students received some kind of financial aid in the 2019-2020 academic year. And most of that came in the form of direct federal student loans, also known as Stafford loans. These loans, in fact, are the single largest source of federal student aid, with more than 33 million borrowers nationwide.
The reason to choose Stafford loans is simple: the interest rate for these loans is remarkably low compared to private loans.
There are three types of Federal Direct Stafford Loans you’ll want to consider when making the decision to go to Culinary School:
- Subsidized loans
- Unsubsidized loans
- PLUS loans
Subsidized and unsubsidized Stafford loans currently have an interest rate of just 2.75% (academic year 2020-2021). The benefit of subsidized loans is that the government pays your interest for as long as you are in school. Unsubsidized loans, on the other hand, begin accruing interest as soon as they are disbursed. Payments are not required for either type of loan until after completing your education, as long as you maintain your full-time student status.
PLUS loans are available to parents of dependent students as well as to independent students and their spouses. The interest rate for PLUS loans is just 5.3% for the academic year 2020-2021.
Note that these rates are subject to change, so for the latest information see the Federal Student Aid interest rates on the Federal Government’s website.
Upon graduation (or if you leave school early), your loans go into repayment after a 6-month grace period. There are a number of repayment plans available, including standard (fixed repayment over 10 years), or graduated (lower payments in earlier years).
There’s also an extended payment plan of up to 30 years for students and parents who decide to consolidate their student loan debt. You can change repayment plans at any time, for free. Be sure to speak with your loan servicer to help find the right repayment program for you.
Here’s a Student Loan Example
Now that you understand the basics, let’s look at an example of what repayment could look like. Keep in mind that these examples are for demonstration purposes only. Financial aid and loan repayment amounts will work differently for every person because everyone’s financial situation is unique.
Still, understanding the mechanics can bring you clarity on what your financial commitments could look like after you graduate.
Once you know how much you’re borrowing and your interest rate, you can use the government’s Student Loan Simulator to see what loan amounts and payments would look like under various scenarios.
What Happens If You Can’t Pay Back Your Student Loans?
If you are going through a hard time, in between jobs, or facing a crisis, the Department of Education has many options on loan repayment, including lowering or postponing payments. Escoffier’s Financial Advisors can help you pick the best option for your specific situation.
If you don’t want to log into the government’s loan simulator site, you can also try Sallie Mae’s Calculator to simulate borrowing and repayment amounts, depending on how much you borrow and the interest rate.
The below chart shows the subsidized and unsubsidized Stafford loans from an example Escoffier Estimated Financial Plan. As you can see, this student qualifies for a total of $20,000 in Stafford Loans: $8,000 as a subsidized loan and $12,000 as an unsubsidized loan.
Plugging these numbers into Sallie Mae’s Loan Payment Estimator reveals an estimated monthly payment of $76 for the subsidized loan and $114 for the unsubsidized loan. So for 10 years, this student would be paying about $190 per month until the loans are paid back.
What about a PLUS loan? How does a higher interest rate compare in terms of payments over time? As you’ll see, your payments would be higher, but not significantly so. Using the example of an $8,000 loan, what would payments look like over 10 years at the PLUS 5.3% interest rate, compared to the 2.75% rate?
For this loan, you or your parents would be responsible for an $86 monthly payment for the next ten years, just $10 more per month than the 2.75% interest rate loan. Obviously, that’s a big difference over a 10-year period, but it’s a relatively immaterial difference on a per-month basis.
If you need to consider a private loan, your interest rate would likely be higher than 5.3%, so use the loan calculators to see what different borrowing amounts and interest rates would do to your monthly payments.
As you play with the numbers, you’ll see how a loan can help you finance your education by breaking a large school investment down into a much smaller monthly payment schedule.
Escoffier also offers flexible payment plans and short-term interest-free loans if your financial aid and other funding sources don’t fully cover your education. Be sure to check with your financial aid advisor to understand Escoffier’s flexible payment options.
Student loans can make the substantial investment of going to culinary school suddenly appear to be within reach. Which brings us back to our original question, slightly modified:
Are Student Loans Worth It…If They Can Help You Achieve Your Career Goals?
Now we have the right question, and an understanding of how to answer it.
After completing your FAFSA, and having a conversation with a financial aid advisor, you’ll find out how much in student loans (and other aid) you qualify for. Then you can run the numbers to see what your repayment schedule would look like over the next ten years after graduating.
In the examples above, would that student paying $100 to $200 per month over ten years believe it’s worth it? If an education helps him or her move towards their dream of opening a restaurant, working towards an executive chef position, or launching a new career path in life, the answer may become more clear.
Of course, there are no guarantees in life. Circumstances can change, and there are risks in any endeavor. Just having a culinary education doesn’t guarantee anything, but it can be the first step towards a rewarding career and a larger plan. And a student loan can help make that step happen sooner rather than later. Life is short.
Remember, borrowing money to go to school should be done responsibly, with a specific vision for your life in mind. If you’re wondering which academic path is right for you…
If you want guidance on clarifying your culinary arts or pastry arts goals…
And if you want to gain clarity on financing your education with loans, scholarships, and other aid, request more information today, and we’ll help you figure out your next steps.
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