Lana Oconnell
Vocational training is an increasingly popular path to a wide range of careers. Students can obtain certification in their chosen fields more swiftly than through other routes. While vocational training can be affordable, financing it can be complicated. Students can use student loans to pay for vocational training, with federal loans being the best option. However, not all trade schools qualify for federal loans. Students can also apply for private student loans, but these generally have fewer repayment options and higher interest rates than federal programs.
| Characteristics | Values |
|---|---|
| Loan type | Federal, private |
| Loan provider | Sallie Mae, College Ave, Edly, employers, unions, third-party organizations |
| Loan features | Variable or fixed interest rates, income-based repayment, co-signer, scholarships, grants |
| School type | Trade, career training, vocational, technical, career and technical colleges |
| School examples | Flight schools, real estate schools, cosmetology schools, HVAC technology-focused schools, online trade schools |
| School accreditation | Accredited by a U.S. Department of Education-recognized agency and authorized to operate in its state |
| Loan forgiveness | Public Service Loan Forgiveness (PSLF) for federal loans |
| Repayment terms | Federal loans: standard 10 years, optional extended plans; Private loans: 5-15 years |
| Cost of attendance | Tuition, fees, books, meals, transportation |
| Other options | Apprenticeships, employer-funded vocational education, ISAs |
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What You'll Learn
Federal loans and scholarships
Federal student loans are awarded by the government and offer various benefits, including income-driven repayment plans and loan forgiveness. These loans are available to students attending vocational schools, provided the school is accredited by the Accrediting Commission of Career Schools and Colleges. Students can fill out the FAFSA to determine their eligibility for federal loans and grants. Direct Subsidized Loans are offered to undergraduate students attending college or trade school who demonstrate financial need. The interest on these loans is subsidised by the government while the student is enrolled in school at least half-time. The amount a student can borrow is determined by their vocational school and cannot exceed their financial need.
Students can also take advantage of scholarships to help fund their vocational training. Scholarships are available from a variety of sources, including professional organisations, private foundations, non-profit organisations, and the school itself. Some scholarships are specific to certain schools or areas of study, while others are open to any postsecondary student. It is recommended that students start their search for scholarships early and create a calendar to keep track of deadlines and requirements.
In addition to federal loans and scholarships, students may also consider private loans to cover the cost of vocational training. These loans typically require a credit check and may need a cosigner with a solid credit history. However, some private lenders, such as College Ave and Sallie Mae, offer competitive rates and flexible repayment options. Students should carefully evaluate all their options and consider starting with federal loans and scholarships before resorting to private loans.
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$55
Private loans
Private student loans are a viable option for those pursuing vocational training. However, it's important to note that private loans generally have fewer repayment options and higher interest rates than federal loans. When considering a private loan, it's advisable to start by comparing interest rates to minimise borrowing costs. A shorter repayment term will help you get out of debt faster, but it will likely result in higher monthly payments.
If you're evaluating private lenders, here are some options to consider:
College Ave
College Ave offers career training loans with competitive rates and flexible repayment options. You can choose between several repayment schedules, and there is an option to apply for an additional six-month grace period after the initial period ends. To qualify, you or your cosigner must have a valid Social Security number and meet the proprietary credit score requirements. College Ave also offers the Career Loan with Success Rewards, where students can get $150 in cash for finishing their programs.
Sallie Mae
Sallie Mae is one of the best-known student lenders and offers the Smart Option Student Loan for Career Training for vocational schools and other professional training programs. The loan can cover tuition, fees, and tools, and cosigner release is available after 12 consecutive on-time payments. The repayment terms offered are 10 to 15 years, along with deferred interest, fixed interest, and interest-only payments while you're in school.
Edly
Edly offers Career Training Loans with Income-Based Repayment plans, making student loans more affordable when the student's income is lower. Their loans are based on your future income rather than a set interest rate, and you won't make payments until your annual income exceeds $30,000.
Ascent
Ascent offers "bootcamp loans" for eligible programs in data science, education, plumbing, and more.
It is important to note that many private lenders require your school to be accredited by a US Department of Education-recognized agency and authorised to operate in its state. Therefore, it is essential to confirm the eligibility of your school before applying for a private loan.
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Apprenticeships
The cost of an apprenticeship is typically lower than that of vocational training, as employers often cover the cost of training. However, the pay during the apprenticeship period may be lower. When considering an apprenticeship, it is essential to weigh the costs against the potential benefits and career opportunities.
Regarding financing, apprenticeships may be eligible for federal student loans and grants. To access federal aid, one must first confirm the eligibility of their apprenticeship programme and then submit the FAFSA (Free Application for Federal Student Aid). If federal loans are not an option, private student loans are available from lenders like College Ave or Sallie Mae. Private loans generally have fewer repayment options and higher interest rates than federal loans, so it is important to compare factors such as interest rates, the requirement for a co-signer, and associated fees when choosing a lender.
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Employer-funded vocational education
Vocational education is a form of education that prepares individuals for a skilled craft or career. It can be offered through various routes, including trade schools, colleges, apprenticeships, and employer-funded training.
Many employers recognize the value of a skilled workforce and are willing to invest in their employees' development. This investment can take different forms, such as direct funding for training, income support during training, or tuition assistance programs. Some employers may even cover the entire cost of an employee's vocational education, although this often comes with a requirement to work for the company for a specified period.
In some countries, government-sponsored vocational training programs also play a significant role. These programs are designed to enhance the employability of individuals, especially those who are unemployed or at risk of becoming unemployed. Governments may subsidize apprenticeship programs or provide direct funding for training, ensuring that individuals have the skills needed to secure employment in various industries.
Overall, employer-funded vocational education offers a valuable alternative to student loans. It allows individuals to gain the necessary skills and knowledge for their careers while avoiding loan repayments. However, it is important to consider the potential limitations on future career flexibility that may come with committing to a specific employer.
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Income-share agreements (ISAs)
You can use student loans to pay for vocational training. Many accredited trade and vocational schools accept federal student loans. However, your school must be accredited by a US Department of Education-recognized agency and authorized to operate in its state. If your school is not accredited, you will likely be unable to take out federal loans, and many private lenders may not lend to you either.
ISAs are characterized by a percentage share of future income for some specified period. They can function like non-voting shares in a company, where the individual student is treated like a company. In the American system, this usually involves an investor transferring funds to an individual in exchange for a fixed percentage of their future income.
Other features of ISAs may include:
- A fixed duration of time for income sharing
- An income exemption where the borrower does not owe anything below a certain income
- A buyout option, where the borrower may pay a specified fee to exit the contract before the full duration of the term
ISAs reduce risk for students and act as an insurance policy for graduates with low earnings. With an ordinary student loan, the nominal monthly payment is fixed, but income could change or disappear. With an ISA, the opposite is true: the nominal monthly payment is unknown, but it will always be affordable.
However, one of the most frequently cited concerns with ISAs is that they are a form of indentured servitude. Critics argue that because students owe a percentage of their income, the investor owns a piece of the student.
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Frequently asked questions
Yes, you can use student loans to pay for vocational training. There are two main types of student loans: federal and private. Federal loans are provided by the government, while private loans are taken out from a bank or credit union. Many accredited trade and vocational schools accept federal student loans.
Some private student loan options for vocational training include College Ave and Sallie Mae. College Ave offers Career Training Loans that can cover up to 100% of school-certified costs, with flexible repayment options. Sallie Mae offers the Smart Option Student Loan for Career Training, which is available to part-time, half-time, and full-time students and can also cover up to 100% of tuition, fees, and tools.
There are several alternatives to student loans for funding vocational training. Apprenticeships allow you to work and earn money while learning a trade, although it may take longer to complete your training. Some employers offer tuition assistance or fund vocational education in exchange for a commitment to work for them. Scholarships, grants, and income-sharing agreements (ISAs) are also options to consider.
