AAA Answers All Your Student Lending Questions

The average yearly cost of tuition, fees, room and board at U.S. colleges is $38,270 as of 2025. If you’re after a four-year degree, it will cost you more than $145,000. This is all to say that you’ll likely need help paying for school in the form of student loans.

But taking out a loan is usually unchartered territory for teenagers. And more questions can arise when beginning to pay back the loan. To help guide you through the process, we asked Donald Kerr, AAA Northeast’s senior manager of student lending, to answer some of the most common student lending questions.

When should I apply for a loan to cover the next school year? 

Usually after May 1 is a good time to start looking around at options. Find answers to your questions about filing the Free Application for Federal Student Aid (FAFSA) and more here.

What are the qualifications to be approved and get a good rate?

Most loans are based on income and credit so the stronger your income and credit is the better chance you have of being approved and getting a good rate.

Are the interest rates variable or fixed? 

Most lenders will let you choose from either fixed or variable rates.

Do I need a co-signer?

This is a popular student lending question, as most applicants are still quite young. While co-signers are not required they are usually needed to meet the income and credit eligibility guidelines, as most students do not work full time or have credit established.

Are there any fees for the loan?

No application fees, no origination fees.

What types of loan terms are offered?

Most lenders allow you to choose from five years, seven years, 10 years or 15 years with the most common being 10 years.

Do I apply for a loan for the whole year or by semester?

Most people apply for a loan for the entire academic year and the funds are sent by the school’s semester schedule.

Can I use the loan to pay for expenses related to college such as off-campus housing or books?

Yes, you can use the loan funds to cover expenses related to the cost of education but all the funds are sent to your school so it is a good idea to ask them what the refund policy is so you have an idea what to expect.

How long does the application take and when does my school receive the money?

You can apply online in as little as 15 minutes and your school will choose the date they want the lender to send them the money.

The school awarded me the subsidized and unsubsidized loan. Should I use them?

Yes, these are government loans and they usually have the lowest rates and best terms so we always recommend that if you have to borrow you should use these loans first and then look at other options to cover any remaining balances.

Do I have to apply every year and will I have multiple loans when I graduate?

The most common option is to apply every year but you might find a lender that will allow you to apply for all four years at once. Keep in mind that if you have multiple loans all with the same lender, they will offer you a combined bill so you only have to make one payment and they will split it up to the individual loans. You can also consolidate all your loans into one after you graduate.

Can I defer my payments until after I graduate?

Yes, most lenders will give you a choice of paying your loan immediately while you’re in school, interest-only payments while in school or defer all payments until six months after graduation. But interest does add up during the deferment period.

How does the One Big Beautiful Bill impact student loans?

On July 4, 2025, the president signed the One Big Beautiful Bill Act into law, which makes changes to some federal loans used to pay for college, effective July 1, 2026.

For current and prospective borrowers:

The Graduate PLUS loan is being eliminated. This is a loan program that graduate students could borrow to cover the cost of attending without the need for a co-signer or help from their parents. This loan did not have any annual limits and only required a light credit check for approval, making it possible for many students to find a way to pay for college.

Graduate students can still borrow the same unsubsidized loan they used as an undergraduate student, but these loans now come with borrowing caps: a standard annual limit of $20,500 and a lifetime limit of $100,000. Students pursuing professional degrees, such as medicine or law, will have higher limits — $50,000 annually and $200,000 over a lifetime.

Changes are also coming to the Parent PLUS Loan program, which is a loan parents can borrow to pay for their child’s undergraduate degree. Parents will now be limited to borrowing $20,000 annually, with a lifetime cap of $65,000, versus today’s annual limit of the cost of education with no lifetime limit. 

With today’s cost of college, eliminating the Graduate PLUS loan and putting limits on the loans parents and graduate student can borrow will force families to find new ways to pay for college or place more focus on choosing a college that is affordable for them. Families and students will have to turn to private student loans or home equity loans and lines of credit which rely on credit and income to determine eligibility. It will be important for families to get their credit into shape now so they can access these options later. Of course, the sooner you can start saving for college the less of an impact all of these changes will have on you. 

For graduates:

For borrowers who have graduated or left college and are in repayment, the number of repayment plans they have to choose from will be reduced to two options by July 1, 2028. Some of the safety nets to help them when they cannot make payments will be limited as well. 

Today, borrowers can choose from a variety of repayment plans that are based on their current income. There are lots of them, including the Saving on a Valuable Education (SAVE) Plan, Pay As You Earn (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) plans.

Borrowers will have only two repayment plans to choose from in the future. The standard repayment plan or the repayment assistance plan (RAP), which will replace all income-based repayment plans.

The standard repayment plan will be a 10- to 25-year loan term based on the total amount you owe in federal loans. So, those with higher amounts of debt will have more time to repay the loan. 

The RAP loan will base your monthly loan payments on 1% to 10% of your adjusted gross income with a $10 per month minimum. In most cases this will result in a higher monthly payment than the older income-based repayment plans.

Hardship forbearances are a way for a struggling borrower to temporarily postpone loan payments if they are unemployed, working part time or cannot make payments for some reason. Today they have up to three years of this type of relief to use. Under the new rules, they will be limited to using no more than nine months in a two-year period. 

Recently, the Department of Education resumed all collection activities such as garnishing wages, taking portions of tax refunds and even Social Security checks. When combined with the changes to loan repayment, borrowers should be as prepared as they can be to pay back their student loans. 

What is the difference between refinancing a loan and loan consolidation?

Consolidation is the act of combining multiple loans into one and refinancing is getting a lower rate and different terms on a single or multiple loans.

Is now a good time to refinance my loans?

Whenever you are ready. College Ave Student Loans and AAA Northeast have partnered to provide members with a better student loan experience and help them save. AAA Northeast Members receive 0.50%, up to $599.99, off the loan amount paid back to the borrower on all refinanced loans. Learn more.

Are there any costs to consolidate or refinance my loans? 

No application fees, no origination fees and no closing costs.

If I change the term of my loan from 10 years to 15 or 20, am I locked into this?

No, if you refinance your loans into a longer-term loan you can always refinance again and change it back into a shorter-term loan.

If I have a co-signer can they be removed from the loan?

Some lenders do offer this as an option but it is important to note that in order for a co-signer to be removed you have to have the income and credit to support the loan on your own. Once you do, you can always refinance the loan again in your own name and remove the co-signer.

How long does the refinance process take?

You can apply online and receive an initial credit decision in as little as 15 minutes. If you are approved and want to move forward with the loan you will go into a loan closing process in which you will have to supply documents such as a pay stub, driver’s license or other documents such as a payoff letter. You will then sign the contract for the loan electronically and the lender will pay off your existing loans and create the new loan. So from the initial application to when your new loan goes into effect can be on average 30 days or longer.

Learn more about AAA student lending services.

Do you have any other student lending questions? Ask them in the comments below.

This article has been updated and republished from a previous version.