You’re probably familiar with Capital One as a credit card company. Their commercials are seemingly everywhere, and their catchphrase – “What’s in your wallet?” – is well-known across the United States. Capital One is a leader in not only credit cards, but auto loans and mortgages as well.
The company used to offer federal student loans under the Federal Family Education Loan Program, or FFELP. In 2010, former President Barack Obama signed the Health Care and Education Reconciliation Act as a companion to his Affordable Care Act; the new law effectively ended the FFELP and put several lenders out of the student loan business – Capital One being one of them. That doesn’t, however, mean Capital One can’t help you pay for college; it still offers a number of products that can help you defray educational costs.
Under FFELP loans, private companies like Capital One would make a federally guaranteed loan to students and parents. The federal guarantee meant that the lender was protected against default; if the borrower didn’t pay Capital One back, the government would pay the lender and then take over collection efforts against the borrower.
At the height of the program, FFELP loans accounted for more than 75% of all new student loans. President Obama, however, announced that he would be ending the program because it used private banks as “middlemen,” and that extra layer of bureaucracy was costing the American taxpayer $68 billion per year. While changing the loan originator to the federal government didn’t change much for students, it changed everything for companies like Capital One, which suddenly found itself out of a major arena.
How Capital One Can Still Help You Pay For College
For most students, building credit is a critical issue. When you’re just starting out, it’s imperative to get a solid – and satisfactory – credit history built. Not only is it necessary to have good credit to get other financial products, such as a private student loan or auto loan, but it also can be the difference between living in an apartment or having to move back home with your parents after you graduate. Credit is used to make a myriad of decisions about you; even most jobs now pull a credit history as part of their pre-hire process.
One of the best ways to build credit is with a credit card – used correctly and responsibly. Capital One’s Journey Student Card is designed for students with average credit, who are looking to build an excellent credit history. It offers 1% cash back on all purchases, and if you make your payments on time, you get an extra cash back bonus of .25%. The card also comes with credit monitoring tools, to help build good habits. The interest rate is higher than normal at 20.99%, but that is to encourage paying off the balance each month.
Another potential way that Capital One can still help you is through a home equity loan. If your parents own their home and there is equity in it, they may be able to take out a loan secured by that equity. Capital One offers both loans and lines of credit, at interest rates starting at 4.24% APR.
Alternative Ways to Finance Your Education
It’s always better to look into scholarship programs, grants, and other sources of funding that don’t require repayment, before you start taking out private or even federal loans. There are databases such as FastWeb that can help identify scholarships that you quality for, and you can also find an immense amount of information to help you create and submit a winning scholarship application package.
If you find that your scholarships aren’t able to cover the whole cost of your education, you can look into federal loans. The government offers many different loans, and highly flexible repayment terms, including income-driven repayment that helps you get started in your new career without demanding high student loan payments right away after graduation. Depending on what your field of study and expected vocation is after college, you may even be able to have your loans forgiven completely.
If you find that you are still in need of funds after exploring scholarships and federal loans, your next option is a private loan, like what Capital One used to offer. There are a number of private lenders with excellent student loan programs. Those programs, however, often come with less repayment flexibility and a higher interest rate, so they’re often seen as the least attractive option.
There are a hundred different ways to pay for school; Capital One is just one of the many companies that can help. If you can think outside the box, there’s a creative solution available for you.