In the United States, the cost of higher education is rising at an unsustainable rate. Even once-affordable public institutions and community colleges are increasing their tuition, board and student fees at 5 to 10 percent per year. At private colleges, the problem is far worse. Some elite private schools now charge undergraduate students over $50,000 per school year. Ironically, many "for-profit" institutions look cheap by comparison: Solid online-based schools may charge between $3,000 and $8,000 per academic year. Of course, many traditional academics insist that the quality of instruction is lacking at these bargain institutions. However, many students feel as if they have no choice but to enroll in such discounted academic programs.
Most of the students who choose to enroll in full-cost schools will require some form of financial aid to help cover their tuition costs. There are two basic types of student loans that exist for this purpose: certified and non-certified loans. The distinction between the two is fairly easy to understand. Certified loans are generally need-based credit facilities that have been "certified" by the institution in which the borrower is currently enrolled.
When a school's financial aid department certifies a loan, it confirms that the borrower would be unable to finance his or her education without the financial boost that it provides. In other words, the school's financial aid department must confirm that the certified loan is essential to the student's ongoing education. Most certified loans are also backed by the federal government and may come with certain other perks. For instance, students who use certified loans to finance their educational endeavors may be able to claim a partial tax credit on the interest that they accrue.
Non-certified or "uncertified" loans are riskier and harder to find than certified loans. In effect, non-certified loans are personal loans that a student may choose to use to finance his or her education. These loans come with higher rates of interest and generally lack federal backing. Even worse, the interest that they accrue can't be claimed as part of the student interest tax credit for which certified, federally-backed loans qualify.
Non-certified loans do have one positive aspect: They are not subject to the borrowing limits to which most certified loans must adhere. As such, they are ideal for students who may have exhausted their certified borrowing options. Non-certified loans are offered by most major banks and some larger credit unions.