Learn About Student Loan Programs
Going to college is expensive. You must pay for tuition, living expenses, textbooks and extra class materials as needed.
Unless you are independently wealthy, worrying about financing and affording your college education is stressful.
Thankfully, options are available to assist you in handling these costs over the duration of your degree program.
The three main ways of paying for college include grants, scholarships, and loans.
Grants and scholarships are offered without expectations for repayment.
Due to this fact, obtaining grants and scholarships is more difficult to achieve.
Loans are offered through private or federal lenders but upon graduation you must repay the amount loaned.
It may not be ideal to take out a loan but if you do it the right way, repaying your loan at the end of your degree is not a life-long endeavor.
Before submitting your application for a student loan, take the time to learn what to expect, how to get the best loan package and repayment options.
What is a Loan?
Loans are a common type of aid for every student, even students receiving grants or scholarships.
Though loans are offered through the federal government or private lenders, most financial experts recommend you accept federal loans first.
This is because the federal loans often have lower interest rates, or waive the interest payments until you graduate.
Private loans are offered from banks, state agencies, or credit unions, though these loans often come with extra stipulations set by the private lender.
Private loans are usually more expensive compared to federal loans.
Another benefit to federal loans is fixed interest rates, deferment options, and interest rate reduction based on payment.
Below the general categories of federal and private loans are specific awards.
Each specific loan comes with its own requirements to continue to receive support.
The amount of money offered is dependent on your level of study and the year of school you are in when you apply.
On average, graduate students are offered higher loan amounts compared to undergraduate students.
The higher amount offered corresponds to the increased cost of the advanced classes.
Additional loans are available to parents of dependent undergraduates to assist with educational expenses.
Learn About Subsidized Versus Unsubsidized Loans
When you take out a loan it begins to generate interest for the length of time it is borrowed.
If you have the option for a subsidized loan, the U.S. Department of Education takes care of the growing interest while you are enrolled.
Unsubsidized loans mean you are responsible for paying any accruing interest.
It is important to note what options you have available to you and only take out unsubsidized loans when necessary.
Learn About the Types of Loans Available
Four main federal loans are available to eligible students. To become eligible for most loans fill out a Free Application for Federal Student Aid.
Once your eligibility is determined through your FAFSA application, different loan offers are made available.
Federal loans are offered through the U.S. Department of Education. Four main programs are available:
- Direct Subsidized Loan Programs
- Direct Unsubsidized Loan Programs
- Direct Consolidation Loan Programs
- Direct PLUS Loan Programs
Direct subsidized loans are offered only to undergraduates.
Direct Unsubsidized Loans are offered to students of all degree levels and there is no financial need requirement.
Direct PLUS loans are only available to parents of dependent undergraduates.
Financial need requirements do not exist for PLUS loans, though a credit check is required.
Consolidation loans are recommended if you have multiple loans and would like to put them all under one servicer for ease of payment.
Learn About Grace Periods for Student Loans
Once you are finished earning your chosen degree, you must start repaying your loan.
Thankfully you are not expected to repay your loan the day after you graduate.
Once you are finished earning your respective degrees, a grace period begins.
During this grace period you do not have to pay anything on your loans.
Typically, a grace period is six months to allow you to settle financially and set-up a repayment plan with your lender.
During the grace period, interest continues to collect on most loans.
Additionally, not all federal loans have a grace period. PLUS loans, for example, do not have a grace period.
It is important to check with your loan servicer in advance to avoid surprises.
How to Repay the Loan
Speak with your loan servicer or lender when it comes time to pay your loans back.
Depending on the repayment plan you choose, these factors are subject to change:
- Due date of the first payment.
- Frequency of payments.
- Total number of payments.
- Amount to be paid each month.
It is important to go over all your options to determine the best repayment plan for your loan program.
The amount of money you owe each month is determined by the types of loans you have, the interest rates, the repayment plan and the amount of money you borrowed.
Once your loan and repayment plan are determined, you begin to make payments to the loan servicer.
For any loans not owned by the Department of Education, payment is made to the lender.
You do have the option to pay more than the required monthly payment.
Sometimes paying a little more each month results in a lower interest rate.
If you do choose to pay a higher sum one month, the extra money does not count towards the amount you owe next month.
It is unfortunate but sometimes you encounter difficulties paying your loans back.
Contact your loan servicer immediately when this happens.
Do not wait and let the problems compound. Failure to pay back your loan means it falls into default.
Defaulting on loans plummets your credit score and you are left open to potential legal recourse.
Your loan servicer does not want your loan to go to collections and will work with you toward a solution.
Most solutions include changing a repayment plan or deferment.
Learn About Loan Forgiveness
In some cases, your loan is forgiven. Loan forgiveness mean you do not have to repay the debt you accrued.
Often if you work in a certain field for a number of years, you are eligible for loan forgiveness.
For example, becoming employed by a government or not-for-profit organization can lead to loan forgiveness.
Many civil service jobs, health and medical jobs as well as expressing a willingness to work in areas of great need can lead to loan forgiveness.
When interviewing for a job, make sure to ask if the company offers any loan forgiveness assistance for student loans. Many do.