Student Loans 101
With tuition rates on the rise, student loans have become a necessary evil for many college students. There are many loan options for higher education and with the fall semester right around the corner, now’s the time to educate yourself on everything from financial aid to student loans!
What’s the first step?
First and foremost, loans should not be your only form of payment when it comes to your education. You should consider all of your options and ways to cut costs, if possible. Check out this blog for ways to lower the cost of tuition before you lean on loans. Second, apply for financial aid and scholarships. You have nothing to lose and everything to gain. Once you’ve exhausted those avenues, you can consider loans.
How do I apply for financial aid?
Familiarize yourself with the acronym – FAFSA! FAFSA stands for Free Application for Federal Student Aid. The form can be found on the Federal Student Aid website.
After submitting the FAFSA form, the Federal Student Aid Department will send an award letter that let’s you know how much of your college tuition will be covered by the department of Federal Student Aid, depending on your eligibility. Usually the full tuition amount is not covered by the department, which leads students to apply for loans to cover the remaining tuition expenses.
What’s the best kind of loan for students today?
Federal loans are usually the best option for students – they carry lower, fixed interest rates, and the repayment terms are more favorable than private loans.
What’s the difference between subsidized and unsubsidized loans?
If you’re applying for a federal student loan, it’ll be either subsidized or unsubsidized.
- A subsidized loan is a loan for which the government pays the interest while you are in school, during grace periods, and during any deferment periods.
- An unsubsidized loan is a loan for which the student is responsible for paying all the interest that accrues at any point in time.
When do I have to start making payments?
All student loans have to be re-paid, however, payments usually aren’t due until after the student graduates. There’s usually a six-month grace period between graduation and your first payment.
What if I don’t finish?
If you don’t graduate (drop out or go part-time instead of full-time) your repayment plan will begin six months following that date. If you choose to head back to school later, you can apply for the loan payments to be deferred. There are also deferment and economic hardship options for those who are no longer attending school but are unable to make payments.
Can I pay early?
There are no repayment penalties on federal student loans. If you can make an extra payment or payoff your loan earlier than planned, it’s completely OK!
What if I can’t manage the repayment terms?
If you ever find yourself unable to make payments towards your student loans during the repayment period, communicate with the company that services your loan. There are many options, and re-payment plans that can be affordable. Ignoring your student loans has no benefits – it’ll hurt your credit, and other funds you might have coming your way (for example, your federal tax refund).
There are many loan options available to students, but it’s important to do your research. Read your loan agreement before signing, and keep an eye out for (legit) loan forgiveness programs from the government.