4 things to know about student loans

Different people will have different needs, which may require applying for different types of loans.

Many people use student loans to help pay for their undergraduate and graduate studies. The student loan system can be difficult to understand at first. Here are five things you should know about student loans.

1. Different types of loans

There are two main types of student loans: private loans and federal loans. You can get a private loan from a bank or other private organization, but generally these are only available after you have received the maximum amount of federal financial assistance that is allowed to you. When you receive a private loan, you may have higher variable interest rates, less choice in terms of repayment plans, and the inclusion of lender fees. They also tend not to be subsidized with annual caps and can be affected by your credit history. Federal loans, on the other hand, tend to have low fixed interest rates, the ability to apply for loan cancellation programs, and very flexible repayment plans.

However, your access to federal loans will be more restricted, depending on whether you are listed as a parent or guardian’s tax dependent, your level of education, and the tax bracket of you or your parent or guardian. . There are four main subtypes of federal student loans: Direct Consolidation Loans, Direct PLUS Loans, Direct Subsidized Loans, and Direct Unsubsidized Loans.

2. Loan repayment

Student loans come with repayment plans that are determined by various factors. You may be limited to one or two choices or you may have a large number of options. Your options will depend on your total loan amount, type of loan, and your income. Some of the most common types of loan repayment plans include: standard repayment, phased repayment, income-based repayment, and extended repayment plans. Each plan will include a repayment rate and a period during which you can expect to repay the loan, typically ten to thirty years.

Payment rates can be fixed or gradual, high or low, and based on a percentage of your income or your total loan amount and interest rate. A good rule of thumb is to set up automatic payments so you don’t forget to submit your monthly payment. It’s also possible to default on your loans, but doing so can negatively impact your overall credit score and increase your risk of not being eligible for future loans, especially student loans.

3. Uses of the loaned money

Students working at a table with coffee, notebooks and laptops; image by Startupstockphotos, via Freepik.com.

Student loans are intended to be used for educational purposes only and are limited accordingly. There will likely be details in your loan agreement, but in general, you can use your loan money for tuition, accommodation and board, off-campus accommodation, transportation, school supplies, textbooks, various program fees and groceries. You will not be allowed to use your loan money for take out food, movies, or travel for vacation purposes. For example, you can use the student loan funds for expenses, transportation, accommodation, and supplies related to studying abroad, but you cannot use these funds for travel or sightseeing while you are studying abroad. ‘foreigner.

4. Loan officers

When you take out a student loan, you will also be able to access a loan manager. Loan managers are the people who track your loan payments and repayment schedule, provide advice and information on various programs and actions, and help you change repayment plans or request payment deferrals and repayment schedules. delivery. If you have a private loan, the lender will likely provide you with a loan manager. If you have a federal loan, your loan manager will be a contractor who works with the federal government.

You need to know who your loan manager is before you start paying off your loans so that you can ask all the questions you need and get ready to start paying off your loans.

Different people will have different needs, which may require applying for different types of loans. It is important for you and your family to determine what and how much you need, and then research the best option to meet your needs.

About Judith J. George

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