What are Student Loans? All You Need to Know About Student Loan
Are you going to start attending college soon? Well, you are definitely not the only one. As such, student loans can vary in size, with students choosing from partial or full loans. By borrowing the money needed for books and tuition fees, everyone, regardless of whether they are well off or poor, will be able to have a chance to learn and make it big in life. After all, education is the key to success.
I’m going to share with you What are Student Loans? All You Need to Know About Student Loans. As well as How to Pay Student Loans and Tips on How to Pay off Student Loans.
So, read on, and learn more about student loans.
What are Student Loans?
A student loan is an amount of money borrowed by students to pay their tuition fees or other associated costs while they pursue their higher studies. In most cases, the government offers loans with lower interest rates and flexible repayment schemes than those offered by banks or other private institutions.
But then again, you can only apply for these loans if you meet certain specified financial requirements. The basic idea behind these educational loans is that you will have no problems getting a high-paying job once you graduate from your degree program because you already possess the knowledge needed for success.
And once you start high-paying, your ability to repay your loan will increase as well. So, should it be at all surprising that almost 85% of college students are taking out educational loans? No! This number was reported back in 2011, hence it’s bound to be higher now! Why Should You?
Types of Student Loans
Direct Subsidized Loans: As the name suggests, this type of loan is given out to students who can’t afford to pay for their education.
Direct Unsubsidized Loans: Unlike direct subsidized loans, this type of loan isn’t paid by the government. It’s your responsibility to pay back the loan amount + interest. In some cases, when you don’t have the ability to make regular payments, you can apply for deferments and interest subsidies.
Federal Perkins Loans: These loans are given out by schools or universities instead of banks or other private institutions. They’re used specifically for sponsoring low-income students who can’t afford their higher studies on their own. Graduate Plus Loans: Most colleges and universities offer graduate student loans at a standard rate of 6%.
Supplemental Loans for Students (SLS): SLS is similar to Federal Perkins Loan Program in that they’re given out directly by schools and not banks or other financial institutions. PLUS loans are usually very expensive because they carry a 6% interest rate in addition to whatever interest rate the recipient is paying on his or her credit card balance.
How to Apply for Student Loans?
- Find out a list of federal and state financial aid programs you may qualify for. Here are some common sources: www.finaid.org, www.studentscholarships.org.
- Decide if you want to attend a public or private institution? Since most schools offer athletic scholarships, it’s better to apply for state colleges first, then try your luck at bigger private universities later in the game if you don’t get accepted at the first phase of the game and can’t afford your tuition on your own.
- Choose a school: You can go directly to college websites and fill out their online application form under the “Admissions” section or you could contact them directly by phone or write to them with an inquiry letter explaining why you’re applying for admission.
- Apply for Federal Financial Aid: The Free Application for Federal Student Aid (FAFSA) is the primary form used by schools to determine need-based aid eligibility.
- Consider financing school with student loans: Students can borrow money from banks (private loans), Federal Government (Direct Subsidized loan), and states (college grants).
- Follow up on all required documents once applying for loans You need to submit official transcripts from high school and previous colleges.
8 Tips on How to Pay off Student Loans Faster
Paying off student loans is not easy especially if you have a lot of outstanding debts. Having a good financial plan can help you manage your finances and pay off your outstanding debts. Here are some tips that can help you pay off your student loans fast.
- Pay More Than the Minimum Monthly Payment It is important to pay more than the required minimum monthly payments as this will help you save money in the long run. You may also want to consider applying for federal income-based repayment plans that are available. These plans allow borrowers to cap their monthly payments at 15 per cent of their discretionary income and extend loan terms from 10 years to 25 years.
- Pay Off High-Interest Rate Debt First If there are different interest rates on your student loans then you may want to prioritize paying off high-interest rate debt first before other loans. You may choose to apply for a consolidation loan or extended repayment plan.
- Try Income-Driven Repayment Plans If you do not have high-interest rate debt then try income-driven repayment plans, which allow borrowers with low-income and high debt levels to receive lower monthly payments over a longer period of time.
- Refinance Your Student Loans Many financial experts say that refinancing student loans with private lenders can be beneficial especially if you get lower interest rates than what you have now. However, there are risks involved so make sure that it is beneficial for you before signing any contract.
- Take Advantage of Federal Loan Forgiveness If eligible, take advantage of loan forgiveness programs offered by the government such as Public Service Loan Forgiveness.
Final Thought on Student Loans
There are many student loan forgiveness programs available nowadays that can help students and parents who struggle with getting out of debt if they are eligible to access them. However, it is important to know that the eligibility for each program depends on your student loan type, repayment plan, federal versus private loans, and employment status among others. Although there is no guarantee that you will get your loans forgiven under the program you are interested in, the more options you have the higher chance you have of finding a suitable program for your needs.
If this article was helpful to you, please make sure to share and also drop a comment, I’ll do well to check it out!! If you’re from California, do well to read our CCPA – California Consumer Privacy Act