Financial Advisor Student Loans

Federal Stafford Loan

A federal student loan is a type of unsecured debt. This type of loan is funded by the Department of Education and offers various repayment options including subsidized loans and unsubsidized loans. You may choose to take out a federal student loan if you plan on attending school full-time as they have lower interest rates than private student loans. Your monthly payments will depend on whether you select an undergraduate or graduate program. Your payment amount may change depending on how long you attend college and where you live. If you do not complete your education and subsequently default on your student loans you could be charged penalties.

Federal Perkins Loan

A federal student aid loan provides funding for students who are enrolled at least half time at a postsecondary educational institution. There are two types of federal student loans. An Perkins loan requires a minimum of 30 credit hours per semester while an unsubsidized loan does not require any credit hour requirement. Both are federally guaranteed and you may apply for them without regard to your financial circumstances. If you attend school full-time and earn less than $30,000 annually, the federal government pays the interest on your loan up to 10 years. After these ten years, you are responsible for paying the principal plus accumulated interest back to the government. Students who receive an advanced degree may qualify for special consideration based on their exceptional academic achievements.

Private Student Loan

Private student loans vary in terms of rates and application requirements. Since these loans are issued by banks, it is important to research the best lenders in your area before borrowing money. In order to qualify for a private student loan, you should be a current high school graduate or graduate with good academic history. Most lenders provide a grace period prior to making a final decision about disbursement; however, some lenders may make decisions within minutes. These loans carry higher interest rates than federal student loans. A private student loan is only recommended if you need additional financial assistance to cover the cost of tuition.

Parent PLUS Loan

If you parent co-signed on a student’s loan or you are taking out a PLUS (Parent Loan) then you are eligible to borrow money too. Parents cannot directly borrow federal student loans, but parents who co-sign on a student loan can utilize a Parent Plus Loan. As a parent borrower, you must be 18 years old or older and you must be a U.S. citizen or legal permanent resident. Parents who co-sign on their child’s loan must have been married to the student for at least two years prior to applying for the Parent Plus Loan. Borrowers must maintain a cumulative GPA of 2.0 or higher throughout the duration of the term.

Financial Advisor Student Loans

For many people, student loans have become the bane of their financial lives. If you’re currently in college or thinking about going back to school for a degree, I encourage you to check out our top 10 tips for getting an education without debt.

10 – Take Advantage Of Federal Work Study Programs

Federal work study programs allow students who need financial assistance to work at least 20 hours per week while enrolled in school and receiving financial aid. Most schools offer these positions to their undergraduate students; however, some schools do provide them to graduate and professional students as well. These jobs not only help with paying tuition bills but also give students valuable experience they can use after graduation. In addition, federal work study grants and scholarships are often awarded based on performance, so those who complete their program successfully may find themselves with additional funding for future schooling.

9 – Make Sure You Get The Right Financial Aid Package

When applying for financial aid, students should carefully review the information provided by the schools they are attending. While the Free Application for Federal Student Aid (FAFSA) is free to fill out, it does not guarantee acceptance into any specific school. Many schools require additional documentation to determine eligibility for financial aid. Students should keep in mind that not all forms of financial aid are equal and that certain types of financial aid are considered loans — therefore, students should pay close attention to loan deadlines.

8 – Seek Out Student Loan Consolidation Options

Consolidating multiple student loans into one single repayment plan can save thousands dollars over time. When using consolidation options, make sure you understand what fees and interest rates are associated with the loan(s). Also remember that most private student loans have variable interest rates, so be aware of that before consolidating.

7 – Be Careful What School Costs Are Covered By Your Financial Aid

Most financial aid packages cover tuition costs. However, if you qualify for Pell Grants, then you will be able to apply that money towards your educational expenses. Remember that many public universities charge higher prices than private institutions, so be sure to compare costs between schools carefully prior to making a final decision.

6 – Determine How Much Money You Can Earn Each Week

Students should always try to maximize their earnings potential in order to reduce their loan burden. This means working part-time jobs during the weekends, getting involved in campus activities, and seeking internships and volunteer opportunities. Also, students looking to attend grad schools or medical schools should consider how much money they stand to earn once they complete their studies.

5 – Avoid Taking On Too Much Debt At Once

If you’ve taken out too much student loan debt, you could end up having trouble repaying it later down the road. Therefore, students should avoid taking on massive amounts of credit card debt along with their student loans. Instead, they should focus all of their efforts on paying off their student loans first, followed by smaller installments toward their credit cards.

4 – Do Not Spend All Of Your Available Funds

Financial Advisor Student Loans

Federal Direct Loan Program (Subsidized)

A government sponsored loan program offered directly to students who meet certain criteria. Eligible borrowers can receive loans from private lenders at below-market interest rates. Students must have a financial need, and parents or guardians must co-sign the loan.

Perkins Loan

This federal student loan provides access to low-interest loans for undergraduate studies. Eligibility requirements include having attended a school eligible for federal Pell grants, being enrolled full time, and having a high school diploma or equivalent. Parents or guardians may sign the loan.

Stafford Loan

Students pursuing higher education degrees are eligible for these government-sponsored loans. The maximum amount of a subsidized Stafford loan is $23,000 per academic year, with no repayment period. However, interest accrues while the borrower is attending college. A parent or guardian may not sign the loan if they have already cosigned a loan for their child; however, they may sign later on in case their child defaults on the loan.

PLUS Loan

The Parent Loan for Undergraduate Students offers a fixed rate of 6 percent for subsidized loans, renewable after five years. Interest begins accruing immediately, and payments start six months after graduation. Borrowers whose families make less than $65,000 annually cannot borrow under this plan. A minimum balance of $100 is required to qualify for the loan. Parental signature is not required for this type of loan.

Private Education Loans

Private lender-administered loans are available for those seeking greater flexibility. These plans offer variable interest rates and flexible repayment terms. Payments are due monthly over a set period of time, starting once the borrower receives his or her degree.

Financial Advisor Student Loans

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Financial Advisor Student Loans

When applying for financial aid, many students rely heavily on scholarships, grants, and loans. These three options are often overlooked when looking at alternative ways to pay for school. However, student loans have become an increasingly popular way to fund education. With interest rates still low, student loan debt is expected to continue its rise over the next few years. There are two types of student loans – private and federal. Private loans are issued by banks and other lenders, while federal loans are underwritten by the U.S. Department of Education. Unlike private loans, federal loans are offered directly by the government. Federal loans offer a variety of repayment plans, including fixed-rate and income-based repayment, which can make them attractive if you plan to stay in school long term.

Private vs. Federal Student Loan Options

The type of loan you choose depends largely on whether you plan to attend college full time or not. If you’re attending school part time, then both options may work for you. If you need additional funds to cover tuition costs or meet nonacademic expenses, you may want to consider private loans. A majority of private loans require you to begin making payments immediately after graduation and before starting classes. In addition, private loans tend to carry higher interest rates than their federal counterpart. On the other hand, federal loans are typically tied to a specific program, such as Stafford or Perkins. As such, they don’t require prepayment until well after graduation, and some programs have low interest rates. Your decision to go with either option should be based upon the amount you need, how much money you’ll save each month, and how much money you feel comfortable paying back.

How Much You Need

If you decide to apply for federal loans, you’ll probably qualify for the Direct Subsidized Loan. The maximum eligible loan amount is $23,500 per year. This includes tuition, fees, room and board, books, supplies, transportation, and other personal expenses. Depending on your family size, this could total between $6,000-$10,000. However, you likely won’t owe that entire sum. Most borrowers receive about 85% of that amount, and the remaining 15%, known as the Unsubsidized Portion, comes straight out of your pocket.

To calculate how much you’ll pay monthly using subsidized loans, you’ll first divide the annual limit by 12 months. Then add this number to the principal balance on your loan. For example, say you receive $9,000 in subsidized loans per year. Divide this figure by 12 ($9,000/12 $750), and then add the remainder of your loan to the principal balance ($750 + $8,250 $9,100). When calculating how much you will pay without subsidies, subtract any private loans from your current outstanding balance. After adding what’s left to the principal balance, divide this amount by 60 (the length of the loan period) to determine how much you will pay each month.

You may also qualify for the Direct PLUS Loan. This is a federally backed loan that covers the cost of tuition and related expenses. The maximum loan amount is $31,000, and most borrowers receive less than half of this amount. To use the PLUS Loan, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA) along with a separate application from your lender. While the FAFSA only applies to subsidized loans, the PLUS Loan doesn’t require you to file it.

Repaying Loans

After you graduate, you’ll have two choices for repaying your loans: Graduated Repayment Plan or Income Based Repayment (IBR). Under the graduated plan, you borrow the same amount throughout your entire undergraduate career. Beginning with the semester following graduation, you’ll make 10% of your discretionary income (not counting Pell Grants) toward repayment. Once you reach 9.5% of discretionary income, you’ll stop making payments and start repaying your remaining debt according to the standard repayment terms.

Under the IBR plan, you repay your loan based on the percentage of income you earn above a defined threshold. This percentage increases annually, so even if your salary stays the same, your monthly payment will increase. You’ll begin making payments when your income reaches 80% of the poverty level for your state of residence. Once you reach 120% of the poverty level, no more payments are due. So if you were to take out a $20,000 subsidized Stafford Loan, you would begin paying $50 per month and would stop once you earned $36,400.

There are other repayment plans available for private loans, such as Income Contingent Repayment (ICR) and Income Sensitive Repayment (ISR). Both of these plans allow you to set up automatic withdrawals from your checking account to pay off your loan. That said, because they aren’t federally guaranteed, you may face difficulty refinancing your loan if you default. If you do, you’ll lose eligibility for future federal aid.

Federal Vs. Private Loans

Private loans tend to be cheaper than their federal counterparts, but they carry high interest rates. According to US News & World Report, the average private student loan carries a 4.74% APR, compared to 3.86% for the average federal loan. In general, private loans offer lower interest rates for new borrowers, but private loans may be harder to refinance later. Federal loans usually have slightly higher interest rates for new borrowers but remain competitive compared to private loans.

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