Student Loans Comparisons

This video compares student loan debt to credit card debt. It also discusses how student loans differ from credit cards. The video gives examples of different types of student loans including federal direct subsidized loans, private student loans, guaranteed student loans, bank student loans, and cosigner loans. I use the example of my personal student loans to illustrate each type of loan.

Student Loans Comparisons

Student Loan Payback Period

The student loan payback period refers to the time between the date a borrower first takes out a student loan and the date he/she pays off the entire debt. Typically, borrowers have 10-15 years to repay their loans, although some federal loan programs allow you to defer payments until after you graduate from college and begin making regular income — which means even longer repayment terms!

Federal vs Private Student Loan Debt

Federal loans offer lower interest rates at times than private alternative lenders. But these types of loans also require higher monthly payments compared to private alternatives, which makes them less attractive if you’re looking for ways to reduce your monthly expenses.

Private Student Loan Debt

Private loans often provide borrowers with flexible payment options, including extended grace periods. These loans also offer lower interest rates than federal loans, but they come with their own set of drawbacks. Higher APR’s (annual percentage rate) and fees make them less desirable options over the long term, especially if you’re trying to build a savings cushion while paying down your student loans.

Public Service Loan Forgiveness Programs

Public service loan forgiveness is offered to certain veteran and active military personnel who work in qualifying public service occupations. Borrowers must complete 120 months of qualified employment and maintain satisfactory credit history and financial standing to receive loan cancellation upon completion of the program.

Income Based Repayment Options

Income based repayment plans let private loan borrowers cap or limit how much money they owe each month based on their annual earnings. A borrower may choose to pay a fixed amount each month (based on his/her salary), a variable amount determined by the lender, or a combination of both. As long as a borrower remains employed and maintains satisfactory academic progress throughout the duration of the plan, s/he should keep lowering his/her monthly payments over time.

Deferments & Forbearance Options

Borrowers facing economic hardship may qualify for private loan forbearances or deferrals. To be eligible, borrowers need to show proof of financial necessity and demonstrate clear efforts to improve their situation. If they meet these requirements, then lenders may temporarily suspend some or all of the borrower’s obligations for a specified period of time.

Alternative Payment Plans

Alternative payment plan options help borrowers manage their finances by providing flexible payment schedules. Instead of making a single, lump sum payment at the end of the loan term, borrowers may opt to spread out their tuition and related costs over a series of smaller payments. Some alternative payment plans might cover only a portion of a borrower’s total loan balance, which could potentially save borrowers thousands of dollars over the course of the loan term.

Student Loans Comparisons

Student Loans – Similarities & Differences?

Many people say student loans are similar to credit cards. While they both have high interest rates, they’re not quite the same. Both types of loans are secured by personal information. However, student loans are backed by the government while credit card debt is not. A lot of credit card companies are going out of business, which means less competition for the borrower. If someone defaults, the lender can repossess their property, whereas student loan creditors cannot.

Student Loans – What Are My Payments?

The average monthly payment amounts vary depending on loan type and amount borrowed. Here’s what some borrowers actually pay each month:

For federal direct student loans:

Federal Perkins Loan $0

Direct PLUS Loan $220 per month

Subsidized Direct Stafford Loan $0

Unsubsidized Direct Stafford Loan (no income restrictions) $330

For private student loans:

Private educational loans come with higher interest rates than federal loans. Most commonly, these loans are used to cover tuition costs, but they may help pay off expenses related to medical bills, car repairs, and home improvements.

Student Loans – How Do I Avoid Them?

There are many ways to avoid student loan debt. One way is to find scholarships before applying for loans. You can also look at community colleges instead of four-year universities if you plan to start a career after college. Another option is to work full time while attending school. Lastly, consider taking out a parent or sibling loan instead of borrowing on your own.

Student Loans – Is There Anything Good About Them?

Student loans are based entirely off of income and credit score. It is similar to a mortgage except the loan amount is generally smaller than a home purchase. A student loan is usually taken out over a few years but the payments are spread evenly throughout the repayment period.

Traditional college loans are based off of a fixed interest rate, sometimes called the APR (Annual Percentage Rate). When the annual payment amount and the interest rate are set at the same time, the loan’s total cost is known. The APR can vary depending on factors such as the lender, loan term, and type of loan.

Private student loans offer financing options outside of government-backed programs. However, they often have higher rates due to riskier investments.

Federal student loans require borrowers to have a FICO Score of at least 680 when applying. If the borrower does not meet these requirements, private lenders may give them lower rates because they believe their default risk is low.

State universities provide grants to those who qualify. This is helpful if students need to cover tuition costs without having access to federal loans. Borrowers should apply for other sources of financial aid before taking out state loans.

Public schools often use tuition tax credits to subsidize the price of education. Tax credits are refundable and can be claimed back at any point after graduation.

Borrowing money while still in school doesn’t make sense since you won’t know what your future income will be until much later in life. Instead, borrow money after graduation, when you have a stable job history and a good idea about how much money you’ll earn.

Interest paid on loans decreases over time. If you take out a loan in 2018, your monthly payment will be slightly larger than the monthly payment on the same loan amount if you’d borrowed it in 2013 and then paid it back in full.

If you plan to attend graduate school, consider borrowing less money. Graduate school generally requires a lot of additional work and many graduates find themselves unable to pay off their loans once they finish school.

If you’re trying to decide between federal and private student loans, opt for private loans. They’re typically cheaper than federal loans and allow you to avoid paying upfront fees.

Take advantage of scholarships and grants. Most states offer their own scholarship programs, and some even offer federal scholarships. Grants are generally easier to get than scholarships. You don’t need to fill out applications or prove eligibility. Grants are awarded based on merit and do not require repayment.

There’s no limit to the number of federal student loans you can receive. Your parents’ student loans cannot be consolidated with yours.

Loan forgiveness programs exist for public service workers and teachers who put in a certain number of years with a career in teaching. This applies to both federal and private loans.

Financial Aid offices for public colleges and universities are always open. Be sure to check with your local office to find out when they are open and how to reach them by phone. Many times you can request information online and print it out.

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